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CFPB Attempts Clarity on Dodd-Frank Act’s Prohibition on Abusive Practices

Wednesday, February 12, 2020   (0 Comments)
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CFPB Attempts Clarity on Dodd-Frank Act’s Prohibition on Abusive Practices

 

Since the CFPB’s founding, industry participants have expressed concern regarding the breadth and ambiguity of the “abusive” authority. There continues to be little clarity on those considered abusive. In its most recent Policy Statement, the CFPB acknowledges the uncertainty and attempts to provide greater clarity, which indicates that the abusiveness standard will be limited in at least the following ways: 

Cost/Benefit Analysis – cite conduct as abusive only if the costs to consumers outweigh the benefits

Avoiding Dual Pleading – avoid challenging conduct as abusive that relies on all or nearly all of the same facts the CFPB alleges to be are unfair or deceptive  

Monetary Relief – will not impose civil penalties on companies who make a good-faith effort to comply with the abusiveness standard

This clarification does not give examples of abusiveness or further explain existing commentary on abusive acts. The Policy Statement also suggests that the agency’s interpretation trends constrictive. Also, even if the CFPB cites a company for an abusive act, penalties may be limited as long as the company has made a “good-faith” effort to comply with the abusiveness standard. In this regard, financial services providers may want to take care to clearly articulate and document the reasons products or services do not meet the abusiveness standard laid out in Dodd-Frank. 

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