On January 24, 2020 the Consumer Financial Protection Bureau (CFPB) approved a Policy Statement that was intended to clarify the meaning of “abusive” in Unfair, Deceptive, or Abusive Acts or Practices. Compliance Resource informed you of this in our blog early last year. The statement provided a framework for the CFPB’s exercise of its supervisory and enforcement authority to address abusive acts or practices in an effort to provide a common-sense framework on how the CFPB intended to apply the “abusiveness” standard in supervision and enforcement matters.

Fast forward to March 11, 2021: the CFPB released “Statement of Policy Regarding Prohibition on Abusive Acts or Practices; Rescission”. In its press release, the CFPB stated, “[t]he 2020 Policy Statement was inconsistent with the Bureau’s duty to enforce Congress’s standard and rescinding it will better serve the CFPB’s objective to protect consumers from abusive practices.” The Rescission notice highlights the main provisions of the January Policy Statement and reasons for rescission of each:

  1. January Policy Statement: The intention to focus on citing conduct as abusive in supervision or challenging conduct as abusive in enforcement if it concludes that the harms to consumers from the conduct outweigh its benefits to consumers.

Reason for Rescission: “This principle was intended to “ensure[] that the Bureau is committed to using its scarce resources to address conduct that harms consumers” and to ensure consistency across supervisory and enforcement matters. The Bureau has concluded, however, that there is no basis to treat application of the abusiveness standard differently from the normal considerations that guide the Bureau’s general use of its enforcement and supervisory discretion. The Bureau also did not find this principle helpful in practice.”

  • January Policy Statement: Intended to generally avoid challenging conduct as abusive that relies on all or nearly all of the same facts that it alleges are unfair or deceptive. Where the CFPB nevertheless decides to include an alleged abusiveness violation, it intends to plead such claims in a manner designed to clearly demonstrate the nexus between the cited facts and the CFPB’s legal analysis of the claim. In its supervision activity, the CFPB similarly intends to provide more clarity as to the specific factual basis for determining that a covered person has violated the abusiveness standard.

Reason for Rescission: “Not asserting abusiveness claims solely because of their overlap with unfair or deceptive conduct or based on the other intended principles articulated in the Policy Statement has the effect of slowing the Bureau’s ability to clarify the statutory abusiveness standard by articulating abusiveness claims as well as through the ensuing issuance of judicial and administrative decisions. It is thus counterproductive to the purpose of the original Policy Statement.”

  • January Policy Statement: Generally, did not intend to seek certain types of monetary relief for abusiveness violations where the covered person was making a good-faith effort to comply with the abusiveness standard.

Reason for Rescission: “The Policy Statement’s intended principles, including “making a good-faith effort to comply with the abusiveness standard,” themselves afford the Bureau considerable discretion in its application and add uncertainty to market participants. Additionally, the Bureau’s further consideration of and experience under the Policy Statement have led it to conclude that the intended principles have the effect of hampering certainty over time.”

The rescission of the 2020 Policy Statement is applicable upon publication in the Federal Register. The CFPB’s press release is available here.