March 19, 2021

Compliance Week Quotes Alex Megaris on CFPB’s Reversal of Trump-Era Abusive Acts Stance

2 min

On March 15, 2021, Alex Megaris was quoted in Compliance Week on the Consumer Financial Protection Bureau’s (CFPB) reversal of a Trump administration policy on how it assesses and punishes abusive practices in the financial services industry.

According to the article, the agency’s March 11 announcement rescinds a January 2020 policy statement on the abusiveness standard issued by former CFPB Director Kathy Kraninger. In that statement, Kraninger said “uncertainty remains as to the scope and meaning of abusiveness” as defined in Dodd-Frank, and that applying the abusiveness standard in supervisory or enforcement actions “may impede or deter the provision of otherwise lawful financial products or services that could be beneficial to consumers.”

Megaris said the new statement “means abusiveness as a stand-alone claim is back on the table. Megaris noted the CFPB’s enforcement decisions have typically paired actions considered abusive with those characterized as unfair and deceptive. Abusive acts and practices are defined in the Dodd-Frank Act as “taking unreasonable advantage” of someone, like having a customer sign an agreement when the company or its representative knows they cannot understand it. Under Biden, this standard will more likely apply to practices involving customers who speak languages other than English, the elderly, and minority populations, she said.

Dodd-Frank also allows the abuse standard to be applied to businesses that promise to act in a customer’s best interest. This may be applied to companies that are acting in an advisory capacity, Megaris said, or that are somehow acting as a broker or middleman to help customers obtain financial services.

Click here to access the article.