The following is a monthly roundup summarizing enforcement actions, guidance, rulemakings, and other public statements from the Consumer Financial Protection Bureau and the Federal Trade Commission regarding the prohibition on unfair, deceptive, or abusive acts or practices (UDAAP) in the marketplace for consumer financial services.
Regulatory Developments
- Consumer Financial Protection Bureau. Prepaid Card Program Managers. CFPB released an issue spotlight examining challenges that recipients of public benefits programs offering cash assistance encounter in accessing funds through financial products or services. The report notes that – regardless of the applicability of the Electronic Funds Transfer Act (EFTA) – prepaid providers and financial institutions providing consumer financial products and services, such as government administered prepaid cards, are subject to prohibitions on unfair, deceptive, or abusive acts or practices under 12 U.S.C. §§ 5531 and 5536. Examples include alleged failures by a financial services company to deliver prepaid debt cards on time to former convicts and one of the country’s largest financial institutions freezing deposit accounts containing government benefits during the COVID-19 pandemic. (UDAAP regulatory focus: abusive, deceptive & unfair).
- Office of the Comptroller of the Currency. Overdraft Fees & Representment. OCC Acting Comptroller provided remarks at the National Community Reinvestment Coalition’s Just Economy Conference. He discussed potential compliance and reputational risks associated with “surprise overdraft fees,” which could violate 12 U.S.C. §§ 5531 and 5536, including: 1) authorize positive, settle negative; 2) representment fees and; 3) no limits on bank overdrafts. (UDAAP regulatory focus: abusive, deceptive & unfair)
Enforcement and Litigation
Consumer Financial Protection Bureau. Debt Collection. CFPB filed a complaint and a stipulated final judgment and order against a large debt collector for allegedly violating a 2015 agency order and engaging in other violations of law. The alleged violations included: 1) Making representations about the amount or validity of unsubstantiated debt; 2) engaging in legal collections without offering to provide consumers required documents; and/or 3) misrepresenting when those documents would be provided; 4) initiating debt collection lawsuits without possessing required documentation and; 5) attempting to collect time-barred debt. The agency asserted that the company violated the 12 U.S.C. ss. 5531, 5536(a), 5564, 5565; the FDCPA, 15 U.S.C. §§ 1692a, 1692e, 1692l; FCRA, 15 U.S.C. § 1681s-2; and Regulation V, 12 C.F.R. §§ 1022.42-1022.43 through its debt collection practices. (UDAAP supervisory focus: deceptive).
Rulemakings and Guidance
- Consumer Financial Protection Bureau. Enforcement & Supervision. CFPB issued a policy statement that explains the Bureau’s rationale related to the legal prohibition on abusive conduct in consumer financial markets and summarizes over a decade of precedent through the Bureau under the Consumer Financial Protection Act section 1036(a)(1)(B), 12 U.S.C.5536(a)(1)(B). Separately, Director Chopra provided remarks on key aspects and objectives of the policy statement. (UDAAP regulatory focus: abusive).
- Consumer Financial Protection Bureau. Student Loans. CFPB released a compliance bulletin to address the treatment of certain private student loans following bankruptcy discharge. The agency asserted that in recent supervisory work, identified servicers did not determine whether education loans were qualified or non-qualified, violating the prohibition on unfair, deceptive, or abusive acts or practices under 12 U.S.C. 5531, 5536. (UDAAP regulatory focus: abusive, deceptive, unfair).
- Federal Trade Commission. Dark Patterns & Payments. FTC proposed amendments to the Commission’s Negative Option Rule to combat unfair or deceptive practices that include recurring charges for products or services consumers do not want and cannot cancel without undue difficulty. The proposed amendments would require that companies implement easy “click-to-cancel” mechanisms. The agency is utilizing its authority under Section 5 of the FTC Act, 15 U.S.C. 45, having previously found that some negative option sales violate prohibitions against unfair and deceptive practices. Separately, Com. Wilson dissented on the proposed rulemaking. Following this action, the agency also published a business blog post and accompanying fact sheet providing additional details on the rulemaking. (UDAAP regulatory focus: deceptive, unfair).
Michael Buckalew is a regulatory analyst with Davis Wright Tremaine LLP.