In statements from the Consumer Bankers Association and Consumer Federation of America, one offered praise, while the other believes that the new standard will open American consumers to additional abusive practices.
Following the release of a Consumer Financial Protection Bureau policy statement that intends to provide a framework for how the Bureau will apply the "abusiveness" standard in supervision and enforcement matters, the regulator received mixed reviews from the industry. The CFPB issued a policy statement clarifying how it intends to apply the "abusiveness" standard in supervision and enforcement matters. Under section 1031(a) of the Dodd-Frank Act, the Bureau may use its authority to prevent covered entities from engaging in abusive acts or practices in connection with consumer financial services or offerings. According to the Bureau, since the Act’s enactment almost 10 years ago, uncertainty remains as to the scope and meaning of abusiveness. The policy statement, which is immediately applicable, is intended to provide clarity and foster greater certainty (see Banking and Finance Law Daily, Jan. 24, 2020).
CBA statement. Following the release of the policy statement, Consumer Bankers Association President and CEO Richard Hunt released a statement saying, "Defining the CFPB’s interpretation of its UDAAP authority will assist consumers as well as financial institutions working to meet their customers’ needs by offering safe and sound banking products within a well-regulated industry. We applaud the Bureau for issuing this statement that provides regulatory clarity."
CFA statement. Professor Christopher Peterson, Director of Financial Services for the Consumer Federation of America and former CFPB law enforcement official, meanwhile believes that the policy statement "attempts to rewrite federal law without authorization from Congress or a court order." By allowing businesses that engage in abusive practices to escape responsibility while simply claiming that the violations were unintentional, Peterson believes that the new policy will open American consumers to additional abusive financial practices. In addition, the policy also imposes a new cost-benefit framework on law enforcement that will slow investigations and create an artificial barrier to protecting the public.
"Today’s decision will embolden debt collectors, payday lenders, and other finance companies to be more reckless and indifferent to the welfare of their customers," stated Peterson. "This policy will make it easier for the banking industry to insert tricks and traps in their contracts with the public. Under the Trump Administration, our consumer protection agency is protecting payday lenders, debt collectors, and credit reporting agencies instead of consumers. And, sadly, our federal consumer protection officials issued this unpopular and unlawful statement on a Friday afternoon, hoping that the public will not notice."
Companies: Consumer Bankers Association; Consumer Federation of America
MainStory: TopStory BankingFinance CFPB ConsumerCredit DoddFrankAct EnforcementActions FedTracker UDAAP
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