The Consumer Financial Protection Bureau is putting limits on the ways that it will use its power to pursue banks and other financial companies for abusive practices against consumers, Bloomberg Law reported. The 2010 Dodd-Frank Act gave the CFPB the unique authority to go after companies for abusive practices alongside long-established standards for pursuing unfair or deceptive acts and practices (UDAP). The financial services industry has long complained that there has been little guidance as to what constitutes an abusive practice. Under a new policy statement, the CFPB said that it will no longer bring abusiveness claims against companies alongside claims that they have engaged in unfair and/or deceptive practices, unless the CFPB can provide a legal rationale for bringing a separate abusiveness claim. The policy statement also says that the CFPB will only bring an abusiveness claim if the agency “concludes that the harms to consumers from the conduct outweigh its benefits to consumers (including its effects on access to credit).” A company’s actions would be deemed abusive if they “materially interfere” with a customer’s ability to understand a term or condition attached to a financial product under a two-pronged test. The second prong states that a practice can be abusive if a company takes “unreasonable advantage” of a customer’s inability to understand any risks or costs of a product or a consumer’s inability to make a choice in their service provider. Read the CFPB press release.
