The American Bankers Association last week called for substantial revisions to the CFPB’s recently proposed guidance on the “abusiveness” standard as defined by the Consumer Financial Protection Act. The guidance outlines how the agency, under its current leadership, plans to analyze the statutory elements of abusiveness to identify unlawful conduct.
ABA raised several concerns about the statement as currently proposed. First, ABA noted that the statement’s examples of abusive conduct “reflect the CFPB’s unproved and untested allegations in enforcement actions,” not fact-based, reasoned decisions made by independent courts. The statement also fails to provide meaningful standards that the industry can use to identify and avoid abusive conduct, ABA added.
The association further pointed out that the bureau’s view of a consumer’s lack of understanding is unworkable. Under the Dodd-Frank Act, entities are prohibited from taking unreasonableness of a consumer’s “lack of understanding of the material risks, costs or conditions of the product or service.” However, ABA noted that the statement, as written, “disclaims all reasonable limits on its meaning, leaving the industry with little guidance,” and that the bureau takes a “paternalistic view of consumers.” That view, “coupled with ‘regulation by enforcement,’ is likely to lead to fewer choices for consumers,” ABA warned.
“The new policy statement is unlikely to stand the test of time and may be revised or rescinded by subsequent administrations,” the association said. “These swings in policy are not helpful for consumers or financial service providers. The policy statement’s vagueness and lack of clear boundaries free regulators to wield abusiveness authority inconsistently, which will encourage regulatory arbitrage by some and will undermine innovation and steady market performance.”