In another Biden era change, the Consumer Financial Protection Bureau has retracted a policy statement it issued last year on the ‘abusive’ standard of the Dodd-Frank Act.
Citing section 1031(d) of the Dodd-Frank Act, the CFPB said abusive acts were those which: materially interfere with someone’s ability to understand a product or service; take unreasonable advantage of someone’s lack of understanding; take unreasonable advantage of someone who cannot protect themself; or take unreasonable advantage of someone who reasonably relies on a company to act in their interests.
“Going forward, the CFPB intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act,” the bureau said.
The January 2020 statement was “inconsistent with the bureau’s duty” to use the standard outlined in Dodd-Frank, the agency said in a statement. In that statement, the bureau defined an abusive act as one which materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service. An abusive act would also be one which takes unreasonable advantage of a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service; or the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.
The January 2020 policy statement also said the bureau would focus on citing or challenging conduct as abusive in supervision and enforcement matters only when “the harm to consumers outweighs the benefit.” It said it would generally avoid “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. And the agency said it would seek monetary relief for abusiveness only when there was a lack of a good-faith effort to comply with the law, except when seeking restitution for injured consumers.
The agency cited this failure to seek monetary relief in certain circumstances for abusive acts and practices in revoking the policy statement since it “undermined deterrence and was contrary to the CFPB’s mission of protecting consumers.”
“A policy of declining to enforce the full scope of Congress’s definition of an abusive practice harms both the consumers who were taken advantage of and the honest companies that have to compete against those that violate the law,” the CFPB said.
The agency recently delayed implementation of a Trump-era change to mortgage rules, signaling a possible reversal under the Biden administration.