Payment Law Advisor Legal Commentary and Resources for the Payment Industry

UDAAP Update: Reflections on Recent Cases & the Future of State AG & Consumer Advocate Activity

Posted in Financial Services Litigation and Enforcement

On Tuesday May 16th, 2017, Adam Maarec and Joseph Rodriguez participated in a panel at the Conference on Consumer Finance Law’s Annual Meeting in Chicago titled UDAAP Update: Recent Cases and the Future of State AG & Consumer Advocate Activity. Andrew Dougherty from the Illinois Attorney General’s Consumer Fraud Bureau and Daniel Edelman from the consumer-advocate firm of Edelman, Combs, Latturney & Goodwin, LLC also participated in the panel.

The panel discussed how political issues may affect the use of federal prohibitions against unfair, deceptive, or abusive acts or practices (UDAAPs) under the Dodd-Frank Act, including:

  • The Congressional Review Act’s immediate impact on the Consumer Financial Protection Bureau’s (CFPB) ability to finalize rules, and how the CFPB might shift resources from rulemaking activities to increase its enforcement activities;
  • The presidential appointment and removal powers that loom over Director Cordray’s remaining tenure and that, when a new Director is eventually in place, the CFPB’s priorities are likely to change including the agency’s approach towards prosecuting cases based on alleged UDAAPs;
  • Legislative efforts embodied in the CHOICE Act that would eliminate the CFPB’s UDAAP authority, leave enforcement of the Federal Trade Commission Act prohibition of unfair or deceptive acts or practices (UDAPs) to the prudential banking regulators, and require them to issue regulations defining UDAPs; and
  • How the issues described above might create a perceived gap in the policing of consumer financial markets, and whether state attorneys general and consumer advocates may be in a position to fill that gap by filing more enforcement actions and class actions, respectively.

The following trends and issues in UDAAP enforcement cases were also discussed:

  • Everything old is new again. It was noted that many of the issues involved in recent enforcement actions have been the basis for past enforcement actions. For example, the three cases against credit bureaus filed this year by the CFPB regarding allegedly deceptive sales of add-on products involved similar conduct to the many add-on product cases filed against credit card issuers in the past six years. This demonstrates the importance of tracking UDAAP enforcement activity and updating policies and procedures to care for UDAAPs identified by the CFPB.
  • Questioning the utility of abusiveness claims. It was posited that the majority of harmful conduct that has been allegedly “abusive” under the Dodd-Frank Act could have been remedied using other federal or state enforcement authorities, such as prohibitions on UDAPs or violations of technical laws and regulations, such as the Truth in Lending Act and Regulation Z. Nonetheless, abusiveness remains an important enforcement tool, even if it is duplicative.

Supporting materials from the presentation can be found here.