Summary of the CFPB's New Policy for Abusive Acts or Practices
On January 24th, the CFPB issued a policy statement to provide clarification on how it intends to apply the “abusiveness” standard in supervision and enforcement matters. Abusiveness is a component of the Dodd-Frank Act’s Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) rule. The CFPB has acknowledged there is still uncertainty as to the scope and meaning of abusiveness, which creates challenges for complying with the law.
The CFPB now intends to apply the following principles during supervision and enforcement work, by:
- Citing or challenging conduct as abusive in supervision and enforcement matters only when the harm to consumers outweighs the benefit;
- 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 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.
In the future, the CFPB may engage in additional rulemaking to further define the abusiveness standard. For now, this is the first step in resolving the uncertainty.