U.S. Chamber Pressures CFPB to Define "Abusive"

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WASHINGTON — The Consumer Financial Protection Bureau should outline what constitutes potentially "abusive" acts or practices, a top U.S. Chamber of Commerce official said Monday.

David Hirschmann, the president and chief executive of the Chamber's Center for Capital Markets Competitiveness, proposed 12 steps that the agency should take to improve its supervision and regulatory processes.

In a letter to CFPB Director Richard Cordray, Hirschmann cited concerns about the new "abusive" standard that was added to the Dodd-Frank Act, along with the already statutory terms "unfair and deceptive practices." Cordray has previously indicated that the agency does not need to spell out what "abusive" is, but Hirschmann said state attorneys general and state regulators could both bring enforcement actions based on their own interpretation of it.

"It is the bureau's responsibility to ensure the law is enforced consistently and disparate standards do not impose excessive compliance burdens and fragment our national credit market at a time when it is already under serious strain," Hirschmann wrote. "A policy statement defining the term… will help prevent divergent interpretations of the 'abusive' standard."

Hirschmann also said the agency should change the way it conducts examinations, including stop bringing enforcement attorneys along as part of the process.

"This fundamentally alters the supervisory relationship, transforming it into an adversarial proceeding," he wrote. "If the goal of the supervision process is an open exchange of information between the bureau and the companies it supervises, this practice is counterproductive."

The Center also objected to what it claimed was a new liability standard in an April 12 bulletin from the agency providing guidelines on when a company can be held responsible for the actions of its service providers. The bulletin said that "depending on circumstances, legal responsibility may lie with the supervised bank or nonbank as well as the supervised service provider."

But Hirschmann said that went too far.

"Surely a random act of negligence by a well-supervised service provider cannot be attributed to the supervised bank or nonbank — but the bulletin provides no information regarding the selection and monitoring procedures that the bureau that a bank or nonbank should put in place to protect against this liability," he wrote.

The letter also urged the CFPB to:

  • Change how it publishes consumer complaints, arguing it should take more steps to ensure the complaints are accurate
  • Sign a memorandum of understanding with the White House Office of Information and Regulatory Affairs to ensure the CFPB's cost benefit analyses are conducted correctly
  • Modify how it conducts small business impact studies
  • Improve coordination with the Federal Trade Commission
  • Ensure the CFPB's pending arbitration study is comprehensive
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