WASHINGTON—The Consumer Financial Protection Bureau has issued a policy statement it says explains the legal prohibition on "abusive conduc"t in consumer financial markets and summarizes more than a decade of precedent.
“In 2010, in response to the financial crisis, Congress passed the Consumer Financial Protection Act, and created the prohibition on abusive conduct,” the Bureau noted. “The Act tasks the CFPB, federal banking regulators, and states with the responsibility to enforce the prohibition, and puts the CFPB in charge of administering it. The policy statement will assist consumer financial protection enforcers in identifying wrongdoing, and will help firms avoid committing abusive acts or practices.”
Since the passage of the Consumer Financial Protection Act, the CFPB said it has brought 43 cases, and examiners have issued numerous citations, alleging abusive conduct. The claims have ranged from predatory student lending practices to charging consumers costly surprise overdraft fees, the agency said.
“Policy statements provide background information about laws the CFPB administers and articulate how the CFPB will exercise its authorities, but they do not impose new legal requirements," the CFPB stated. "In 1980 and 1983, respectively, the Federal Trade Commission issued policy statements on both the unfair and deceptive practices prohibitions. Similarly, today’s guidance summarizes precedent and establishes a framework to help federal and state enforcers identify when companies engage in abusive conduct."
In its new policy statement, the CFPB said it sets forth how abusive conduct generally includes obscuring important features of a product or service or leveraging certain circumstances—including gaps in understanding, unequal bargaining power, or consumer reliance—to take unreasonable advantage. In particular, the statement describes how the use of dark patterns, set-up-to-fail business models like those observed before the mortgage crisis, profiteering off captive customers, and kickbacks and self-dealing can be abusive.
Read the Statement of Policy Regarding Prohibition on Abusive Acts or Practices.