WASHINGTON—The Consumer Financial Protection Bureau said it is rescinding its Jan. 24, 2020 “Statement of Policy Regarding Prohibition on Abusive Acts or Practices.”
The change means the agency will be able to assess financial penalties, which it says it needs to be able to do to force compliance. The authority had been dialed back under the Trump Administration.
NAFCU said the change will create confusion unless greater clarity is provided.
Going forward, the CFPB said it intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress. The CFPB added it has made these changes to better protect consumers and the marketplace from abusive acts or practices, and to enforce the law as Congress wrote it.
In a statement, the CFPB said Congress defined abusive acts or practices in section 1031(d) of the Dodd-Frank Act. Paraphrasing Congress, that standard prohibits companies from:
- Materially interfering with someone’s ability to understand a product or service
- Taking unreasonable advantage of someone’s lack of understanding
- Taking unreasonable advantage of someone who cannot protect themselves
- Taking unreasonable advantage of someone who reasonably relies on a company to act in their interests.
‘Inconsistent Statement’
“The 2020 Policy Statement was inconsistent with the Bureau’s duty to enforce Congress’s standard and rescinding it will better serve the CFPB’s objective to protect consumers from abusive practices,” the CFPB said. “For example, the 2020 Policy Statement stated that the CFPB would decline to seek civil money penalties and disgorgement for certain abusive acts or practices. The CFPB deters abusive practices and compensates certain harmed consumers using penalties, so the Policy Statement undermined deterrence and was contrary to the CFPB’s mission of protecting consumers.”
Going forward, the CFPB said it intends to consider good faith, company size, and all other factors it typically considers as it uses its prosecutorial discretion.
“But a policy of declining to enforce the full scope of Congress’s definition of an abusive practice harms both the consumers who were taken advantage of and the honest companies that have to compete against those that violate the law,” the CFPB said.
The Rescission of the Policy Statement can be found here.
NAFCU Response
"The actions by the CFPB…will create regulatory uncertainty on what is considered to be abusive acts or practices," said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. "While the Dodd-Frank Act provides broad definitions of prohibited behaviors under UDAAP, these are not clear rules of the road. Credit unions strongly support consumer protections and consistently work to meet the needs of their members.
"NAFCU will continue to work with the Bureau and reiterate its longstanding call for specific examples and defined guidance on prohibited practices so that the CFPB can prevent abusive behaviors, as opposed to just going after the bad actors in the marketplace,” Hunt added.