CFPB Leadership Seeks to Provide Clarity around UDAAP

Mick Mulvaney, acting director of the Consumer Financial Protection Bureau (CFPB), recently announced that the CFPB would issue a regulation that would provide clarity around “unfair, deceptive or abusive acts or practices,” popularly known as UDAAP.

UDAAP has its origins in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that created the CFPB. Prior to Dodd-Frank, financial institutions were subject to laws regulating unfair or deceptive acts or practices, or simply UDAP. Over decades, these terms have been made clear and more defined by precedent.

In Dodd-Frank, Congress added the word “abusive” to UDAP, yet failed to fully define or clarify what it meant. Since its creation in 2010, the CFPB has done little to issue any agency guidance to supplement the brief descriptions of “abusive” in Dodd-Frank. “One of the biggest challenges is identifying what conduct is abusive that is not already deceptive or unfair,” former CFPB Deputy Enforcement Director Ori Lev said in 2015.

Speaking at the Mortgage Bankers Association’s annual conference, Mulvaney announced that the CFPB would issue a rulemaking that would define certain practices that would qualify as abusive. “I think we’re going to announce some rulemaking on what that term means, said Mulvaney. “I think ‘unfair’ is fairly well-established in the law, ‘deceptive’ is very well-established in the law and to my knowledge, I don’t think ‘abusive’ is nearly as established in the law.”

For much of the past year, consumer groups have been critical of Mulvaney’s approach as the head of the CFPB, arguing that he has not pursued UDAAP violations fully. At the conference, Mulvaney sought to assure his critics by saying that the CFPB has continued monitoring UDAAP violations because it is the law, which he does not have the authority to repeal.