CFPB Drops UDAAP Discrimination Case – Mortgage Lenders Need to Know

The Consumer Financial Protection Bureau (CFPB) has officially dismissed its Fifth Circuit appeal challenging a 2023 ruling that struck down the CFPB’s 2022 UDAAP examination manual update. That update controversially sought to classify discrimination as an “unfair” practice even in cases where traditional fair lending laws did not apply.

On April 30, 2025, the CFPB filed a joint stipulation agreeing to dismiss its appeal with prejudice – permanently closing the door on this case.  See our prior discussion here.

Why This Matters

• The 2022 UDAAP manual update is permanently vacated.

• The dismissal cements the district court’s decision that the CFPB exceeded its statutory authority and bypassed proper rulemaking under the Administrative Procedure Act (APA).

• The CFPB is signaling a broader retreat from expansive legal theories.

• This move aligns with the CFPB’s recent trend of stepping back from hyper-aggressive interpretations advanced under the prior administration.

What This Means for Mortgage Lenders and Financial Institutions

While the CFPB is abandoning this specific UDAAP-discrimination theory, fair lending enforcement remains a priority for:

• State regulators,

• Private plaintiffs,

• Future federal leadership, and

• The CFPB

The shift from the hyperaggressive stance does not necessarily signal that the CFPB is declining to enforce fair lending laws.  To the contrary, it could simply mean that the agency will focus on more viable cases.  It is also important to note that the book of business being written today could very well be reviewed by a very different CFPB in the future. 

Mortgage lenders, banks, and other financial services companies should continue to:

• Maintain robust fair lending compliance programs

• Monitor evolving regulatory guidance

• Stay prepared for potential litigation risks

UDAAP and fair lending obligations are still firmly in place, even as the CFPB’s approach evolves.

Bottom Line

The CFPB’s decision offers welcome regulatory clarity. However, mortgage companies and financial institutions should use this window to review and strengthen compliance strategies.  State and private enforcement of fair lending laws are ripe for expansion and there are plenty of regulators to dig into these issues.

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Want to understand more? Contact Troy Garris at troy@garrishorn.com  for further information on how this decision is likely to affect your business.