The Consumer Financial Protection Bureau has rescinded Trump administration guidance on the agency's policy for combating “abusive” industry practices.
The Dodd-Frank Act gave the CFPB the authority to punish firms for violating the longstanding federal prohibition on "unfair" or "deceptive" acts or practices, while also introducing a new "abusive" standard.
Last year, then-CFPB Director Kathy Kraninger
But the CFPB, which is now led by acting Director Dave Uejio and has already unwound numerous Trump-era policies, said Thursday that Kraninger's January 2020 policy statement was inadequate and “inconsistent with the bureau’s duty to enforce Congress’s standard” on abusive conduct.
In explaining the policy reversal, the bureau pointed to Dodd-Frank's definition of abusive conduct. The law prohibits companies from materially interfering with someone’s ability to understand a product or service. It also forbids companies from taking unreasonable advantage of someone’s lack of understanding, inability to protect themselves and reliance on a company to act in the consumer's interests.
“Going forward, the CFPB intends to consider good faith, company size, and all other factors it typically considers as it uses its prosecutorial discretion,” the bureau said in a press release. “But a policy of declining to enforce the full scope of Congress’s definition of an abusive practice harms both the consumers who were taken advantage of and the honest companies that have to compete against those that violate the law.”
Before the agency released its guidance last year, banks and other financial institutions had long sought to narrowly define the abusive standard.
The CFPB said its reversion to the Dodd-Frank standard “deters abusive practices and compensates certain harmed consumers using penalties.”
Further, the bureau said the 2020 policy statement “undermined deterrence and was contrary to the CFPB’s mission of protecting consumers.”
