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On June 25, the CFPB held its “Abusive Acts or Practices Symposium,” the first event in a symposia series covering a range of consumer financial services topics. The event had two panels of experts discussing unfair, deceptive, or abusive acts and practices (UDAAP)—the first was a policy discussion, moderated by Tom Pahl, CFPB’s Policy Associate Director, Research, Markets and Regulation; and the second, examined how the “abusive” standard has been used in practice in the field and was moderated by David Bleicken, CFPB Deputy Associate Director, Supervision, Enforcement and Fair Lending. Director Kraninger began the symposium noting that it will help to “inform the Bureau’s thinking as to whether the Bureau should use its rulemaking or other tools to provide clarity about the general meaning of abusiveness—and, if so, which principles should be applied to determine the scope of abusiveness.”
The policy panel focused on whether consumer harm was required for a practice to be considered abusive. One panelist noted that while the Dodd-Frank Act statutory definition of abusive does not specifically require proof of consumer harm, it would be surprising if consumer harm wasn’t a priority in weighing enforcement claims. As for what principles the Bureau should apply in determining the scope of abusive acts and practices, one panelist identified three: “fidelity, autonomy, and modesty,” meaning the Bureau should follow the statutory language, protect autonomy of consumer decision-making, and be careful not to tie its hands prematurely based on current market information.
The practitioners’ panel focused on whether there was even a need to clarify the abusive standard, as it is already statutorily defined. Most panelists agreed that a guidance document or policy statement would be an important first step for the Bureau in providing clarity to the industry. Specifically, the panelists noted that the industry has struggled with examples of how abusiveness is different from unfairness or deception, arguing the Bureau has been “inconsistent at times” in the application of the abusive standard. One panelist explained that the Bureau often brings abusive claims in connection with a claim of deception or unfairness, stating “while this may work for the Bureau’s litigation strategy the market looks to enforcement for guidance on the policy. Standalone abusiveness claims that show how abusiveness is different from deception and unfairness would provide direction to staff and industry.” Because the standard is unclear to industry, a panelist argued that many companies choose to limit products or offerings to avoid unknown compliance risks.
An archived copy of the webcast will be available on the Bureau’s website.
On June 11, the CFPB announced that its first symposium, regarding the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act, will be held on June 25. As previously covered by InfoBytes, the CFPB announced a symposia series that will convene to discuss consumer protections in “today’s dynamic financial services marketplace.” The June 25 symposium will be a public forum with two panels of experts discussing unfair, deceptive, or abusive acts and practices (UDAAP). The first panel will be a policy discussion, moderated by Tom Pahl, CFPB’s Policy Associate Director, Research, Markets and Regulation. The second panel will examine how the “abusive” standard has been used in practice in the field and will be moderated by David Bleicken, CFPB Deputy Associate Director, Supervision, Enforcement and Fair Lending.
In addition to the June 25 symposium, the series will have future events discussing 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.
On April 17, Kathy Kraninger, Director of the CFPB, spoke before the Bipartisan Policy Center where she reiterated the Bureau’s focus on prevention of harm and announced a symposium that will explore the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act. In her remarks, Kraninger touched on the four “tools” the Bureau has at its disposal to execute its mission: education, rulemaking, supervision, and enforcement.
- Education. The Bureau wants to help consumers protect their own interests and choose the right products and service to help themselves. Specifically, the Bureau is focusing on ensuring that American consumers learn to save to be able to absorb a financial shock.
- Rulemaking. The Bureau will comply with Congressional mandates to promulgate rules or address specific issues through rulemaking, but when the Bureau has discretion, it will focus on “preventing consumer harm by maximizing informed consumer choice, and prohibiting acts or practices which undermine the ability of consumers to choose the products and services that are best for them.” In the coming weeks, the Bureau will release its proposed rules to implement the FDCPA, which will include (i) bright line limits on the number of calls consumers can receive from debt collectors on a weekly basis; (ii) clarity on how collectors may communicate through new technology such as, email and text messages; and (iii) requiring more information at the outset of collection to help consumers better identify debts and understand payment and dispute options. Kraninger stated, “the CFPB must acknowledge that the costs imposed on regulated entities absolutely affect access to, and the availability of, credit to consumers.”
- Supervision. This tool is the “heart of the agency,” according to Kraninger, as it helps to prevent violations of laws and regulations from happening in the first place. The Bureau will keep in mind that it is not the only regulator examining most entities and will focus on coordination and collaboration with the other regulators so as not to impose unmanageable burdens in examinations.
- Enforcement. The Bureau will continue to enforce against bad actors that do not comply with the law, as enforcement is “an essential tool that Congress gave the Bureau.” The Bureau will have a “purposeful enforcement regime” to foster compliance and help prevent consumer wrongs. Kraninger is “committed to ensuring that enforcement investigations proceed carefully and purposefully to ensure a fair and thorough evaluation of the facts and law… [and ensuring they] move as expeditiously as possible to resolve enforcement matters, whether through public action or a determination that a particular investigation should be closed.”
Kraninger also touched on how the Bureau plans to measure success going forward. Kraninger noted that in the past, the Bureau touted its outgoing statistics as a measurement, such as amount of consumer redress and number of complaints handled. However, according to Kraninger, if the Bureau succeeds in fostering a goal of prevention of harm, certain outputs like meritorious complaints would actually be lower. Therefore, the Bureau’s success should be based on how it uses all of its tools. Lastly, Kraninger announced a symposia series that would convene to discuss consumer protections in “today’s dynamic financial services marketplace.” The first will explore the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act, specifically, to address issues with the “reasonableness” standard. There are no additional details on the date for the symposium but Kraninger noted that this would be the next step in exploring future rulemaking on the issue. The series will also have future events discussing 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.
Additionally, on April 9, acting Deputy Director, Brian Johnson, spoke at the George Mason University Law & Economics Center's Ninth Annual Financial Services Symposium. In his prepared remarks, Johnson emphasized that regulatory rules should be “as simple as possible” when dealing with complex markets as they are easier for a greater portion of actors to understand and adapt to and also promote compliance, “which has the ancillary benefit of making it easier for consumers (not to mention regulators) to distinguish between good and bad actors.” Johnson argued that regulators should not try and dictate specific outcomes in rulemaking. Instead, Johnson stated that “financial regulators should recognize that complex market systems are not a means to accomplish their specific goals” and should “narrowly-tailor rules to address a discrete market failure.” Johnson also touched on the Bureau’s new Office of Innovation, noting that the Bureau’s proposed No Action Letter Program and Product Sandbox will offer firms “the opportunity to expand credit while still preserving important consumer protections,” while assisting the Bureau in learning about new technologies and potential consumer risks. As for the Bureau’s cost-benefit analysis, Johnson said that this activity will not be limited to future actions, but will also be used for “periodic retrospective analysis” because financial markets are “constantly changing, requiring constant reappraisal and verification of the rules that govern the system.”
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