The CFPB issued a policy statement on Jan. 24 that provides guidance on applying the “abusiveness” standard in supervision and enforcement matters.
The Dodd-Frank Act prohibits “abusive” acts or practices in connection with the provision of consumer financial products or services, but the scope and meaning of abusiveness has remained unclarified. “This uncertainty creates challenges for covered persons in complying with the law and may impede or deter the provision of otherwise lawful financial products or services that could be beneficial to consumers,” states a press release by the CFPB.
The release further outlined the following principles it intends to apply during supervision and enforcement work:
- focusing on citing or challenging conduct as abusive in supervision and enforcement matters only when the harm to consumers outweighs the benefit;
- generally avoiding “dual pleading” of abusiveness and unfairness or deception violations arising from all or nearly all the same facts, and alleging stand-alone abusiveness violations that demonstrate clearly the nexus between cited facts and the bureau’s legal analysis; and
- seeking monetary relief for abusiveness only when there has been a lack of a good-faith effort to comply with the law, except the bureau will continue to seek restitution for injured consumers regardless of whether a company acted in good faith or bad faith.
“We’ve developed a policy that provides a solid framework to prevent consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future,” said CFPB Director Kathleen Kraninger in the press release.
In its policy statement, the CFPB left open the possibility of engaging in a future rulemaking to further define the abusiveness standard.
The full CFPB statement can be accessed here.