Who Has Rulemaking Authority for Udaap
12 décembre 2022

In this latest statement of expansion of its CAADU authority, the CFPB stated that the failure of a bank or non-bank financial corporation to adequately protect its customers` personal information may meet the criteria of unfairness under the Consumer Financial Protection Act. First, I find the argument that if Congress considered discrimination “unjust,” it would have been unnecessary for Congress to pass legislation like the Equal Credit Opportunity Act to specifically prohibit discrimination. According to Professor Sovern, this argument is flawed because the ECOA does more than prohibit discrimination in credit transactions, such as giving aggrieved consumers a private right of action, and therefore would have been necessary even if Congress had considered discrimination as something the CFPB could address through its UDAAP authority. This would have been necessary, Professor Sovern says, because the CFPA does not give consumers a private right of action for UDAAP claims, and “Congress wanted aggrieved consumers to have a private claim,” which is provided for in the ECOA. Continuing a trend it follows, the CFPB on Thursday used an unregulated circular (Consumer Financial Protection Circular 2022-04) to determine that its UDAAP authority extends its enforcement authority to situations where financial institutions have inadequate privacy or information security. The circular can be found here. The Consumer Financial Protection Bureau plays a key role with respect to PADUs. Dodd-Frank gives the agency the power to set rules about these practices. The law also includes the power to enforce measures that prevent “unfair, misleading or abusive acts or practices” related to consumer offers and transactions for financial products and services, as long as the business falls under the CFPB`s jurisdiction. The Consumer Financial Protection Bureau (CFPB) announced last week that it would investigate financial institutions for discriminatory practices aimed at prohibiting unfair, deceptive or abusive acts or practices (UDAAP). In particular, the CFPB has issued amendments to its OADAA audit manual that require auditors to examine discriminatory behaviour that may be unfair – even in situations where fair lending laws may not apply. The CFPB also confers enforcement powers on the Federal Trade Commission.

Like the other agency, the FTC ensures that financial product and service providers comply with consumer protection laws by demonstrating truth and ethics in their offerings and practices. In this role, he is responsible for investigating complaints, enforcing regulations and taking action against companies that break the law. These include the imposition of fines and penalties, up to and including the criminal prosecution of service providers. Earlier this year, the CFPB announced that its UDAAP authority extends to fair lending issues that go beyond ECOA and the CFPB`s traditional equitable credit coverage. See the customer alert of March 31, 2022. The CFPB`s and Professor Sovern`s interpretation raises even more questions related to discrimination against non-credit products such as deposits, prepaid cards and remittances. For example, many banks have a policy of not opening deposit accounts for someone who is not located in the bank`s market area. Would this be considered a violation of the UDAAP? While there is a well-established set of rules regarding the application of ECOA, there is absolutely no law on how the injustice of the OACU is applied to non-credit products. Although the CFSA came into force in 2011, I am not aware of a single instance where the CFPB used its PAADU authority to take action against an individual based on non-credit discrimination. Furthermore, I am not aware that the FTC uses its UDAP power under Section 5 of the FTC Act (enacted more than 100 years ago) to detect discrimination related to credit or other products. Unfair, misleading or abusive actions and practices (UAAA) can cause significant financial harm to consumers, undermine consumer confidence and undermine the financial market.

Under the Dodd-Frank Act, it is illegal for any provider of financial products or services to consumers or a service provider to engage in unfair, deceptive or abusive acts or practices. The Act also gives the Consumer Financial Protection Bureau (CFPB) the authority to regulate and, with respect to businesses under its jurisdiction, enforcement authority to prevent unfair, misleading or abusive acts or practices related to transactions with a consumer for a consumer-directed financial product or service. or offering a financial product or service to consumers. In addition, the CFPB has supervisory powers to identify and assess risks to consumers and markets related to consumer financial products and services. UDAAP is an acronym that stands for unfair, deceptive or abusive acts or practices of suppliers of financial products and services. They are illegal under the Dodd-Frank Act. The Act gives the Consumer Financial Protection Bureau the authority to make rules for these illegal acts. Both the CFPB and the Federal Trade Commission are responsible for enforcing these regulations to ensure consumers are protected from unscrupulous lenders and financial institutions. Given the complexity of the issues raised by the CFPB`s extension of the PADAP, it seems clear that this type of radical change should be achieved through rule-making rather than an amendment to an audit manual.