The letter addresses recent changes to UDAAP manuals focused on supervisory examinations as well as Chopra’s regulatory and enforcement agenda.
05/19/2022 3:30 P.M.
3 minute read
The ranking member of the House Financial Services Committee, U.S. Rep. Patrick McHenry, R-N.C., and the ranking member of the Subcommittee on Consumer Protection and Financial Institutions, U.S. Rep. Blaine Luetkemeyer, R-Mo., sent a letter with House Financial Services Committee Republicans to Consumer Financial Protection Bureau Director Rohit Chopra regarding changes in the bureau’s supervisory procedures.
In the letter to Chopra, the legislators focus on the bureau’s new unfair, deceptive, or abusive acts and practices (UDAAPs) supervisory policy and the recent changes to CFPB administrative adjudication procedures that deviate significantly from past practices.
“[N]otwithstanding the fact these actions were taken outside of the typical notice and comment process, they suggest the CFPB intends to pursue a regulatory and enforcement agenda well beyond its statutory authority,” they wrote. “We call on you [to] rescind these measures immediately and adhere to the appropriate notice and comment paradigm.”
The CFPB published an updated UDAAP exam manual in March, ACA International previously reported.
These examination procedures provide general guidance, according to the CFPB, on:
- The principles of unfairness, deception and abuse in the context of offering and providing consumer financial products and services.
- Assessing the risk that an institution’s practices may be unfair, deceptive or abusive.
- Identifying unfair, deceptive or abusive acts and practices (including by providing examples of these potential practices).
- Understanding the interplay between unfair, deceptive or abusive acts or practices and other consumer protection and antidiscrimination statutes.
“We applaud Congressmen McHenry and Luetkemeyer for their leadership in holding the CFPB to the established, by law, rulemaking processes and to ensure the right stakeholders are at the table and able to identify potential pitfalls,” said ACA International CEO Scott Purcell. “Our industry is too complex, and we’ve all invested so much to achieve the current level of compliance required by the bureau. These newly defined policy changes and guidance that do not adhere to the established rulemaking requirements turn that process on its head and leave regulated entities without the rules that they want and need.”
The changes in the exam manual focus on supervisory operations to better protect families and communities from illegal discrimination, including in situations where fair lending laws may not apply, according to the CFPB.
“Let us be clear, there is no place for discrimination in financial services. If illegal discriminatory practices are identified, they should be addressed through the enforcement of existing laws, such as the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act—known together as the fair lending laws,” the letter from Luetkemeyer and McHenry states. “Congress enacted the fair lending laws and delegated their enforcement to the CFPB, clearly defining the limits of CFPB’s jurisdiction. Extending ECOA’s disparate treatment and disparate impact analysis to non-credit financial products and services ignores these clear limits. Moreover, the CFPB’s recent decision to fundamentally alter long-standing fair lending policy was made outside of the rulemaking process.”
The legislators request answers to several questions in the letter, including:
- Does the CFPB believe that entities regulated by the CFPB should change their practices or take additional steps—for example, by seeking demographic information or language preference information on customers where not already required to do so by law—in response to these changes to the examination manual?
- Is the CFPB pursuing any enforcement matters under this theory of unfairness? Does the CFPB expect covered entities to retroactively comply with the new supervisory guidance?
- On what date did the CFPB begin pursuing the inclusion of “discriminatory” conduct under UDAAP in relation to supervisory responsibilities?
The lawmakers also request documentation related to the subject of the questions.
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