BCFP To Issue Rule Defining ‘Abusive’ Practice

Mick Mulvaney, the acting director of the Bureau of Consumer Financial Protection, announced yesterday that the agency is working on a rule to codify what has been considered one of the most amorphous, yet harmful, words in the BCFP’s lexicon: abusive.

While there have long been laws that banned practices deemed to be unfair or deceptive, the Dodd-Frank Wall Street Reform & Consumer Protection Act, which gave birth to the BCFP, added the word abusive into the financial services practices that the agency had purview over. And the BCFP has frequently used its enforcement authority to penalize firms for engaging in what the agency defined as abusive practices. But what constituted an abusive practice was undefined, until now.

“I think ‘unfair’ is fairly well-established in the law, ‘deceptive’ is very well-established in the law and to my knowledge, I don’t think ‘abusive’ is nearly as established in the law,” Mulvaney said yesterday during remarks before a group of mortgage bankers.

One thing Mulvaney made clear during his speech was that if a financial services company regulated by the BCFP was going to be accused of wrongdoing, the agency will be able to point to a specific rule or law that has been allegedly broken.

“Regulation by enforcement is done,” Mulvaney said.

Since Mulvaney does not have the power to repeal or amend the UDAAP provisions of Dodd-Frank, and he acknowledged that UDAAP is the law under Dodd-Frank, a rule clarifying what constitutes an abusive practice was the least he could do for the industry.

“You have a right to know what the law is,” Mulvaney said.

It has been pointed out by a a number of outlets that the regulatory and enforcement actions announced by the BCFP during Mulvaney’s 11 months at the helm of the agency are dramatically lower from the number announced by his predecessor, Richard Cordray.