CFPB to define ‘abusive acts or practices’

“Regulation by enforcement is the equivalent of playing ‘Guess Who’ for financial institutions."

Credit union trade groups, longtime critics of the CFPB’s vague power to police financial industry “abusive” practices say they’re pleased the agency is going to take steps to define what those practices are.

Under the Dodd-Frank Act, the CFPB has the power to take action when it finds evidence of Unfair, Deceptive or Abusive Acts or Practices. Federal law long has allowed agencies to take action when they find unfair or deceptive practices. However, Dodd-Frank expanded that to include abusive acts or practices.

Critics say the agency, under the leadership of former Director Richard Cordray never codified what that meant, although in a 2013 bulletin, the agency said that “UDAAPs can cause significant financial injury to consumers, erode consumer confidence, and undermine fair competition in the financial marketplace.”

The bulletin went on to say that an act is abusive when it takes unreasonable advantage of consumers’ lack of understanding, their inability to protect their interests or their “reasonable” reliance on someone to protect their interests.


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