CFPB Releases Policy Statement on Abusive Acts or Practices
Last week, the Consumer Financial Protection Bureau (CFPB) issued a policy statement reminding lenders of its prohibition against abusive acts and practices in the consumer financial market, which was created in 2010 when the CFPB passed the Consumer Financial Protection Act (CFPA) as a response to the Wall Street meltdown in 2008.
“In response to the predatory mortgage lending practices that drove the financial crisis, Congress banned abusive conduct in consumer financial markets,” said CFPB Director Rohit Chopra, according to PYMNTS. The latest guidance is meant to “provide an analytical framework to help federal and state agencies hold companies accountable when they violate the law and take advantage of families.”
The policy statement alleges that abusive conduct usually conceals a product’s key features or uses things like a lack of understanding or unbalanced bargaining power to gain an unfair advantage. Earlier this year, the CFPB went after companies that use “dark practices” in the subscription industry, like hiding information, making it hard to cancel subscriptions, or persuading customers to make unnecessary purchases.
The CFPB has also recently cracked down on small business lending; banks and nonbanks will have to broaden the data they collect when determining approval for new business loans. As a result, lenders will need to depend on digital means of collecting important borrower information.
“There is currently limited data on small business entrepreneurs’ access to credit, and no comprehensive information available about small business lending,” said the CFPB. “For decades, the government has assembled data pursuant to Congressional mandates on residential mortgages.”
Lenders who issue over 100 small business loans annually would have to collect and analyze demographic and other data under the CFPB’s new rules, which would represent more than 95 percent of small business loans issued nationwide.