U.S. Rep. Andy Barr (R-KY) introduced legislation to amend the unfair, deceptive, acts and practices (UDAAP) authority granted to the Consumer Financial Protection Bureau (CFPB) through the Dodd-Frank Act.
The Rectifying UDAAP Act would require clear descriptions of acts or practices that are “abusive.” It would also establish policies and procedures for the imposition of civil penalties, and mandate cost-benefit analysis of any final rule under UDAAP. Further, it would clarify that the bureau may not interpret its authority under UDAAP to include discriminatory practices.
“Since the Dodd-Frank Act passed, financial institutions and providers have been left without clarity of the definition for the term “abusive,” and inadequate guidance from CFPB on what would constitute a UDAAP violation. Regulatory uncertainty leads to fewer choices and higher prices for consumers, and the agency tasked with protecting consumers should not be complicit in regulation that is causing these outcomes,” Barr said. “My legislation, the Rectifying Undefined Definitions of Abusive Acts or Practices or the Rectifying UDAAP Act, requires the CFPB to provide the transparency financial institutions need to serve consumers and ensure there is ample access to credit in our consumer markets.”
The bill is supported by several financial industry associations, including the American Financial Services Association, Credit Union National Association, Consumer Bankers Association (CBA), American Bankers Association, and the Independent Community Bankers of America (ICBA).
“ICBA and the nation’s community banks have long sought much-needed clarity on the Consumer Financial Protection Bureau’s definition and regulation of unfair, deceptive, and abusive acts and practices within the legal authority defined by Congress,” ICBA President and CEO Rebeca Romero Rainey said. “We thank Congressman Barr for introducing the Rectifying UDAAP Act to clarify the CFPB’s regulatory authority related to UDAAP and to ensure it does not restrict the ability of community banks to meet the needs of the customers and communities they serve.”
CBA President and CEO Lindsey Johnson said it is imperative that Congress better define the Bureau’s UDAAP authority to ensure it acts within its statutory boundaries.
“If history is any guide, even the most well-intentioned rules without clear expectations can lead to unintended consequences when applied to the marketplace,” Johnson said. “Thank you to Rep. Barr for introducing this important legislation which would ensure the Bureau operates beyond reproach while also providing industry with the clarity needed to comply with current and future regulatory requirements.”