Three Things To Know About The CFPB's Proposed Guidance On Abusive Acts Or Practices

On April 3, 2023, the Consumer Financial Protection Bureau (CFPB) issued the CFPB Policy Statement on Abusive Acts or Practices (the Proposed Guidance), which is intended to provide long-awaited clarity on the "abusiveness" standard of the Consumer Financial Protection Act (CFPA).

The lack of clarity surrounding the abusiveness standard has been a point of contention for industry participants since the enactment of the CFPA in 2010. The CFPB, until now, had declined to provide an analytical framework defining what behavior would constitute abusive acts or practices under the CFPA. Rather, the CFPB had chosen to define the abusiveness standard through legal actions taken against industry participants, a practice derided by some as "regulation by enforcement." The publication of the nonbinding Proposed Guidance, which sets forth a framework to be used by the CFPB to evaluate potentially abusive conduct and provides illustrative examples of such conduct, represents