Increased enforcement highlights importance of honest, transparent practices

March 11, 2021 – The Consumer Financial Protection Bureau (CFPB) announced in a press release Thursday that it is rescinding its January 24, 2020 policy statement, “Statement of Policy Regarding Prohibition on Abusive Acts or Practices.

The 2020 Policy stated that the CFPB would decline to seek civil money penalties and disgorgement for certain abusive acts or practices.

New Director Dave Uejio, says that the Policy was “inconsistent with the bureau’s duty to enforce Congress’s standard” against abusive acts and practices, which “harms both the consumers who were taken advantage of and the honest companies that have to compete against those that violate the law.

Going forward, the CFPB intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress.

What Does This Mean For Businesses?

In plain words, this means that companies who violate the prohibition against abusive acts and practices can expect to face monetary penalties, as the CFPB enforces the standards laid out by Congress in section 1031(d) of the Dodd-Frank Act.

Paraphrasing Congress, the standard prohibits companies from: 

  • Materially interfering with someone’s ability to understand a product or service
  • Taking unreasonable advantage of someone’s lack of understanding
  • Taking unreasonable advantage of someone who cannot protect themselves, and
  • Taking unreasonable advantage of someone who reasonably relies on a company to act in their interests.

As stated in the CFPB’s Supervision and Examination Manual, “unfair, deceptive, or abusive acts and practices (UDAAPs) can cause significant financial injury to consumers, erode consumer confidence, and undermine the financial marketplace.”

That means dishonest practices don’t just hurt customers – they hurt businesses too.

The wrong approach can have significant costs, including:

  • Litigation, enforcement actions & monetary penalties
  • Operational expenses to correct UDAAP issues
  • Damaged reputation & customer confidence

To avoid penalties, businesses should ensure that they take an honest, transparent approach with their customers and avoid any practices that might mislead or take advantage of people.

How Cedar Financial’s People-First Approach Helps You

With consumer confidence eroded, it can be difficult to regain the trust needed to recover your funds and grow your business. That’s why it’s so important to take the right approach from the start.

At Cedar Financial, we don’t just believe in a People-First Approach – we know it works.

For 30 years, we’ve been helping clients achieve better payment outcomes by building trust with their customers. We know that when customers are treated with dignity and respect, they’re much more likely to resolve their debts – and remain your customers for years to come.

See What People-First Collections Can Do for You

*The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.

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