Critics of the current regime leading the Consumer Financial Protection Bureau had harsh words to describe their feelings and reaction to the agency’s policy statement that sought to define how it would address abusive acts or practices under the Unfair, Deceptive, and Abusive Acts or Practices (UDAAP) component of the Dodd-Frank Act.
“Friday’s announcement that the Consumer Bureau will enact a policy to gut the Dodd Frank Act’s prohibition on unfair, deceptive or abusive acts or practices will only encourage bad actors to engage in the reckless anti-consumer behavior that led to the financial crisis,” said Rep. Maxine Waters [D-Calif.], the chair of the House Financial Services Committee and a vocal critic of the current leadership of the CFPB. “Director Kraninger’s new policy creates new standards that must be satisfied before the Consumer Bureau will enforce the ‘abusive’ component of UDAAP, hampering the agency’s ability to protect consumers or to punish bad actors. This policy will also hinder the Consumer Bureau’s ability to hold entities accountable by rewriting the law to require a cost-benefit analysis when considering whether an act or practice is abusive. Even worse, it allows entities that engage in abusive conduct to avoid paying penalties, literally letting those who abuse consumers get off scot-free.”
Under the policy statement, the CFPB said it would only bring an abusive claim “when the harm to consumers outweighs the benefit.” As well, the CFPB also said that it would generally not seek monetary relief for abusive violations “where the covered person was making a good-faith effort to comply with the abusiveness standard.”
“The Policy Statement is disappointing in several respects,” wrote Jeff Sovern, a professor at St. John’s University School of Law who maintains a blog on consumer law and policy. “I want to suggest another reason the industry pressed the Bureau to limit the use of its abusiveness power: the more the Bureau foregoes use of its abusiveness power, the more the industry can engage in abusive conduct to generate revenue. It is not a coincidence that Congress gave the Bureau the power to block abusive behavior in the wake of the subprime lending that led to the Great Recession.”
Some advocates accused the agency of purposely “tying its own hands” in issuing the policy statement.
“It seems that the agency is trying to highly constrict the use of ‘abusive’ by using terms that do not fully capture the way lenders behave,” said Linda Jun, an attorney at the advocacy Americans for Financial Reform.