Holding out the possibility of a future rulemaking, the consumer financial protection agency on Friday announced what it described as a “common-sense” framework on how it plans to apply the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank) prohibition on abusive acts or practices.
The Consumer Financial Protection Bureau (CFPB), which put the new policy into effect Friday, notes that Dodd-Frank is the first federal statute to broadly prohibit “abusive” acts or practices in connection with the provision of consumer financial products or services. It says the new policy attempts to provide clarity.
“Through this policy statement, the Bureau is providing clarification on how it intends to apply abusiveness in order to promote compliance and certainty,” it said in Friday’s announcement.
The bureau said that “commencing immediately,” it intends to apply the following principles 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;
- 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.
“I am committed to ensuring we have clear rules of the road and fostering a culture of compliance – a key element in preventing consumer harm,” said CFPB Director Kathleen Kraninger. “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.”
The policy statement and Friday’s announcement notes that during a symposium the CFPB held last June on the abusiveness standard, most (but not all) participants expressed a need for more clarity to aid compliance. It says that in issuing Friday’s statement, the bureau “does not foreclose the possibility of engaging in a future rulemaking to further define the abusiveness standard.”
The policy does not address the Dodd-Frank prohibitions of unfair or deceptive acts, which, the bureau notes, have been addressed through policy statements, administrative and judicial precedent, and statutory amendments over 80 years under the Federal Trade Commission Act.