#2022-32, December 9, 2022

ABA, Associations Seek Summary Judgment in CFPB Lawsuit

Last week, the American Bankers Association (ABA), along with six other trade groups, asked a federal court in Texas to grant summary judgment in their lawsuit against the CFPB for exceeding its legal authority when it expanded the definition of “unfairness” to encompass discrimination in the unfair, deceptive, or abusive acts and practices (or UDAAP) exam manual earlier this year.  In a motion filed with the U.S. District Court of Eastern Texas, the groups asked the court to set aside the CFPB’s March update to the manual and permanently enjoin the agency from pursuing any examinations or enforcement actions based on the update.

Underpinning the groups’ argument was a recent ruling by a three-judge panel of the Fifth Circuit Court of Appeals, which covers Texas, earlier this year.  The opinion in an unrelated lawsuit found that the CFPB’s funding structure violates the separation of powers clause of the Constitution.  An appeal of the earlier ruling is pending before the Supreme Court; regardless of the outcome, ABA’s argument for summary judgment primarily relies on CFPB violations of the Administrative Procedure Act.

The groups sued the CPFB and agency Director Rohit Chopra in September after urging the agency to rescind the update, saying that the bureau’s UDAAP authority cannot be used to extend fair lending laws beyond the bounds set by Congress.  In the recent motion, attorneys for ABA and other associations argued their members would suffer irreparable harm as institutions would be compelled to comply with the update or face legal action.  They also argued that a permanent injunction wouldn’t harm the public interest, as “the public has a strong interest in the proper function of the banking industry nationwide.”

To read the motion, please click here.

OCC: Bank-Fintech Partnerships Remain Area of Heightened Scrutiny

As banks increasingly partner with financial technology companies to provide products and services, third-party risk management continues to be an area of heightened supervisory focus for the OCC, the agency said yesterday in its fall Semi-annual Risk Perspective report.  The report cautioned that banks must “conduct appropriate due diligence” before entering into any partnership with a third party.  “The scope and depth of due diligence, as well as ongoing monitoring and oversight of the third party’s performance, should be commensurate with the nature and criticality of the proposed activity,” the agency said.

The OCC announced earlier this year that it would establish an Office of Financial Technology in 2023 to bolster its expertise on fintech.  During a call with reporters yesterday, Acting Comptroller Michael Hsu said what role the office takes in supervising third-party relationships will depend on who heads it, which hasn’t been determined yet.  “Once we do, then we'll provide an update at that point as to how that’s going to play out,” he said.  “But the general idea is to provide a greater degree of focus and capabilities—both monitoring and engagement, and policymaking—through that office.

To read the full OCC semiannual risk perspective report, click here.

U.S. Adds 263,000 Jobs in November

The U.S. economy added 263,000 nonfarm jobs in November, the Labor Department said on Friday.  Gains were strongest in leisure and hospitality, health care and government.  The unemployment rate is unchanged from October at 3.7%.  The labor force participation rate was 62.1%, virtually unchanged from the previous month.

Consumer Credit Increased in October

Consumer credit increased at a seasonally adjusted annual rate of 6.9% in October, the Federal Reserve reported yesterday.  Non-revolving debt—the category that includes auto loans and student loans—grew 5.8%.  Revolving debt, which includes credit cards, increased at an annual rate of 10.4%.  Consumer credit increased at a seasonally adjusted annual rate of 7% for the third quarter.