On April 3rd, the Consumer Financial Protection Bureau issued a new Policy Statement ("Policy") providing an analytical framework to identify "abusive" conduct.[1] This is the second time the CFPB has issued a Policy Statement on abusive conduct – the agency previously issued one in 2020 under Director Kraninger and repealed it the following year under Acting Director Uejio.[2] The new Policy draws on facts of prior cases to provide a roadmap of what the CFPB considers to be abusive conduct. The Policy signals the CFPB may be considering more enforcement cases alleging the existence of abusive conduct and that it wants to make it easier for other government enforcers to bring similar cases. The Policy is quite detailed and lists a variety of conduct that CFPB could deem abusive.
In the 1930s, Congress authorized the Federal Trade Commission to prohibit unfair or deceptive practices. In the 2010 Dodd-Frank Act, Congress expanded on that concept to also prohibit abusive conduct by providers of consumer financial products and create the CFPB to enforce that prohibition.[3] Since that time, the CFPB has brought a number of enforcement actions against companies for engaging in abusive conduct, although usually alongside allegations of unfair or deceptive conduct.
The new Policy summarizes the existing case law concerning abusive conduct, analyzes its elements, and provides a framework for identifying it. According to the CFPB, its goal in issuing the Policy is to assist government enforcers and the market with identifying abusive acts or practices.
The Dodd-Frank Act defines prohibited abusive conduct in two provisions. The first states an act or practice is abusive if it "materially interferes" with a consumer's ability to understand a consumer financial product or service's term or condition. The Policy explains this first prong in more general terms as meaning a company cannot obscure important features of its product or service.