CFPB Rescinds Policy Statement Regarding Prohibition on Abusive Acts or Practices

Last week, the Consumer Financial Protection Bureau (CFPB) rescinded its “Statement of Policy Regarding Prohibition on Abusive Acts or Practices,” originally issued in January 2020.

The Bureau’s rescission claims that  the January 2020 statement issued under previous CFPB Director Kathy Kraninger was inconsistent with its duty to enforce Congress’s law, as it stated the CFPB would “decline to seek civil money penalties and disgorgement for certain abusive acts or practices.” The rescission also notes that the 2020 policy statement undermined deterrence as the CFPB uses penalties to deter abusive practices, so such a policy goes against the CFPB’s mission.

“Going forward, the CFPB intends to consider good faith, company size, and all other factors it typically considers as it uses its prosecutorial discretion,” the CFPB said in a press release. The release also noted that these changes were made to allow the Bureau to “enforce the law as Congress wrote it.” This includes following the standards that define what constitutes an abusive act or practice, as outlined in section 1031(d) of the Dodd-Frank Act.

In the Dodd-Frank Act, Congress defined “abusive” acts or practices as interfering with consumers’ ability to understand a product, taking advantage of consumers’ lack of understanding, and taking advantage of a consumer who cannot protect themselves or who relies on a company to act in their interests.

“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 Bureau said.