Opposition Brief in UDAAP Manual Appeal

INTRODUCTION

The Consumer Financial Protection Bureau wields “vast authority.” Seila Law v. CFPB, 591 U.S. 197, 236 (2020). The Dodd-Frank Act created the CFPB to “implement and ... enforce Federal consumer financial law.” 12 U.S.C. §5511(a). Among its respon- sibilities, Congress charged the agency with enforcing a prohibition on “any unfair, de- ceptive, or abusive act or practice”—or UDAAP. §5536(a)(1)(B). To carry out this UDAAP authority, the Act says the CFPB can “require reports,” “conduct examina- tions,” “asses[s] compliance,” “obtai[n] information,” “conduct investigations,” “issue subpoenas and civil investigative demands,” “initiate administrative adjudications,” and “prosecute civil actions in federal court.” §§5514-15; Seila Law, 591 U.S. at 206 (citing 12 U.S.C. §§5562, 5564(a), (f)). The Act further contemplates penalties like restitution, rescission of contracts, disgorgement, and injunctive relief. 12 U.S.C. §5565(a)(2).

But even broad regulatory authority has limits; and the CFPB’s broad authority makes enforcing those limits more important, not less. As the district court recognized, the CFPB must stay within the four corners of its statutory authority, including its UDAAP authority. ROA.3097-104. Yet the CFPB’s recent update to its examination manual arrogated to itself an open-ended and novel power: It reinterpreted its UDAAP authority, for the first time, to regulate discrimination as a UDAAP—and not just dis- crimination, but discrimination based on disparate impacts against an unidentified and potentially endless set of protected classes.

Plaintiffs and their members oppose discrimination; the problem is that the CFPB has gone beyond Congress’s specifically crafted prohibitions on discrimination. Congress knows how to grant agencies the all-important power to regulate discrimina- tion, how to specify the classes protected by that power, and how to create disparate- impact liability. Congress did not silently do all that with a reference to “unfairness.” 12 U.S.C. §5536(a)(1)(B). The CFPB’s contrary interpretation flouts everything about the text, history, and structure of the Dodd-Frank Act. The district court agreed, vacating the CFPB’s March 2022 manual update as exceeding the agency’s statutory authority and enjoining the agency from pursuing examinations or enforcement actions based on its unlawful interpretation. ROA.3109-10.

Tellingly, the CFPB waits until page 43 of its brief to contest the district court’s decision on the merits. Instead, the CFPB primarily raises procedural objections. Though Plaintiffs’ memberships include many entities that are directly regulated by the CFPB’s new rule, the agency claims that not one has Article III standing. The CFPB first finds in the Supreme Court’s decision in Summers v. Earth Island Institute, 555 U.S. 488 (2009)—a case involving no pseudonyms—a ban on associations referring to their members with pseudonyms. Then the agency repackages a final-agency-action argu- ment that was rejected below as a reason why Plaintiffs’ declarations were somehow insufficient. That argument is based on evidentiary objections that the CFPB never raised below and are thus forfeited. Even so, Plaintiffs submitted substantial and competent evidence. The CFPB understands that its manual directs the behavior of agency per- sonnel and regulated entities—that’s the whole point of it—which in turn compels Plaintiffs’ members to expand UDAAP compliance programs and systems, imposing heavy compliance costs.

The CFPB’s remaining procedural arguments are no stronger. It challenges venue because the forum plaintiff, the Longview Chamber, supposedly lacks standing. But the agency’s standing arguments all fail. The CFPB also criticizes the relief granted below, arguing that vacatur would have sufficed to remedy Plaintiffs’ harms. But the district court provided sound reasons for each kind of relief, including an injunction that stops the CFPB from circumventing vacatur and inflicting irreparable harm on Plaintiffs’ members.

This Court should affirm the well-reasoned decision below.

Download to read the full text.