ICYMI: CBA Advocates For Revisions To CFPB Policy Statement On Abusive Acts Or Practices

The Consumer Bankers Association (CBA) this week submitted a comment letter to the Consumer Financial Protection Bureau (the Bureau) regarding its Statement of Policy Regarding Prohibition on Abusive Acts or Practices (the Policy Statement). In the letter, CBA reiterated longstanding concerns that the Bureau is utilizing guidance and policy statements as a substitute to formal rulemakings when communicating new legal standards for the industry:

“The Policy Statement as currently drafted does not clarify the abusiveness standard in a way that would allow regulated entities to understand what may be “abusive” in the Bureau’s future judgment. As a result, [it] is of little value to industry—or the Bureau—because there is no specificity that market participants can use to comply or that the Bureau can easily enforce.”

To alleviate regulatory uncertainty across the various laws under its purview and achieve the Bureau’s goal of providing an analytical framework for identifying abusive acts or practices, CBA urges the Bureau to revise the Policy Statement to:

1. Eliminate New, Ambiguous “Prominent and Clear” Disclosure of Terms Standard in Favor of the FTC’s Well-Established “Clear and Conspicuous” Standard
2. Clarify That the Use of Form Contracts is Not Per Se Abusive
3. Specify that the Bureau is Relying on the FTC’s Standard of Materiality
4. Provide greater clarity on the standard the Bureau will use for determining whether a financial services provider took unreasonable advantage of a consumer’s lack of understanding by:

• Revising the Policy Statement to articulate that a consumer’s lack of understanding must be “reasonable.”
• Identifying instances in which regulated entities should change products based on a small number of complaints rather than the current practice of making changes based on general trends and patterns of complaints; and
• Providing further detail on the Bureau’s expectations regarding a consumer’s awareness of potential negative consequences.

These examples illustrate just some of the ways the Policy Statement could be improved to provide actionable guidance to industry, enhance compliance practices, and better protect consumers. As CBA goes on to conclude:

“If the Bureau’s aim is providing ‘rules of thumb’ and ‘practical analytical frameworks,’ we would encourage the Bureau to revise the Policy Statement to establish objective standards that meaningfully define and place limitations on the meaning of abusiveness. […] Standards and definitional rigor in this Policy Statement would allow financial services providers to identify specific operations or products as part of their compliance efforts and create better outcomes for consumers.”

To read the full letter, click HERE.

CBA Advocacy

On Monday, CBA joined a broad coalition of financial services trade associations in a joint commentletter to the CFPB on its Policy Statement governing abusive acts or practices. The letter outlines significant flaws of the Statement including 1) how it deviates from the statute and 2) how it increases uncertainty rather than providing additional clarity.

Earlier this year in an op-ed for Real Clear Markets, CBA President & CEO Lindsey Johnson emphasized the need for Congress, rather than the CFPB, to outline the Bureau’s authority and clearly define UDAAP.