CFPB Clarifies “Abusiveness” Standard in New Policy Statement

The Consumer Financial Protection Bureau (CFPB) recently issued a statement clearing up how the Bureau plans to tackle the Dodd-Frank Act’s “abusiveness” standard as it undertakes its supervision and enforcement authorities. The Dodd-Frank Act is the first federal law to broadly prohibit “abusive” acts concerning consumer financial services and products, which has led to uncertainty for covered persons.

“I am committed to ensuring we have clear rules of the road and fostering a culture of compliance ⎯ a key element in preventing consumer harm,” said CFPB Director Kathleen Kraninger in a press release announcing the policy. “We’ve developed a policy that provides a solid framework to prevent consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future.”

According to the statement, the agency is immediately implementing principles to promote compliance and clarify abusiveness. They will be focused on citing abuse when it may harm consumers, avoiding “dual pleading” for violations, and seeking monetary relief for abuse when there is a lack of effort to follow the law.

While the Bureau intends to apply these principles during enforcement work and supervision, the statement leaves open the possibility of future rulemaking an option to further define the standard.

In 2019, the CFPB held a Symposium on Abusive Acts or Practices where experts provided the benefits of forming a coherent understanding of abuse. They agreed that the Bureau should attempt to resolve the confusion, which played an important role in the CFPB’s decision to issue the policy statement.