U-turn: CFPB rescinds policy statement on abusiveness

On March 11, 2021 the Consumer Financial Protection Bureau (CFPB) announced it was rescinding a policy statement it had issued in January 2020. The rescission of this policy statement could have a significant impact on the bureau’s approach to enforcement under the Biden Administration. For those who have not been following this issue closely, here’s a summary:

The policy statement was originally issue on January 24, 2020 under then-Director Kathleen Kraninger. The document’s stated goal was to reduce uncertainty by providing a framework for the bureau’s supervision and enforcement approach regarding abusive acts or practices. The policy statement discusses the history of the bureau’s authority in this area: Title X of the Dodd-Frank Act, which created the CFPB, empowered the bureau to “take any action authorized… to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice” in transactions involving consumer financial products or services. Other agencies, such as the Federal Trade Commission (FTC), had previously been empowered to take action against unfair or deceptive acts or practices, and thus there were guidance documents and legal precedents discussing those standards. However, this provision of Dodd-Frank was the first time a federal agency was empowered to take action against “abusive” acts or practices. While Dodd-Frank defined the term “abusive,” many participants in the financial services industry felt the definition alone was too broad and additional guidance was needed to describe which acts or practices would be deemed “abusive.” The bureau did not issue such guidance, but did bring a number of enforcement actions over the years alleging the defendants engaged in “abusive” acts or practices.

 

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