Dive Brief:

• Seven trade groups sued the Consumer Financial Protection Bureau (CFPB) and its director, Rohit Chopra, over a recent policy update aimed at combating discrimination in banking, alleging the change exceeds the agency’s statutory authority and violates proper notice-and-comment rulemaking procedures.
• In a March update to the CFPB’s Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) section, the bureau said it would scrutinize banks’ and other companies’ compliance with consumer protection rules to identify and root out discriminatory conduct that violates federal prohibitions against unfair practices, even in situations where fair lending laws may not apply. 
• The groups called the updated manual “arbitrary” and “capricious,” and a violation of the Administrative Procedure Act (APA) “because it constitutes a legislative rule that failed to go through notice and comment.”

Dive Insight:

The groups — the American Bankers Association (ABA), the U.S. Chamber of Commerce, Longview Chamber of Commerce, Texas Bankers Association, Independent Bankers Association of Texas, Texas Association of Business and the Consumer Bankers Association (CBA) — say the CFPB should have requested comment on a proposed rule before implementing such a change. 

"The CFPB's decision to dramatically expand its regulatory reach without any input from the public was not authorized by statute and has significant implications for consumers, banks and the broader financial markets," ABA President and CEO Rob Nichols said in a statement. "This is a step we did not want to take, but it was a necessary step given the extraordinary actions of the CFPB."  

In the lawsuit, the trade groups said they fully support the fair enforcement of nondiscrimination laws, but said the CFPB created regulatory uncertainty and imposed costly burdens on businesses in the manner in which it enacted the policy.

“This Court’s intervention is needed to ensure that the CFPB is accountable to legal constraints, the rule of law, and the public as it pursues an aggressive agenda with far-reaching implications for the American economy, Plaintiffs, and their members,” the groups argued in the lawsuit, filed in the U.S. District Court for the Eastern District of Texas.

The update to the CFPB examination manual has already been challenged by Senate Republicans. 

During an April hearing, the ranking member on the Senate Banking Committee, Pat Toomey, R-PA, blasted the update and called the agency, under Chopra’s leadership, “more out of control than ever before.” 

“It’s once again pursuing a subversive far-Left agenda by abusing — and exceeding — its authorities,” he said. 

This month, Chopra pledged to push ahead with the agency’s new policy, as well as several others that have been subject to Republican attacks in recent months.

“We’re going to keep doing our work, regardless of the false accusations that are made about our staff,” Chopra said during a nonprofit speaking engagement, according to The Wall Street Journal.