Small Case, Big Impact: CFPB Cracks Down on “Abusive” Practices Under Dodd-Frank
By Paul Hastings Professional
Last week, the Consumer Financial Protection Bureau (“CFPB”) reached
The company, American Debt Settlement Solutions Inc. (“ADSS”), agreed to pay damages of $499,248 and a civil money penalty of $15,000, in response to a
The case highlights an interesting development that results from the creation of, and nonbank jurisdiction of, the CFPB under the DFA. Prior to the DFA’s creation of the CFPB, a case such as this would have fallen within the FTC’s jurisdiction over unfair or deceptive acts and practices (“UDAP”). As the CFPB’s action demonstrates, these types of consumer protection claims now fall within the jurisdiction of more than one federal agency. The settlement illustrates the increased overlap between the FTC’s and CFPB’s enforcement authority – a trend that is likely to continue.
Additionally, the DFA expanded the scope of the consumer protection agencies’ collective enforcement authority from UDAP to UDAAP – that is, unfair, deceptive, or abusive - acts and practices. The ADSS case is the first to highlight this new “abusive” standard under which the CFPB can bring claims. Until now, “abusive” has been a relatively novel and uncertain concept; however, the case provides some insight as to how the CFPB intends to apply the new standard.
Given the number of federal and state regulators with the authority to enforce UDAP laws and regulations, it is likely that there will be increasing activity among regulators concerned with consumer financial protection. With the addition of the abusive standard, the CFPB’s UDAAP authority and broad jurisdictional reach over nonbank financial firms will further fuel their activity. Look for an upcoming Paul Hastings StayCurrent for more details on this landmark settlement and its implications for the future of UDAAP enforcement.
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