The "Rectifying UDAAP Act" amends the Consumer Financial Protection Act of 2010 to refine the definitions and enforcement process for unfair, deceptive, or abusive acts or practices, including limitations on the CFPB's authority and new requirements for transparency and due process.
Garland "Andy" Barr
Representative
KY-6
The Rectifying UDAAP Act amends the Consumer Financial Protection Act of 2010, modifying the rulemaking process for unfair, deceptive, or abusive acts or practices. It requires the CFPB to define "abusive act or practice," conduct cost-benefit analyses for new rules, and consider mitigating factors when assessing civil penalties. The act also sets new limitations and standards for the CFPB's enforcement authority, including where they can file enforcement actions, the clarity of their claims, and the remedies they can seek. Furthermore, it provides a notice and cure period for covered entities that self-report potential violations.
CFPB's 'Abusive' Power Gets Sharply Redefined: Rectifying UDAAP Act Alters Enforcement Landscape
The "Rectifying Undefined Descriptions of Abusive Acts and Practices Act," or "Rectifying UDAAP Act," significantly reshapes how the Consumer Financial Protection Bureau (CFPB) handles unfair, deceptive, or abusive practices in the financial industry. It's all about adding more checks and balances to the CFPB's power.
New Definitions, New Limits
This bill changes the game by defining exactly what "abusive" means. Before, it was a bit vague, but now, the CFPB has to prove a company intentionally messed with a consumer's understanding of a financial product and that it caused substantial harm. (SEC. 5). Think of it like this: if a bank uses confusing language in a loan agreement, and a customer ends up with unexpected fees, the CFPB has to show the bank did it on purpose to cause that confusion.
It also puts new limits on the penalties the CFPB can slap on companies. If a company gets a decent compliance rating, the CFPB can't fine them for violations that happened before that rating (SEC. 8). They can still go after restitution (getting your money back), but not extra fines. And, if a company messes up but makes a "good-faith effort" to follow the rules, the CFPB can't seek monetary relief from them (SEC. 5). The CFPB also has to do a cost-benefit analysis for any new rule about abusive, unfair, or deceptive practices (SEC. 3). This means they have to weigh the costs to businesses against the benefits to consumers before making a rule.
The "Notice and Cure" Clause
One big change is the "notice and cure" rule (SEC. 6). If a company accidentally violates the rules and tells the CFPB about it, they get 180 days to fix the problem before the CFPB can take any action. It's like getting a warning before a speeding ticket – a chance to make things right. This part is good for businesses that are trying to do the right thing but slip up.
Courtroom Changes and No More Discrimination Claims
Where the CFPB can sue companies is also changing. Lawsuits have to happen either where the company is headquartered or in D.C. (SEC. 7). Plus, the CFPB has to be super specific when they accuse a company of wrongdoing. They can't just say something was "unfair or deceptive" if their main claim is that it was "abusive" – they have to pick one and stick to it (SEC. 7).
Crucially, this bill says the CFPB can't use its power over "unfair, deceptive, or abusive acts" to go after discriminatory practices (SEC. 4). So, if a lender is accused of, say, charging higher interest rates to people of a certain race, the CFPB can't use the UDAAP rules to deal with it. They'd have to use other laws.
The Bottom Line
The Rectifying UDAAP Act aims to make the CFPB's rules clearer and give companies more leeway. It sets up a more structured process for defining and enforcing violations. Whether this is good or bad depends on your perspective. On one hand, clearer rules and a chance to fix mistakes could be good for businesses. On the other hand, it could make it harder for the CFPB to protect consumers from genuinely harmful practices, especially if companies can easily claim they made a "good-faith effort" or that they didn't intend to cause confusion.