Officials at small banks are justifiably concerned that aggressive regulation by the Consumer Financial Protection Bureau could force them to stop offering mortgages or could even result in the end of community banks, according to lawyers with CFPB enforcement experience.

The lawyers, including Ballard Spahr partner Christopher J. Willis, said the CFPB is pursuing a disparate impact theory of discrimination with little detail about the regulator's methodology, and is offering insufficient guidance on what exactly constitutes unfair, deceptive, and abusive acts or practices (UDAAP).

Mr. Willis argues that the CFPB has been aggressive in its interpretation of UDAAP, and he criticized the Bureau for failing to provide sufficient guidance before taking action.

"It's just a question of trying to figure out what the agency thinks is unfair and deceptive and what's not," he said. "And when we find that out through a consent order, whoever the consent order is against didn't have advance notice of that."

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