Federal regulatory body concurs to drop appeal in unfair, deceptive, or abusive acts or practices lawsuit
Consumer Financial Protection Bureau Drops Lawsuit Over UDAAP Manual Changes
In a significant development, the Consumer Financial Protection Bureau (CFPB) has announced that it will drop its appeal in a lawsuit challenging changes to its Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) manual. The decision comes after a joint stipulation with several banking trade groups, including the American Bankers Association (ABA) and the U.S. Chamber of Commerce.
The lawsuit, which was filed in September 2022, contested a Biden-era update to the CFPB's unfair practices manual. The update aimed to give the bureau's examiners more authority to investigate banks for discrimination under UDAAP. However, the trade groups argued that the update exceeded the agency's statutory authority under the Dodd-Frank Act and violated proper notice-and-comment rulemaking procedures.
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 and barring the agency from enforcing it in actions against members of the trade groups. In August 2024, the CFPB filed its appellant brief with the Fifth Circuit, appealing Barker’s decision.
However, the CFPB has now decided to drop its appeal, as announced last week. This decision follows the dismissal of a three-year-long case by the new CFPB leadership, which was welcomed by both Chris Furlow, CEO and president of the Texas Bankers Association, and ABA CEO Rob Nichols. Furlow stated that the decision was a recognition that the previous Administration's CFPB leadership failed to follow the law and ended unaccountable regulatory over-reach.
This move by the CFPB comes amidst a broader trend of the agency undoing many Biden-era rules and policies during the first few months of the second Trump administration. Recently, the CFPB also announced that it would not enforce its small-business data collection rule, which was intended to collect data on race, gender, LGBTQ status, and demography from borrowers.
The current status of the lawsuit challenging changes to the CFPB’s UDAAP manual involves a key case in the U.S. District Court for the Northern District of Illinois. On June 12, 2025, Judge Valderrama denied a joint motion to vacate a stipulated final judgment reached between the CFPB and Townstone Financial, Inc., in a related enforcement action alleging violations tied to practices under the Equal Credit Opportunity Act (ECOA). This denial effectively keeps the prior final judgment intact and rejects the CFPB’s attempt to refund Townstone’s civil money penalty, with the court criticizing the CFPB’s conduct in the case as “breathtaking” [1][3].
These developments underscore judicial scrutiny of the CFPB’s UDAAP enforcement approach and the legal limits of modifying or vacating stipulated judgments in such cases. The decision also highlights the ongoing disputes about how the CFPB enforces UDAAP standards and penalties, with states and financial industry stakeholders actively engaged in regulatory and litigation matters concerning CFPB rules and enforcement practices [2][5].
In light of the Consumer Financial Protection Bureau (CFPB) dropping its appeal, the general news now highlights a shift in finance policies, with businesses closely watching the bureau’s actions as they intertwine with politics, particularly in the context of ongoing disputes about UDAAP enforcement standards and penalties in the realm of business and politics. The decision also raises questions about the CFPB's jurisdiction under the Dodd-Frank Act and adherence to notice-and-comment rulemaking procedures, a topic of broader discussion in legal circles.
