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Question:

I read something about how the Consumer Financial Protection Bureau (“CFPB”) intends to apply the “abusiveness” standard in supervision and enforcement matters.  What’s changed?

 Answer:

The Dodd-Frank Act is the first Federal law to broadly prohibit “abusive” acts or practices in connection with the provision of consumer financial products or services.  Uncertainty as to the scope and meaning of “abusiveness” creates challenges for covered persons in complying with the law.

On January 24, 2020 the CFPB issued a policy statement providing a framework on how it intends to apply the “abusiveness” standard in supervision and enforcement matters.  The policy statement indicates that, effective immediately, the CFPB will apply the following principles during supervision and enforcement activities:

• Focus on citing or challenging conduct as “abusive” only when the harm to the consumer outweighs the benefit.
• Generally avoid "dual pleading" of “abusiveness” and “unfairness” or “deception” violations arising from all – or nearly all – the same facts in favor of alleging "stand alone" “abusiveness” violations that clearly demonstrate the nexus between cited facts and the CFPB’s legal analysis.
• Seek monetary relief for “abusiveness” only when there has been a lack of a good faith effort to comply with the law, except the CFPB will continue to seek restitution for injured consumers regardless of whether a company acted in good faith or bad faith.

The CFPB’s policy statement left open the possibility of engaging in a future rulemaking to further define the “abusiveness” standard.