CFPB Exceeds Jurisdiction
A mortgage lender and its owner have won a decisive victory against the CFPB in federal court. In Bureau of Consumer Financial Protection v. Townstone Financial et al., the U.S. District Court for the Northern District of Illinois invalidated the CFPB’s contention that it can police for discrimination against prospective applicants for credit.
The Equal Credit Opportunity Act (ECOA) makes it unlawful for creditors to discriminate against applicants for credit based on certain protected factors. Regulation B, which implements ECOA, goes further than the statute by providing protection to “prospective applicants.”
The defendants were alleged to have discouraged prospective applicants to apply for credit based on race, which would violate Regulation B. In assessing this allegation using the Chevron Test, the court found that ECOA “only prohibits discrimination against applicants,” not prospective applicants.
The court disregarded the Bureau’s argument that other provisions of law permitted it to exceed ECOA’s limits, ruling that only the Chevron Test should be used to determine the validity of an agency interpretation.
Time will tell whether other courts will continue to rule in this direction, but this ruling calls into question the CFPB’s interpretation of Regulation B more broadly and to bring the CFPB’s interpretations in line with statutory authorities.
February 9th, 2023
