On January 17, 2018, the Consumer Financial Protection Bureau (the “CFPB”) announced that it will issue a call for “evidence” to ensure the CFPB is “fulfilling its proper and appropriate functions to best protect consumers.” The announcement states that in the coming weeks the CFPB will issue a Request for Information (“RFI”) seeking comment on the CFPB’s currently utilized enforcement, supervision, rulemaking, market monitoring and education activities. In so doing, the CFPB’s current utilization of its statutory authority to prosecute Unfair, Deceptive, or Abusive Acts and Practices (“UDAAP”) claims will likely take center stage.
Over the past seven years, the CFPB has aggressively pursued enforcement actions against a wide range of consumer financial services providers. In bringing enforcement actions, the CFPB has typically relied upon its UDAAP powers. However, although the CFPB has relied heavily upon its UDAAP authority, it has never provided guidance on how it defines a UDAAP. Without official guidance from the CFPB as to the meaning of a UDAAP, critics of the CFPB have alleged that they are left with trying to interpret each enforcement action taken and its possible application to their own operations.
Critics have gone on to allege that by exercising its discretionary UDAAP authority so aggressively, the CFPB has sought to avoid the rulemaking process which is subject to notice and comment. By engaging in regulation through enforcement, the CFPB has been critiqued as (i) limiting activities which have not otherwise been prohibited by law, (ii) subjecting financial services companies to novel and undocumented interpretations of existing laws, of which companies did not have fair notice, (iii) causing marketplace uncertainty and (iv) increasing compliance costs.
While it is too early to say for certain, one could expect the CFPB to receive ample comments, analysis and information concerning the CFPB’s use of its UDAAP authority.