CFPB Issues Policy Statement Regarding Abusive Acts or Practices

The CFPB recently issued a policy statement that explains the meaning of the Consumer Financial Protection Act’s (CFPA) prohibition on “abusive” conduct. 

The policy statement summarizes over a decade of supervisory and enforcement actions taken since the passage of the CFPA, and provides a framework to help federal and state consumer financial protection enforcers identify violations.  The Bureau’s issuance of this policy statement may signal an uptick in enforcement regarding abusive acts and practices.

Through the policy statement, the Bureau interprets the CFPA standard as a prohibition against conduct that “generally includes (1) obscuring important features of a product or service or (2) leveraging certain circumstances—including gaps in understanding, unequal bargaining power, or consumer reliance—to take unreasonable advantage.”  The CFPB underscores that an enforcer or supervisor is not required to show that an act or practice caused substantial injury in order to establish liability.  Moreover, under the second form of “abusiveness,” it is prohibited for an entity to take unreasonable advantage of the articulated circumstances even if such circumstances were not created by the entity.

The policy statement goes in-depth regarding the standard and provides examples of conduct that may constitute violations.  For example, an entity’s provision of a product or service may constitute an abusive practice “if the product or service is so complicated that material information about it cannot be sufficiently explained.”  The policy statement also describes how the use of dark patterns, set-up-to-fail business models, profiteering off captive customers, and kickbacks and self-dealing can be abusive.

According to a press release, the policy statement will be published in the Federal Register, and the public will have until July 3, 2023, to submit comments.