Bureau Sows More Confusion on UDAAP
This spring, the Consumer Financial Protection Bureau (CFPB) released a proposed Statement of Policy Regarding Prohibition on Abusive Acts or Practices.
While the Statement is meant to produce “clearer and simpler guidance,” it instead sows more confusion. AFSA submitted a letter on the policy outlining some key objections to the Statement:
It is inconsistent with the statutory term it seeks to clarify.
- The Statement purports to give its view of what the statute’s text means. Instead, it expands the concept of “abusive” in a manner unmoored from the underlying statute and inconsistent with the understood meaning of the word “abusive.”
It would make common business practices “abusive” and demonstrates a fundamental lack of understanding of consumer-credit businesses.
- The Statement includes a number of common practices as potential indicators of abusiveness that the CFPB has previously deemed acceptable in other markets.
- These include drop-downs, pop-ups, and click-throughs.
It is not sustainable.
- Guidance that fails to meaningfully differentiate between innocent conduct and abusive acts and practices and that is so vague as to leave industry participants unable to guard against liability cannot realistically be enforced in a fair manner.
- Guidance is only useful when a regulated entity can implement it and know ahead of time whether its conduct is compliant or not.
It cannot be implemented in practice or with fairness.
- The Statement is in its second iteration; the first version lasted only 14 months and was rescinded after a change of administration.
- Because the CFPB, unlike the FTC, is run by a single director removable by the President, its guidance is more prone to result in industry whiplash, as each new administration “interprets” the statute differently than the previous one.
AFSA also signed on a joint trade letter expressing concern with the CFPB’s hasty approach to this policymaking, its deviation from statutory requirements and its failure to provide clear guidance regarding abusive acts or practices.
AFSA calls on the Bureau to withdraw the statement.
July 7th, 2023 by AFSA
