Pub. 9 2020 Issue 1

The CommunityBanker 10 F E A T U R E O n Jan. 24, 2020, the Consumer Financial Protection Bureau (CFPB) published “Statement of policy regarding prohibition on abusive acts or practices” (Statement). 1 The CFPB’s intention in publishing the Statement was, “To convey and foster greater certainty about the meaning of abusiveness.” The Statement provides little to immedi- ately clarify the definition of abusiveness. It does create a framework for promoting greater clarity through super- visory opinions and enforcement actions over time. It also provides some reduction in the financial risk of violating the evolving standard. Background The Dodd-Frank Wall Street Reform and Consumer Protection Act (Act) provided the CFPB with supervisory and enforcement authority to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. 2 The term “abusive” was a new term in consumer financial services regulation. The Act provides that an act or practice is not abusive unless it: 1. Materially interferes with the ability of a consumer to understand a term or condition of a consumer finan - cial product or service; or 2. takes unreasonable advantage of (A) a lack of understanding on the part of the con- sumer of the material risks, costs, or conditions of the product or service; (B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or (C) the reasonable reliance by the consumer on a cov- ered person to act in the interests of the consumer. 3 A First Step on the Road to Clarity: CFPB Abusive Acts or Practices Statement of Policy