On May 27, two nonprofit fair housing and fair lending organizations and two private fair lending consultancies filed a complaint in the U.S. District Court for the District of Columbia challenging the CFPB’s final rule amending Regulation B, which implements the ECOA (previously covered by InfoBytes here). The plaintiffs allege multiple APA violations against the Bureau, arguing the final rule is arbitrary and capricious, contrary to law, exceeded the Bureau’s statutory authority, and was issued without observance of statutorily required procedures. The complaint also alleges that the rule is “independently invalid” on the ground that the appointment of the acting director of the CFPB was unconstitutional and that the acting director thus was not lawfully serving in the role. The plaintiffs’ theory is that the Federal Vacancies Reform Act does not authorize the appointment of an acting CFPB official when the prior Senate-confirmed director was removed from office by the president.

The plaintiffs argue the final rule — which eliminates disparate-impact liability provisions, narrows the parameters of what would be considered to “discourage” prospective applicants, and restricts for-profit special purpose credit programs — is arbitrary and capricious because it is contrary to 50 years of what the plaintiffs call “consistent regulatory implementation” and allegedly without reasoned justification. The plaintiffs further raise concerns that the rulemaking was procedurally flawed, contending that the Bureau relied on “conclusory assertions” rather than evidence, ignored extensive comments opposing the rule, and failed to meaningfully conduct required cost-benefit and regulatory flexibility analyses by failing to rely on costs to consumers or entities covered by the rule. The plaintiffs also allege that the CFPB’s rulemaking was procedurally flawed because the Bureau failed to convene a Small Business Regulatory Enforcement Fairness Act panel, provided only a 32-day comment period, and failed to conduct a Final Regulatory Flexibility Analysis or respond to significant comments.

The complaint seeks: (i) declaratory relief that the final rule is arbitrary and capricious, contrary to law, in excess of statutory authority, and issued without observance of procedure required by law; and (ii) injunctive relief vacating the final rule. The complaint does not seek a preliminary injunction staying the final rule, which is scheduled to become effective July 21. The case has been assigned to Senior Judge Beryl Howell, who previously served as the Chief Judge of the District Court for the District of Columbia.