U.S. Chamber of Commerce Wins Summary Judgment in Challenge to CFPB’s Update to Its Examination Manual

On September 8, 2023, the United States District Court of the Eastern District of Texas granted plaintiff U.S. Chamber of Commerce’s (the “Chamber”) motion for summary judgment invalidating the Consumer Finance Protection Bureau’s (“CFPB”) Exam Manual changes from March 2022 that stated that discriminatory conduct may be a UDAAP violation.

As discussed by Goodwin previously, the Chamber sued the CFPB in September 2022 challenging the CFPB’s update to its Examination Manual as outside the scope of its statutory authority.  The Chamber moved for summary judgment on November 29, 2022.  The CFPB likewise moved to dismiss or, in the alternative, for partial summary judgment, on December 23, 2022, arguing that the Chamber lacked standing and also that the update to the Examination Manual was not a final agency action such that review under the Administrative Procedures Act (APA) was not appropriate, among other things.

The Court found in favor of the Chamber, holding that:

  • The Chamber sufficiently established standing “through declarations establishing that their members are incurring costs to comply with the manual’s new UDAAP provisions,” which the CFPB did not adequately challenge.
  • The updates to the Examination Manual constituted a final agency action subject to APA review.
  • Interpreting the Dodd-Frank Act “without deference to the agency’s position because defendants never request[ed] deference,” the Court concluded that the CFPB exceeded its statutory authority. The Court stated that the “whether the CFPB has authority to police the financial-services industry for discrimination against any group that the agency deems protected, or for lack of introspection about statistical disparities concerning any such group, is a question of major economic and political significance” that would have large economic impact.  The Court noted that the “the Dodd–Frank Act treats discrimination and unfairness as distinct concepts.”  Further, such “broad authority staked out by the CFPB … would allow the agency to displace the balances struck by the States on those matters.”  The Court held that the invocation of such broad federal power was not “exceedingly clear” given “the statutory text, structure, and history … [of] the Dodd–Frank Act’s language authorizing the CFPB to regulate unfair acts or practices.”
  • As a remedy, the Court: (1) vacated the March 2022 revisions to the Examination Manual; and (2) granted an injunction “declaring that pursuing any examination, supervision, or enforcement action against any member of a plaintiff organization based on the CFPB’s interpretation of its UDAAP authority announced in the March 2022 manual update would be unlawful as exceeding statutory authority and as based on unconstitutional funding.”

The Court also acknowledged that the Chamber was also entitled to summary judgment on its separate Appropriations Clause claim, given the binding force of the Fifth Circuit’s decision in Community Financial Services Association of America, Ltd. v. CFPB, where the CFPB’s funding structure was found unconstitutional.  The Court here reached the Chamber’s other arguments in light of the Supreme Court’s pending review of that decision.

The Eastern District of Texas’s decision raises a number of questions.  Chief among them is whether the plaintiff-specific injunction against the CFPB could lead to other parties in the midst of enforcement proceedings to seek a similar injunction.

The CFPB’s deadline to appeal the decision is October 8, 2023.