Financial regualtions.
Credit union trade groups, longtime critics of the CFPB's vague power to police financial industry "abusive" practices say they're pleased the agency is going to take steps to define what those practices are.
Under the Dodd-Frank Act, the CFPB has the power to take action when it finds evidence of Unfair, Deceptive or Abusive Acts or Practices. Federal law long has allowed agencies to take action when they find unfair or deceptive practices. However, Dodd-Frank expanded that to include abusive acts or practices.
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Critics say the agency, under the leadership of former Director Richard Cordray never codified what that meant, although in a 2013 bulletin, the agency said that "UDAAPs can cause significant financial injury to consumers, erode consumer confidence, and undermine fair competition in the financial marketplace."
The bulletin went on to say that an act is abusive when it takes unreasonable advantage of consumers' lack of understanding, their inability to protect their interests or their "reasonable" reliance on someone to protect their interests.
Acting CFPB Director Mick Mulvaney told the Mortgage Bankers Association this week that that does not go far enough. He said the agency will better define what "abusive" actually means.
Credit union trade groups applauded that news.
"While we would need to see the proposed rule text before declaring our support, the Bureau's history of leaving UDAAP largely undefined in favor of 'regulation through enforcement' has only resulted in confusion and increased litigation risk," said CUNA Chief Advocacy Office Ryan Donovan.
"Regulation by enforcement is the equivalent of playing 'Guess Who' for financial institutions," Carrie Hunt, NAFCU's executive vice president of government affairs and general counsel said. "To effectively and properly serve consumers, credit unions need clarity and consistency in the laws and regulations they are required to follow."
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