In the first of a series of symposia to "explor[e] consumer protections in today's dynamic financial services marketplace," the CFPB on June 25, 2019 held a two-panel symposium on the scope and application of the term "abusive" as defined in the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act's (CFPA) prohibition of unfair, deceptive, or abusive acts or practices (UDAAP).
Director Kathleen Kraninger opened the symposium, noting that industry participants have commented that "uncertainty about abusiveness's parameters" creates compliance challenges. Moreover, she noted that while the CFPA defines the term "abusive," this prong of the CFPB's UDAAP authority is not supported by an extensive history of interpretive caselaw. Director Kraninger reiterated that the Bureau is considering "rulemaking or other activities" to clarify the scope and meaning of "abusive acts or practices." To help inform the Bureau's future activity, the CFPB sought commentary from academics, industry participants, and other enforcement agencies regarding:
- Whether the Bureau should clarify the term "abusive" in the CFPA;
- If the Bureau decides to define "abusive," the optimal process to create the definition (e.g., through rulemaking or guidance); and
- How a new definition of the term "abusive" might overlap with the current definitions of the terms "deceptive" and "unfair" practices.
Panelists from the public and private sectors presented a wide array of opinions and proposals. A key point of disagreement among the panelists was whether the Bureau should seek to provide clarity through a rulemaking, informal guidance, or let "abusive" continue to be defined through caselaw and enforcement actions.
The first panel of academics from various law schools focused on policy considerations, while the second panel of public and private sector attorneys addressed the practical impacts the current "abusive" standard has on businesses and the financial services market. Issues raised by the panels included whether an "abusive" act or practice must result in consumer harm, whether the Bureau has the authority to write rules defining "abusive," and whether "abusive" requires scienter or knowledge on the part of the person or company engaged in an alleged "abusive" act or practice. Panelists noted, among other things, that rulemaking provides more certainty and concrete parameters for compliance in the industry, while also providing clear direction to Bureau attorneys regarding what to investigate and prosecute. Whereas application of "abusive" on a case-by-case basis or "regulation by enforcement" provides regulators with flexibility, it fails to provide industry participants with fair warning to avoid violating the law.
A majority of industry participants and private sector attorneys see a benefit to some form of rulemaking that provides clear guidance. However, some academics and enforcement officials seem to prefer the flexibility of "regulation through enforcement."
Deputy Director Brian Johnson stated that the CFPB plans additional symposia on behavioral law and economics, small business loan data collection, disparate impact and the Equal Credit Opportunity Act, cost-benefit analysis, and consumer-authorized financial data sharing.