Perhaps the most controversial aspect of the Richard Cordray-era CFPB was its use of UDAAP enforcement authority to punish companies for conduct that, until that time, no one new was illegal. The Bureau routinely launched invasive enforcement actions against companies for violating UDAAP – Unfair, Deceptive, and Abusive Acts and Practices – even though the alleged violation was not prohibited by any other statute or regulation.
And just what is a unfair, deceptive, or abusive act or practice? Well, that was in the eye of the beholder. Because instead of putting forth regulatory guidance, the Bureau simply launched enforcement actions for conduct that had been considered legal for decades.
After Cordray left office, the CFPB retreated from this controversial practice and focused more on prosecuting actual violations of law or regulation. Gone were the days of declaring an activity a UDAAP, even if it was perfectly permissible under current law.
Unfortunately, it looks like we might be on a path back to 2015-era UDAAP enforcement. Yesterday, the CFPB rescinded a January 2020 policy statement that sought to provide greater clarity of the “abusive” prong of UDAAP.
The Bureau’s reasoning behind the rescission should give companies pause: “The 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.” It went on to state that “a policy of declining to enforce the full scope of Congress’s definition of an abusive practice harms both the consumers who were taken advantage of and the honest companies that have to compete against those that violate the law.”
It doesn’t take much to read between those lines. Current CFPB leadership believes that the Bureau has been too lenient and did not exercise its enforcement authority enough. And it intends to be much more aggressive, particularly through the controversial use of UDAAP enforcement authority.
I said this before, after the 2020 election and in my 2021 predictions column, but the time to prepare for increased regulatory scrutiny is now. And if you have questions about how to prepare your company for increased scrutiny and enforcement actions – or have received a CID – give us a call. We have significant experience handling CFPB, FCC, and FTC investigations.