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The Consumer Financial Protection Bureau’s policy statement that explains the legal prohibition on abusive conduct in consumer financial markets fails to acknowledge the myriad rules and regulations that apply to insured depository institutions, ICBA said.
Background: The CFPB policy statement issued in April says abusive conduct generally obscures important product features or uses certain circumstances, such as gaps in understanding and unequal bargaining power, to take unreasonable advantage of consumers. It also discusses the use of dark patterns, set-up-to-fail business models, profiteering off captive customers, and kickbacks and self-dealing.
ICBA Response: In a comment letter to the CFPB, ICBA said:
It appreciates the bureau’s desire to provide a framework that financial institutions can use when assessing products, services, and practices to ensure consumers are not harmed.
The policy statement nevertheless takes a broad-brush approach that could impede normal and legally permitted bank operations and prevent institutions from offering services out of concern for newly conceived UDAAP risk.
Provisions of the policy statement related to material interference and unreasonable advantage contradict regulatory disclosure requirements and expose financial institutions to arbitrary enforcement and liability, including for services provided by a third party.
ICBA Recommendations: ICBA called on the CFPB to develop an updated policy that:
Accounts for other community bank regulations.
Defines standards for intent and reasonableness.
Does not punish banks for actions that are not intentionally abusive.
Does not contemplate that banks know what a consumer may be thinking.
Does not expect financial institutions to monitor circumstances beyond their control.
Provides clear guidelines that factor compliance with current regulatory requirements and parameters.