ICBA Press Release Banner 2020

New White Paper Details Why CFPB Lacks Legal Authority for Recent Actions

Washington, D.C. (June 28, 2022) — The Independent Community Bankers of America (ICBA) and other groups issued a joint white paper detailing why recent Consumer Financial Protection Bureau actions to expand its examination of banks for discrimination exceeds the bureau’s legal authority. The groups offered to work with the CFPB and Congress to address these issues and ensure the bureau follows the law.

In “Unfairness and Discrimination: Examining the CFPB’s Conflation of Distinct Statutory Concepts,” the groups call on the CFPB to rescind its recent "update" of its examination manual and explain why the bureau lacks the legal authority to examine financial institutions for alleged discriminatory conduct under its “unfair, deceptive, and abusive acts or practices” (UDAAP) authority.

The analysis concludes that the new manual and related CFPB actions are "contrary to law and subject to legal challenge" as well as potential congressional action under the Congressional Review Act. The groups note that the bureau’s recent actions have “tremendous implications for consumers, for banks, and for financial markets at large."

"It represents an enormous self-expansion of the CFPB’s authority that stands contrary to law and the intent of Congress,” the groups wrote. “Such sweeping changes that alter the legal duties of so many are the proper province of Congress, not of independent regulatory agencies, and the CFPB cannot ignore the requirements of the Administrative Procedures Act and Congressional Review Act. The CFPB may well wish to 'fill gaps' it perceives in federal anti-discrimination law. But Congress has simply not authorized the CFPB to fill those gaps. If the CFPB believes it requires additional authority to address alleged discriminatory conduct, it must obtain that authority from Congress, not take the law into its own hands. The associations and our members stand ready to work with Congress and the CFPB to ensure the just administration of the law."

Throughout many decades, Congress never used two statutory concepts, “unfairness” on the one hand, and “discrimination” on the other, interchangeably, according to the white paper. Rather, they are distinct, and each has a well-established meaning and scope of application. However, on March 16, the CFPB conflated the concepts by announcing — via a UDAAP exam manual “update” — that it would begin examining financial institutions for alleged discriminatory conduct that it deemed to be “unfair” under its UDAAP authority.

About ICBA

The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. With more than 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ nearly 750,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets, nearly $4 trillion in deposits, and more than $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.

About the American Bankers Association

The American Bankers Association is the voice of the nation’s $24 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $19.9 trillion in deposits and extend $11.4 trillion in loans.

About the Consumer Bankers Association

The Consumer Bankers Association represents America’s leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA’s corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on Twitter @consumerbankers.