In late January, the Consumer Financial Protection Bureau (the “CFPB”) issued a “Statement of Policy Regarding Prohibition on Abusive Acts or Practices”, which the bureau itself styled a “common-sense framework on how it intends to apply the ‘abusiveness’ standard in supervision and enforcement matters.” The policy statement is being provided as the CFPB recognizes there is still a lot of confusion about what is meant by the term “abusive” almost a decade after it became law as part of a new Unfair, Deceptive, or Abusive Acts or Practices standard in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
As discussed in its release with the statement, the policy outlines three main principles the CFPB will follow in applying the “abusiveness” standard in its supervision and enforcement activities:
- Focusing on citing or challenging conduct as abusive in supervision and enforcement matters only when the harm to consumers outweighs the benefit;
- Generally avoiding “dual pleading” of abusiveness and unfairness or deception violations arising from all or nearly all the same facts, and alleging “stand alone” abusiveness violations that demonstrate clearly the nexus between cited facts and the Bureau’s legal analysis; and,
- Seeking monetary relief for abusiveness only when there has been a lack of a good-faith effort to comply with the law, except the Bureau will continue to seek restitution for injured consumers regardless of whether a company acted in good faith or bad faith.
Upon its first few rounds of supervision and enforcement activities, the CFPB was often criticized for a sense of what the industry termed “regulation by enforcement” especially in areas such as UDAAP where the elements of a violation were unclear. With this policy statement, it seems the CFPB is taking steps to make it clearer when a violation may occur so as to alleviate these “regulation by enforcement” concerns.
The CFPB’s announcement of the Policy Statement and accompany release can be found here.
