Regulator consents to drop appeal in legal action pertaining to Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) lawsuit
The Consumer Financial Protection Bureau (CFPB) has agreed to dismiss with prejudice a Biden-era update to its Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) manual, marking the end of a three-year legal battle.
The decision comes after the CFPB called off a rule that was set to collect data on race, gender, LGBTQ status, and demography from borrowers, roughly 2 1/2 months before it was due to begin. The move was met with approval from several trade groups, including the U.S. Chamber of Commerce, American Bankers Association, Consumer Bankers Association, Independent Bankers Association of Texas, Texas Association of Business, and Texas Bankers Association.
The lawsuit, filed in September 2022, alleged that the CFPB's policy update exceeded the agency's statutory authority under the Dodd-Frank Act and violated proper notice-and-comment rulemaking procedures. The Dodd-Frank Act, signed into law in 2010, gave the CFPB the power to penalize any financial firm found violating the long-established federal prohibition of "unfair or deceptive acts or practices" and introduced the "abusive" standard under UDAAP.
The change made in March 2022 to the CFPB's supervisory operations aimed to identify and root out discriminatory conduct that violated federal prohibitions against unfair practices. However, the CFPB's directive to examiners to consider discrimination in any financial product as a likely unfairness under UDAAP was deemed an overreach by the courts.
Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas granted summary judgment to the plaintiffs in September 2023, vacating the policy update. The CFPB filed its appellant brief with the Fifth Circuit in August 2024, appealing Barker's decision, but has now decided to dismiss the appeal.
Chris Furlow, CEO and president of Texas Bankers Association, lauded the new CFPB leadership's decision to dismiss the case, asserting that the previous leadership failed to follow the Administrative Procedure Act and delivered an "illegal" update beyond the scope of statutory authority.
In a recent development, the CFPB also announced that it would not enforce its small-business data collection rule, which eases the compliance burden for lenders originating 2,500 or more small business loans annually. This move follows the CFPB's decision not to enforce the rule during the first few months of the second Trump administration.
Rob Nichols, CEO of the American Bankers Association, welcomed the joint stipulation with the CFPB to dismiss its appeal in the UDAAP manual case. He stated that the Bureau's expansion of its statutory authority crossed the line and he strongly supports fair enforcement of nondiscrimination laws.
The dismissal of the appeal marks a significant step in resolving the legal dispute and may pave the way for a more collaborative approach between the CFPB and the financial industry in the future.
[1] Source: https://www.cfpb.gov/about/legal-reports/appellate-court-filings/2025-04/cfpb-v-aba-et-al-fifth-circuit-docket-22-50552
The CFPB's decision to dismiss the appeal in the UDAAP manual case has been applauded by several business groups, including the American Bankers Association, due to concerns about the expansion of its statutory authority exceeding its legal boundaries. The Financial industry may now look forward to a more collaborative approach with the CFPB in the future.
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