CFPB issues policy statement on abusive conduct

The CFPB on Monday announced it has issued a policy statement that explains the legal prohibition on abusive conduct in consumer financial markets and summarizes over a decade of precedent. In 2010, in response to the financial crisis, Congress passed the Consumer Financial Protection Act as part of the Dodd-Frank Act, and created the prohibition on abusive conduct. The Act tasks the CFPB, federal banking regulators, and states with the responsibility to enforce the prohibition, and puts the CFPB in charge of administering it. The Bureau's policy statement was issued to assist consumer financial protection enforcers in identifying wrongdoing, and will help firms avoid committing abusive acts or practices.

Since the passage of the Consumer Financial Protection Act, the CFPB has brought 43 cases, and examiners have issued numerous citations, alleging abusive conduct. The claims have ranged from predatory student lending practices to charging consumers costly surprise overdraft fees. Yesterday's policy statement builds on the agency’s actions as well as summarizes for the market, in clear and simple terms, the meaning of the statutory prohibition on abusive conduct.

In its policy statement, the CFPB sets forth how abusive conduct 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 of a consumer. In particular, the statement describes how the use of dark patterns, set-up-to-fail business models like those observed before the mortgage crisis, profiteering off captive customers, and kickbacks and self-dealing can be abusive.

The Bureau's Policy Statement on Abusiveness will be published in the Federal Register. The public will have until July 3, 2023, to submit comments.

PUBLICATION UPDATE: Published at 88 FR 21883 in the 4/12/2023 Federal Register.