UDAAP ‘Abusiveness’ uncertainty creates impediments to those that want to comply with law, consumer bureau leader asserts

Uncertainty over the parameters of “abusiveness” creates impediments to innovation and other helpful developments in the marketplace, according to the director of the federal consumer financial protection agency, a condition, she claimed, that makes it harder for businesses desiring to comply with the law to do so.

In opening the first of the Consumer Financial Protection Bureau’s symposia series on key topics, Kathleen (“Kathy”) Kraninger said the bureau’s authority to protect consumers from unfair, deceptive, or abusive acts or practices – or “UDAAP” – is “a fundamental and critical responsibility.” But, she asserted, “abusiveness” – which was added to federal law in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) – lacks a “long and rich history” under legal definitions. She said that stands in contrast to 80 years of authority by the Federal Trade Commission (FTC) to address unfair and deceptive acts and practices that harm consumers.

“Statutory language, regulations, agency policy statements, and a substantial body of case law have clarified the metes and bounds of these concepts” of unfair and deceptive acts and practices, she said. “Over time, this has provided reasonably clear standards for market participants to use in assessing whether their own conduct comports with laws prohibiting unfair and deceptive acts and practices.

“’Abusiveness’ is somewhat different,” she said.

Kraninger said Tuesday’s symposia “will help inform the bureau’s thinking as to whether the bureau should use its rulemaking or other tools to provide clarity about the general meaning of abusiveness – and, if so, which principles should be applied to determine the scope of abusiveness.”

In remarks following Kraninger, bureau Deputy Director Brian Johnson said future symposia sponsored by the bureau would look at behavioral law and economics, small business loan data collection, disparate impact and the Equal Credit Opportunity Act, cost-benefit analysis, and consumer-authorized financial data sharing.

Kathleen L. Kraninger’s Speech at the Abusive Acts or Practices Symposium