CFPB Must Resolve Hastily Crafted, Overreaching Policy on Abusive Acts or Practices

Unknown Jul 03, 2023

Washington, D.C. – A broad coalition of financial services trade associations submitted comments t oday to the Consumer Financial Protection Bureau on its Policy Statement governing abusive acts or practices. The associations, including the Bank Policy Insti tute, American Financial Services Association, Consumer Bankers Association, Credit Union National Association, Mortgage Bankers Association, and the U.S. Cham ber of Commerce, expressed concern with the CFPB’s hasty approach to this policymaking, its deviation from statutory requirements and its failure to prov ide clear guidance regarding abusive acts or practices.

“Responsible providers already take steps to identify and avoid practices that may be unfair, deceptive or abusive, and federally-regulated financial institutions have extensive compliance management systems specifically to monitor for su ch conduct,” the coalition wrote. “By identifying conduct that may be abusive because it is more egregious than conduct that is solely unfair or de ceptive, the Bureau will enable institutions to better calibrate compliance systems, change practices, and better protect consumers.”

C ongress granted the CFPB authority to regulate unfair, deceptive, or abusive acts or practices (referred to as UDAAP) through the Consumer Financial Protection Act. Congress’s decision to specifically prohibit “abusive” acts or practices supports an interpretation that abusive actions must be more e gregious than unfair or deceptive practices; however, the specific application of this authority has been unclear. Instead of issuing a request for information or other solicitation for feedback on the interpretation of “abusiveness” prior to drafting the policy, the CFPB issued a Statement of Policy in A pril 2023 and sought comments after it was published in the Federal Register. This is the second iteration of a policy statement by the CFPB to define “a busive” acts. The CFPB issued a Statement of Policy in 2020, which was subsequently rescinded in 2021.

The 2023 Policy St atement has significant flaws:

• The Statement deviates from the statute. There is no di stinction made between unfair and deceptive acts or practices and abusive acts — which the Statement intends to address – despite clear indications from Congress that abusive acts are distinct and must clear a higher bar.
• The Statement increases uncertainty rather than pr oviding additional clarity. The Statement fails to point to important factors indicative of an abusive act or practice and instead refers to gen eric activities such as “obscuring features, products or services” or taking “unreasonable advantage” of a consumer.