On March 11, 2021, the Consumer Financial Protection Bureau (the “CFPB” or “Bureau”) announced it was rescinding its “Statement of Policy Regarding Prohibition on Abusive Acts or Practices” (the “2020 Policy Statement”). The rescission is the latest in a series of actions under Acting Director David Uejio that demonstrate a recalibration in the Bureau’s regulatory and enforcement priorities from those of previous leadership. The Bureau has signaled with the rescission that as part of its enforcement review going forward, it will pursue abusiveness claims without necessarily adhering to the boundaries set by the 2020 Policy Statement.
The now-rescinded 2020 Policy Statement, which was issued under the direction of former CFPB Director Kathy Kraninger, provided a framework for interpreting the scope of the Bureau’s supervisory and enforcement authority with respect to abusive conduct under section 1031(d) of the Dodd-Frank Act. In describing this framework, the 2020 Policy Statement set forth three principles:
- First, the Bureau would focus on citing conduct as abusive only when the harms to consumers outweighed the benefits to consumers.
- Second, the Bureau would generally avoid challenging conduct as abusive where it was relying on all or nearly all of the same facts that the Bureau alleged were unfair or deceptive. This principle was intended to provide clarity to industry participants regarding the specific facts that would give rise to an abusiveness claim.
- Third, the Bureau would generally not seek certain types of monetary relief for abusiveness violations where a financial institution was making a good-faith effort to comply with the abusiveness standard.
At the time, Director Kraninger praised the framework as “prevent[ing] consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future.”
In rescinding the 2020 Policy Statement, the Bureau rebuked the Bureau’s prior work, citing its “review of, and experience in applying, the Policy Statement.” Moving forward, the Bureau indicated that it will assert abusiveness claims, regardless of whether they overlap with claims of unfair or deceptive conduct, and may seek the full array of potential penalties, regardless of whether the financial institution was attempting in good faith to comply with the abusiveness standard. To do less, the Bureau argued, would be “contrary to the Bureau’s current priority of achieving general deterrence through penalties and other monetary remedies.” The Bureau did not provide new guidance on the contours of the abusiveness standard or its approach to its enforcement except to state that it “intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress,” and that, “[g]oing forward, the CFPB intends to consider good faith, company size, and all other factors it typically considers as it uses its prosecutorial discretion.”