CFPB Rescinds “Abusive” Policy Foreshadowing More Aggressive Enforcement
The Consumer Financial Protection Bureau recently announced its intention to rescind its 2020 “abusive acts and practices” policy statement. The CFPB’s authority to prevent such practices stems from the Dodd-Frank Act, which also created the CFPB.
In 2020, the CFPB set forth narrow principles that should be considered when applying its “abusive” authority. The first, consumer harm and countervailing benefits. The second, avoiding additional “abusive” allegations when the facts are similar to unfairness or deception allegations. The third, whether the covered entity made a good faith effort to comply with the law.
In announcing its intention to rescind the 2020 policy statement, the CFPB stated that the “2020 Policy Statement was inconsistent with the Bureau’s duty to enforce Congress’s standard” and that “the CFPB intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress.”
Pursuant to the Dodd-Frank, an act or practice is abusive if it:
- Materially interferes with someone’s ability to understand a product or service
- Takes unreasonable advantage of someone’s lack of understanding
- Takes unreasonable advantage of someone who cannot protect themselves, and
- Takes unreasonable advantage of someone who reasonably relies on a company to act in their interests
According to the CFPB, the agency intends to consider good faith, company size and other factors it typically considers in its prosecutorial discretion.” However, the CFPB made it clear that it would not bound by the prior policy statement that, from the perspective of now current leadership, fails to enforce the law as Congress intended.
The Bureau has generally used its abusive authority sparingly. In those few cases where it has specifically alleged abusiveness, it wasn’t clear that the Bureau couldn’t have brought the allegations under either an unfairness or deception theory.
The announcement is consistent with expectations that the CFPB will be significantly more aggressive when it comes to enforcement proceedings than it had been in recent years.
This topic should be of interest to digital marketers and participants in performance marketing landscape. Consult with an experienced FTC defense attorney to discuss the meaning of impact of the CFPB’s recent announcement.
Richard B. Newman is an FTC attorney at Hinch Newman LLP..
Informational purposes only. Not legal advice. May be considered attorney advertising.