Back in April, the Consumer Financial Protection Bureau issued a policy statement on the prohibition on abusive acts or practices in financial services. At the same time it issued its statement, it also opened the statement up for comments from the public. In a comprehensive attempt to make its case, a number of trade groups from across the financial services industry joined together to submit a comment, saying that the policy statement was “too broad and general to provide guidance as to whether any specific market practice is ‘abusive.’ “
A copy of the comment, submitted by the American Financial Services Association, the Bank Policy Institute, the Consumer Bankers Association, the Credit Union National Association, the Mortgage Bankers Association, and the U.S. Chamber of Commerce can be accessed by clicking here.
This is not the first time that the CFPB has sought to define what constitutes “abusive” conduct within the confines of Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). Congress added the extra “A” into UDAAP when it enacted the Consumer Financial Protection Act and gave birth to the CFPB. The previously issued guidance was rescinded back in 2020 when former Director Kathleen Kraninger was fired.
In summarizing what will constitute abusive conduct, the CFPB said that anything that obscures the important features of a product or service or leverages certain circumstances to take an unreasonable advantage. Those circumstances generally will focus on gaps in understanding, unequal bargaining power, and consumer reliance.
“The statute and rules of statutory construction dictate that abusiveness means something more egregious than something unfair or deceptive, but the Statement does not articulate this fact,” the groups wrote. “The Statement indicates potential liability beyond the bounds set by Congress in the statutory language and also takes issue with standard and routine practices necessary to the functioning of markets for consumer financial products and services. Under the statute, whether acts or practices are potentially ‘abusive’ will turn on whether they materially interfere with a consumer’s understanding (beyond mere deception) or whether an institution has taken ‘unreasonable advantage.’ However, the Statement merely references the dictionary definitions of ‘reasonable’ and ‘unreasonable’ without providing guidance on factors that might render those acts or practices egregious and thus potentially unreasonable and abusive. In fact, there are several factors that emerge from the agency’s enforcement history on abusive claims that help distinguish lawful from unlawful conduct, which the Statement fails to highlight.”