The banking-related entities (the banks) filed an action against the Consumer Financial Protection Bureau (CFPB) and its director in response to the CFPB’s “Final Rule.” The rule added additional data points to the reporting requirements required by Section 1071 of the Consumer Protection Act of 2010 (CPA), which was enacted to “identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.” The banks challenged the final rule, arguing (1) that the CFPB had committed APA violations by abusing its statutory authority, (2) the final rule was arbitrary and capricious for failing to consider proper cost-benefit analysis, and the CFPB had failed to consider or respond to comments raised by interested parties. The banks filed a motion to supplement the administrative record and filed a motion for summary judgment. In response, the CFPB filed a cross-motion for summary judgment.
In Tex. Bankers Ass'n v. Consumer Fin. Prot. Bureau, No. 7:23-CV-144, 2024 WL 3939598, 2024 U.S. Dist. LEXIS 152401 (S.D. Tex. Aug. 26, 2024) (opinion not yet released for publication), the court denied the banks’ motions and granted summary judgment for the CFPB. First, it denied the banks’ motion to supplement the administrative record with an ABA Banking Journal of February 2024 because the scope of judicial review under the APA is “limited to the administrative record that was before the agency when it promulgated the challenged regulation.” Thus, because the article came out after the release of the CFPB’s rule it cannot be included in the administrative record unless “unusual circumstances justifi[ed]” expanding the scope of judicial review. Medina Cnty. Env’t Action Ass’n v. Surface Transp. Bd., 602 F.3d 687, 706 (5th Cir. 2010). One such exception identified in Medina would be if the proposed supplement to the record would provide “‘background information’ to help determine whether the agency considered all of the relevant factors.” Id. However, the court found that the ABA article did not supply the requisite background information and denied the banks’ motion. Second, the court addressed the banks’ motion for summary judgment on the claim that the CFPB had violated 5 U.S.C. § 706(2)(C) by acting in excess of its statutory authority and by abusing its discretion. Specifically, the banks assert that under the CPA, the CFPB’s actions must advance the purpose of the statute, and the CFPB’s final rule fails to do so and, therefore, exceeds its authority. However, the court disagreed and granted summary judgment in favor of the CFPB. It explained that the banks’ argument “fundamentally misunderstands the Section 706(2)(C) inquiry.” The final rule was issued to benefit women-owned, minority-owned, small businesses; thus, according to § 1071, it acted in the matter for which it was purposed. The court clarified that the banks’ claims did not attack the legality of the CFPB’s actions but rather the effectiveness of its final rule. Therefore, the court concluded that, under the statute, the CFPB also had the right to collect data points in addition to those required for the loan application process. Third, the court addressed the banks’ argument that the final rule was arbitrary and capricious because it failed to consider the costs and benefits of the rule properly. The court explained that the CFPB satisfied the requirement that agencies “reasonably consider relevant issues” and “reasonably explain the decision”; additionally, it explained how the CFPB went even further than this standard by implementing various accommodations. Because the CFPB provided a reasonable rationale for its rule and the costs and benefits it predicted the rule would provide, the court held that the CFPB did not act arbitrarily and capriciously. Ultimately, the court denied the banks’ motion to supplement the administrative records, denied its motion for summary judgment, and granted the CFPB’s cross-motion for summary judgment.
By Dillon Richardson: [email protected]
Edited By Callighan Ard: [email protected]
Edited By Ashley Boyce: [email protected]
Edited By Hayden Mariott: [email protected]