Chamber, Bankers: CFPB Has No Power to Police Discrimination

Chamber of Commerce and banking groups file motion seeking to curb bureau’s actions and influence.

The CFPB has no authority to police discrimination in financial services and a federal court should swiftly make that abundantly clear, the U.S. Chamber of Commerce and banking trade groups said last week.

“Through its recent examination manual update, the CFPB has, with the stroke of a pen arrogated an open-ended and novel power to police regulated entities for discrimination—including for mere disparate impact,” the groups stated in a motion for summary judgement filed in the U.S. District Court for the Eastern District of Texas.

Background on the Issue

Earlier this year, the Chamber announced a campaign to force the rollback of policies that have been adopted during Rohit Chopra’s term as CFPB director.

In September, the Chamber, the American Bankers Association and several other state banking groups filed a suit contending that agency officials exceeded their authority when they decided to investigate discrimination as part of their examination process. Credit union trade groups are not parties to that suit.

The CFPB had amended its examination manual that guides examiners and directed them to probe discrimination by financial institutions as part of its power to investigate Unfair, Deceptive or Abusive Acts or Practices (UDAAP) at financial institutions.

Inside the Motion

In its motion, the Chamber and banking groups said that the CFPB’s vast authority makes it even more crucial to constrain the agency, and that the bureau must stay within the limits established in the Dodd-Frank Act.

That law did not give the CFPB the power to investigate discrimination, they held. In addition, even though the updated examination manual imposes new burdens on financial institutions, the CFPB did not go through the regulatory process of opening the proposal for public comment, the groups argued.

They further asked the federal court to set aside the CFPB’s update to its examination manual and to permanently enjoin the bureau from pursuing any examinations or enforcement actions based on it.

Letter Questions Legality of Some Actions

Separately, the Chamber last week sent a letter to the Senate Banking Committee accusing Chopra of operating both negligently and beyond legal bounds.

“The current CFPB Director is acting recklessly, and in some cases unlawfully, as he attempts to institute his preferred policies,” Chamber officials wrote. “The Director has concentrated his circle of advisors and decision-makers in a manner unprecedented at the CFPB, and as a result sidelined the knowledge and expert judgement of career staff.”

They added, “The current CFPB Director favors the use of inflammatory rhetoric, rather than deliberate notice-and-comment rulemaking, as the preferred method to change market practices.”