On Monday, it was reported that significant changes had been made to the Consumer Financial Protection Bureau’s (CFPB) Unfair, Deceptive, or Abusive Acts and Practices (UDAAP) Exam Manual earlier this year. This document has been under discussion since a lawsuit was brought to the Federal District Court for the Eastern District of Texas in 2021 by various trade associations. The altered manual included discrimination claims within the purview of the “unfairness” category, a change that some argue goes beyond the scope of the Equal Credit Opportunity Act.
Ballard Spahr LLP reviewed the Court’s opinion issued on September 8 regarding the argument. It appears that the Court took exception to the CFPB’s alteration of the UDAAP Exam Manual, ultimately choosing to both vacate the changes and issue an injunction. This double measure was taken despite the fact that reversing the changes might have been enough to resolve the issue.
Following this injunction, an important question that poses itself is why the Federal District Court felt compelled to order an injunction in addition to vacating the changes. It is worth noting that an injunction might seem superfluous to those unfamiliar with legal complexities since vacating the changes to the manual would have presumably made the subject moot. However, the deployment of an injunction along with the vacating decision can serve the purpose of giving a stronger message to federal agencies about overstepping their bounds.
As we await further guidance on this subject, the broader impact of this decision on the CFPB’s operations and on financial services businesses remain to be seen. This issue is of particular interest to legal professionals who work with the CFPB’s UDAAP guidelines. How the CFPB decides to proceed could set a precedent for how federal agencies are allowed to interpret and expand upon existing laws.