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MONTH-IN-BRIEF (Jan 2020)

Consumer Finance

Bureau Announces Policy Regarding Abusive Acts or Practices

By Eric Mogilnicki and Lucy Bartholomew, Covington & Burling LLP

On January 24, 2020, the CFPB released a policy statement providing what it terms a “common-sense framework” on how it intends to apply the abusiveness standard in supervision and enforcement matters.  The Dodd-Frank Act broadly prohibits abusive acts or practices in connection with the provision of consumer financial products or services.  The policy statement follows a 2019 Bureau Symposium on Abusive Acts or Practices.

The CFPB’s policy statement identifies several principles it intends to follow in its enforcement and supervision activities including:

  • focusing on citing or challenging conduct as “abusive” in supervision and enforcement matters only when the harm to consumers outweighs the benefit;
  • generally avoiding dual pleading of both abusiveness and unfairness or deception on the basis of the same facts;
  • alleging abusive conduct in a way that will demonstrate the nexus between cited facts and the Bureau’s legal analysis; and
  • seeking Civil Monetary Penalties for abusiveness only when there has been a lack of a good-faith effort to comply with the law.

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