The CFPB has rescinded its January 2020 Policy Statement regarding the Bureau's approach to "abusive" acts or practices under the Consumer Financial Protection Act's ("CFPA") prohibition of unfair, deceptive, or abusive acts or practices ("UDAAP"). The "abusive" prong of UDAAP was an addition to the unfairness and deceptive standards that the CFPA imported from the Federal Trade Commission Act. As a new principle without a history of interpretation and guidance, the "abusive" prong of UDAAP has created a level of uncertainty with regard to the scope of the prohibition and the Bureau's enforcement authority.
The 2020 Policy Statement included three guideposts that the CFPB has used to inform its use of the "abusive" prong in enforcement and supervisory activity:
- Balancing benefits to consumers with regulatory certainty.
- Focusing on stand-alone abusive prong violations.
- Recognizing and considering good-faith efforts to avoid abusive acts or practices and to comply with applicable law.
These guideposts are no longer operative. And since the 2020 Policy Statement was a general statement of policy exempt from the notice and comment rulemaking requirements of the Administrative Procedure Act, it may be rescinded at will by the Bureau, without a notice and comment period or similar process.
In rescinding the 2020 Policy Statement, the CFPB noted that the discretion allowed under the 2020 Policy Statement did not reduce regulatory uncertainty or "delivery clarity to regulated entities." The Bureau also stated that civil money penalties and disgorgement, among other penalties, are used to "deter abusive practices and compensate certain harmed consumers" and are a part of the CFPB's "mission of protecting consumers."
The rescission may signal a return by the Bureau to its prior use of the "abusive" prong of UDAAP and its prior enforcement policies generally. As such, the rescission may be a good incentive to review and revisit policies, procedures, and compliance controls in light of the UDAAP prohibitions and financial regulatory requirements.