Last year, the CFPB provided some answers to the question: What is abusive conduct? For 10 years, industry waited on a policy statement regarding the framework that the CFPB would use in enforcement related to the catch-all category of “abusiveness” only to have the CFPB rescind the policy statement citing that it intended to “exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act.”
The intention of the 2020 Abusiveness Policy statement was to provide industry with principles and a framework to assess abusive activities in order to deliver clarity to regulated entities. In rescinding the 2020 policy, the CFPB determined these principles failed to deliver clarity and that the 2020 policy’s “intended principles have the effect of hampering certainty over time.”
For example, under the 2020 policy statement, the CFPB stated that it would decline to seek penalties and disgorgement when covered persons were making a good-faith effort to comply with the standard. In hindsight, the Bureau views that applying such a principle provides too much discretion to the agency. Instead, the CFPB now believes there is no reason to treat the abusiveness standard differently from the “normal considerations that guide the Bureau’s general use of its enforcement and supervisory discretion.”
What is abusive now?
According to the CFPB, it will rely on the defined abusive acts and practices from section 1031(d) of the Dodd-Frank Act, broadly summarized as prohibiting companies from:
- Materially interfering with consumers’ ability to understand a product or service;
- Taking unreasonable advantage of consumers’ lack of understanding;
- Taking unreasonable advantage of consumers who cannot protect themselves; and
- Taking unreasonable advantage of consumers who reasonably rely on a company to act in their interests.
