On October 15, 2018, in remarks to the Mortgage Banker’s Association, Acting Director Mick Mulvaney declared that the CFPB will move away from “regulation by enforcement” by clarifying standards of conduct, to provide the regulated community with a measure of certainty when engaging in business operations. Mulvaney stated that, under his leadership, the Bureau is looking to change tack, that the goal is to “move the needle to the middle” in balancing consumer protection goals with providing certainty to the regulated community, and that the Bureau will “continue to function as [it] did before—we are just taking a different way of looking at it.” Thus, while the CFPB will continue to pursue enforcement actions against entities that break the law, “[i]f you’re doing something we don’t like, but it’s within the law, then we’re going to leave you alone.”
As an example, Mulvaney highlighted the ambiguous definition of “abusive” conduct under Dodd-Frank: “[w]e know what ‘unfair’ is; we know what ‘deceptive’ is; I’m not sure we know how to define ‘abusive.’” The formal definition of an “abusive” practice is codified in 12 U.S.C. § 5531(d), which defines the term as a practice that “materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service” or “takes unreasonable advantage of – (A) a lack of understanding on the part of a consumer of the material risks, costs, or conditions of the product or service; (B) the inability of the consumer to protect the interests of the consumer in selecting or issuing a consumer financial product or service; or (C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.” But what constitutes an abusive practice under the statutory language remains unclear – i.e., what it means to “materially interfere” with a consumer’s ability to understand a transaction, or what “takes unreasonable advantage” of a consumer is open to interpretation and potentially applicable to a range of conduct. As Mulvaney indicated in his comments, the CFPB has added clarification of the definition of “abusive” practices as a “future planning” item in its Fall 2018 Rulemaking Agenda.
From the tenor or Mulvaney’s statements, the change to the definition of “abusive” may be one of many concrete steps that the Bureau will take to enhance clarity for the regulated community. LenderLaw Watch will monitor any such future changes, and will bring you the latest developments as they occur.