Following its enactment, the Dodd-Frank Act left the financial services industry with uncertainty in many areas. For example, for nearly 10 years, the industry has wondered and speculated about the inclusion of a prohibition against abusive acts and practices.
What exactly is abusive conduct? Is abusive conduct different from unfair, or false and misleading acts? How will the CFPB handle enforcement?
The Consumer Financial Protection Bureau recently announced the long-awaited policy statement regarding the framework that it will use in enforcement activities related to the category of "abusiveness."
A copy of the Statement of Policy is available here: Link to Statement of Policy
Overall, the objective attempts to use a common-sense view, and the principles are at least designed to promote compliance and certainty.
This theme is carried on with the delineated principles:
- In evaluating conduct, to be abusive, the harm to consumers should outweigh the benefit.
- Abusive conduct is distinguishable from unfair or deceptive violations; therefore, no "dual pleading."
- Monetary relief (penalties) for abusiveness only when there has been a lack of good-faith effort to comply. CAVEAT: restitution for injured consumer regardless of whether a company acted in good faith or bad.
Ralph T. Wutscher
Maurice Wutscher LLP
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