Following its enaction, the Dodd-Frank Act left the financial services industry with uncertainty in many areas. For nearly 10 years, the industry has wondered and speculated about the inclusion of a prohibition against abusive acts and practices. What exactly is abusive conduct? Is abusive conduct different from false and misleading acts or unfairness? How will the CFPB handle enforcement?
On Jan. 24, the Consumer Financial Protection Bureau announced the long-awaited policy statement regarding the framework that it will use in enforcement activities related to the catch-all category of “abusiveness.”
At the get-go, the objective demonstrates a common-sense view: the principles are designed to promote compliance and certainty. This theme is carried on with the delineated principles:
- In evaluating conduct, to be abusive, the harm to consumers should outweigh the benefit.
- Abusive conduct is distinguishable from unfair or deceptive violations; therefore, no “dual pleading.”
- Monetary relief (penalties) for abusiveness only when there has been a lack of good-faith effort to comply. CAVEAT: restitution for injured consumer regardless of whether a company acted in good faith or bad.
The full policy may be found here.