CFPB Rescinds Policy Defining “Abusive” Standard for UDAAP
Earlier this month, the Consumer Financial Protection Bureau (“CFPB”) rescinded a Trump-era statement of policy that sought to define an “abusive” act or practice for purposes of the Dodd-Frank Act’s UDAAP prohibition. The now rescinded policy statement defined an “abusive” act or practice as one in which the harm to consumers outweighs the benefit. According to the CFPB, under the direction of acting Director Dave Uejio, the definition contained in the prior policy statement was inconsistent with the definition of abusive acts contained Section 1031(d) of the Dodd-Frank Act and, if allowed to remain, would limit the CFPB’s ability to enforce the full scope of what Congress intended by its definition of an “abusive” act.
The CFPB’s decision to rescind the policy is a blow to financial service providers who have long sought to clarify what standard the CFPB applies in determining an act or practice to be “abusive” in violation of the Dodd-Frank Act. The lack of any clear standard has led some to charge that the CFPB’s standard for “abusive” acts or practice boils down to “we know it, when we see it.”
More broadly, the rescinding of the policy statement is another clear signal to the industry that a significant uptick in enforcement actions from the CFPB is on its way.
The CFPB’s news release rescinding the policy can be found here.