CFPB defines illegal abusive acts in proposed guidance

The Consumer Financial Protection Bureau today issued proposed guidance on the “abusiveness” standard as defined by the Consumer Financial Protection Act. The guidance summarizes previous actions to enforce the abusiveness standard and offers insight into how the agency, under its current leadership, plans to analyze the statutory elements of abusiveness to identify violative acts or practices.

Notably, the CFPB asserted that the statutory language prohibiting abusiveness includes acts or practices that “obscure, withhold, de-emphasize, render confusing, or hide information relevant to the ability of a consumer to understand terms and conditions.” The agency also noted that such acts or practices could include buried disclosures, physical or digital interference, prominently placing certain content to interfere with the comprehension of other content (known as “overshadowing”), and various other means of “manipulating consumers’ understanding.”

Further, the CFPB said that institutions may not take “unreasonable advantage” of consumers’ lack of understanding of the risks, costs or conditions of a product or service; the inability of the consumer to protect their interests in using or selecting a consumer financial product or service; or reasonable reliance by the consumer that the institution will act in the consumer’s interest. The agency asserted that “advantages” can include market share, revenue, cost savings, profits, reputational benefits, and other operational benefits.

“Evaluating unreasonable advantage involves an evaluation of the facts and circumstances that may affect the nature of the advantage and the question of whether the advantage-taking was unreasonable under the circumstances,” the CFPB said. “Such an evaluation does not require an inquiry into whether advantage-taking is typical or not. And even a relatively small advantage may be abusive if it is unreasonable.” Public comments on the guidance are due July 3.