Pub. 9 2020 Issue 1

11 s p r i n g | 2020 F E A T U R E This is an undeniably broad definition. The CFPB acknowledged that nearly ten years after prohibition of abusive acts or practices, there remains significant uncertainty regarding the scope and meaning of abusiveness. The CFPB also acknowledged that its practice in enforcement actions of alleging abusiveness claims that arise from the same facts as allegations of either unfair or deceptive practices has limited the usefulness of those actions in building a clear definition of abusive as a separate and distinct prohibited behavior. A significant concern is that such uncertainty may impede or deter the provision of otherwise lawful fi - nancial products or services that could be beneficial to consumers. Action By reducing uncertainty regarding the definition of abusive, the CFPB seeks to improve compliance with the abusive standard while encouraging innovation in consumer products and services. The Statement does nothing to immediately clarify the definition of abusive. But, it does take three important steps to reduce uncertainty over time. First, the CFPB states its intention to focus its supervision and enforcement resources on acts or practices where the behavior meets the definition of abusive and the harm to consumers from the behavior outweighs its benefits to con - sumers including its effects on access to credit. This introduces a balancing test not previously articulated. Second, in circumstances where a single course of conduct may provide the factual basis for allegations of unfair, deceptive, or abusive acts or practices, the CFPB will avoid alleging an abusiveness violation that relies on all or nearly all the same facts as an unfairness or deception violation. This will help to create a clearer history of actions that the CFPB and courts find violate the abusive standard. Third, the CFPB expressed its intention not to seek certain monetary remedies for abusive acts or practices if the covered person made a good-faith effort to comply with the law based on a reasonable-albeit mistaken-interpre- tation of the abusiveness standard. This potentially reduces the financial risk of consumer finance innovation. Only a first step Over time the CFPB’s adherence to the Statement may lead to greater clarity, reduced uncertainty and greater innovation. But the Statement’s benefits are substantially qualified and limited. First, it is only a policy statement. It only suggests a course of action. It does not change the underlying law or bind the CFPB. Second, the CFPB will continue to seek equitable remedies for even good- faith violations of the abusive standard. CFPB retains the ability to determine what constitutes good-faith. Third, the CFPB may amend or re- verse its policy position in the future. The Statement is a positive develop- ment for financial service providers with a desire to develop innovative consumer products and services. But until a body of supervisory or enforce- ment actions is developed, the risks of innovation remain, for the most part, unchanged. 1 Bureau of Consumer Financial Protection, Statement of Policy Regarding Prohibition on Abusive Acts or Practices, https://www.consumerfinance.gov/policy- compliance/guidance/supervisory-guidance/statement- policy-regarding-prohibition-abusive-acts-or-practices/ (January 24, 2020) 212 USC §5531(a) 312 USC §5531(d) Mark Mangano is counsel with Jackson Kelly PLLC. Mark is an attorney focusing on strategic planning, corporate gover - nance and banking matters. He has 26 years of experience as the CEO and owner of a community bank. mark.mangano@ jacksonkelly.com . 304-284-4104