Court Rejects CFPB's Argument that "Discrimination" is Subsumed in "Unfairness"
Commentary by Steven Lofchie
The U.S. District Court for the Eastern District of Texas (the "Court") held that the CFPB's amendments to its supervisory operations and examinations manual to include "discrimination" under "unfair, deceptive, or abusive acts or practices" ("UDAAP") exceed the agency's authority under Dodd-Frank.
In its Opinion and Order, the Court stated that Dodd-Frank "treats discrimination and unfairness as distinct concepts." The ruling follows a lawsuit filed by the U.S. Chamber of Commerce seeking relief from the CFPB's amendments which directs examiners to "scrutinize companies for discrimination," including companies' ability to "introspect about statistical disparities in data concerning their business practices." Under the amendments made in March 2022, the CFPB said that it would "closely examine financial institutions' decision-making in advertising, pricing, and other areas to ensure that companies are appropriately testing for and eliminating illegal discrimination" (see previous coverage).
The Court ruled in favor of the Chamber of Commerce, saying that the CFPB's assertion that the term "unfairness" included "discrimination" invoked the "major-questions canon" and thus it was necessary for the CFPB to show clear language to support its purported authority. The Court also said that the "unfairness" section of the relevant states makes no mention of discrimination, of protected classes or of disparate impact standards.
Commentary
No doubt that CFPB Director Rohit Chopra wishes to do the moral thing, but as a regulator an essential part of doing the moral thing is confining your exercise of governmental authority to the powers granted to you by Congress, which is to say in accordance with the U.S. Constitution. When regulators seek to coerce the regulated through powers not granted through Constitutional, statutory or rulemaking process, that is not the moral thing. If Mr. Chopra believes that there is a gap in the law, notwithstanding that there are a good number of statutes forbidding various types of discrimination, his moral obligation is to go back to Congress and seek authority, not to discover the authority by rediscovering the hidden meaning in the statute as if it were a Canto by Mr. Pound that had meaning not visible to the ordinary reader. See also "CFPB Director Chopra Previews Plans to Regulate Data Brokers" (further questioning whether Mr. Chopra should seek legislation before imposing a new set of rules).