The Consumer Financial Protection Bureau is attempting to clarify its definition of “abusiveness” standards relating to its supervision and enforcement under the Unfair, Deceptive, or Abusive Acts or Practices Act, which regulates financial services companies under the Dodd-Frank Act.
“One of the criticisms the bureau has faced over the last 10 years is that they’ve had a difficult time defining what ‘abusive’ is,” Michael Benoit, chairman at Hudson Cooke, told Auto Finance News. “They’ve also had a difficult time defining how ‘abusive’ is different than ‘unfair’ or ‘deceptive.’” The new policy would focus on identifying conduct as abusive only when the harm to consumers outweighs the benefits, according a statement from the CFPB. It would also avoid lumping violations of abusiveness, unfairness and deceptiveness together if they arise from the same facts. Finally, the CFPB will seek monetary relief for “abusive” infractions from institutions only when there has been a lack of “good faith effort to comply with the law.”
In the past, the CFPB has used “abusive” as a safety net for behavior it finds objectionable, but isn’t necessarily “deceptive” or “unfair,” Benoit said. “I think [this new clarification] is to get away from that as a catch-all for actions the bureau may not like, but isn’t necessarily harmful for consumers,” he added.
“We’ve had years of jurisprudence to identify what’s unfair and what’s deceptive. This [policy] at least puts people on notice that the beholder has to go beyond just unfairness deceptiveness to be abusive,” Benoit said. “It’s a bit of a needle to thread. But, it’s a start, and I suspect that this is going to be an evolving standard over time,” he added.
However, while the notice is beneficial to the industry, the bureau’s new policy is not without its shortcomings, Christopher Willis, of Ballard Spahr, told AFN.
“The bulletin says nothing about unfair and deceptive [practices], and it says nothing about when the bureau must choose to address something as abusive versus unfair or deceptive,” Willis said. “So, the choice that the bureau has had all this time in choosing unfair, deceptive over abusive [practices] — a choice, which by the way, they have almost always made in favor of unfair and deceptive — is still there and completely unchanged by the bulletin,” he explained.
“The other thing about the bulletin is it’s full of these very subjective concepts, like weighing harm versus benefit, or whether a company is ‘acting in good faith’ or not,” Willis said, noting that the CFPB has already issued numerous consent orders under the current administration, choosing not to impose civil monetary policies on companies because of a “good faith” action.
“What would have been helpful is some sort of indication as to why additional types of facts would cause behavior that was ‘unfair’ or ‘deceptive’ to also be ‘abusive,’” Hudson Cooke’s Benoit added, noting that the first two behaviors could sometimes be considered abusive.
“It’s not perfect, but it’s certainly a step in the right direction,” said John Redding, partner at Buckley LLP. “I think that’s true for both consumers and industry.”
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