A group of lenders are smelling blood in the water surrounding the Consumer Financial Protection Bureau and filed suit against the regulator yesterday, accusing the previous leadership of overstepping its authority in issuing a rule that mandated the same disclosures on Property Assessed Clean Energy (PACE) loans as residential mortgages. As well, a consumer advocacy has published a summary of the status of enforcement actions in the wake of the Bureau dismissing or choosing not to proceed with previously announced cases.
Group Sues Over PACE Loans Rule
Back in December, the CFPB issued a final rule regulating PACE loans, which are used by homeowners to make energy-related upgrades to their homes — like installing solar panels — and for disaster readiness resources. The loans are paid back through increased property tax bills. Critics of the products claimed that lenders “lured” unsuspecting consumers into the subprime-style products with false promises of savings on their energy bills. The proposed rule would have required lenders making PACE loans to provide consumers with the same disclosures made when obtaining mortgages so that consumers could compare the cost of the loan with other forms of financing.
In its lawsuit, Building Resilient Infrastructure & Developing Greater Equity argues that the rule unlawfully expands the scope of the Equal Credit Opportunity Act. Specifically, the complaint alleges that the CFPB is trying to regulate discriminatory practices that fall outside of “credit” as defined by the ECOA, including those involving non-credit financial products or services. The plaintiffs claim the rule violates the Administrative Procedure Act, exceeds the CFPB’s statutory authority, and improperly relies on the disparate impact theory to allege discrimination. They also assert that the rule imposes significant compliance burdens and legal risks on small businesses without a clear legal mandate.
Where Active Enforcement Actions Stand
The Consumer Federation of America has published a memo outlining the status of enforcement actions at the CFPB, as a means of calling out the Bureau’s leadership for “repeatedly” attempting “to gut the only federal consumer financial law enforcement agency … by dismantling its enforcement program.” The memo details the 21 different enforcement actions that have been dismissed since Acting Director Russell Vought replaced former Director Rohit Chopra.
Along with dismissing nearly two dozen different cases, the CFPB has also terminated early or sought to vacate a handful of consent orders with different companies.
According to the memo, there are still 17 other publicly announced enforcement actions that are still pending or in progress.
