Rectifying Undefined Descriptions of Abusive Acts and Practices Act or the Rectifying UDAAP Act
This bill restricts the Consumer Financial Protection Bureau’s (CFPB’s) authority to deem a financial practice abusive for purposes of enforcement activities. Currently, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB may take enforcement action against a financial product or service provider in connection with any transaction with a consumer for a consumer financial product or service that is unfair, deceptive, or abusive.
Specifically, the bill prohibits the CFPB from including discrimination as an abusive practice. Further, the bill revises what an abusive practice is, including by additionally requiring the act or practice to intentionally interfere with the ability of a consumer to understand a term or condition.
The bill also establishes additional criteria for abusive actions. For example, conduct is considered abusive if (1) it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers, (2) the substantial injury is not outweighed by countervailing benefits to consumers or to competition, or (3) the conduct is otherwise prohibited under federal consumer financial law.
The bill also eliminates the CFPB’s ability to seek monetary relief for unfair, deceptive, or abusive acts or practices if the provider establishes a good faith effort to comply with requirements.
The bill establishes rulemaking requirements, including requiring a cost-benefit analysis for a rule relating to unfair, deceptive, or abusive acts or practices.
Finally, the bill establishes the right for providers to cure violations if they self-report and limits the CFPB’s use of alternative claims in court.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6789 Introduced in House (IH)]
<DOC>
118th CONGRESS
1st Session
H. R. 6789
To amend the Consumer Financial Protection Act of 2010 to clarify
standards for UDAAP enforcement actions brought by the Bureau of
Consumer Financial Protection, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 14, 2023
Mr. Barr (for himself, Mr. Luetkemeyer, Mr. Posey, Mr. Meuser, Mr.
Steil, Mr. Sessions, Ms. De La Cruz, Mr. Fitzgerald, Mr. Timmons, Mr.
Rose, Mr. Mooney, Mr. Loudermilk, Mr. Norman, Mrs. Kim of California,
and Mr. Williams of Texas) introduced the following bill; which was
referred to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Consumer Financial Protection Act of 2010 to clarify
standards for UDAAP enforcement actions brought by the Bureau of
Consumer Financial Protection, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Rectifying Undefined Descriptions of
Abusive Acts and Practices Act'' or the ``Rectifying UDAAP Act''.
SEC. 2. MITIGATING FACTORS IN ASSESSING CIVIL PENALTIES.
Section 1055(c) of the Consumer Financial Protection Act of 2010
(12 U.S.C. 5565(c)) is amended by adding at the end the following:
``(6) Rulemaking.--The Bureau shall, not later than 180
days after the date of the enactment of this paragraph, issue a
rule that establishes policies and procedures relating to the
imposition of civil monetary penalties sought under this
subsection, including the application of the mitigating factors
described in paragraph (3).''.
SEC. 3. RULEMAKING RELATING TO UNFAIR, DECEPTIVE OR ABUSIVE ACTS OR
PRACTICES.
(a) In General.--Section 1031(b) of the Consumer Financial
Protection Act of 2010 (12 U.S.C. 5531) is amended by striking
subsection (b) and inserting the following:
(b) Rulemaking.--
``(1) In general.--The Bureau may prescribe rules
applicable to a covered person or service provider identifying
as unlawful unfair, deceptive, or abusive acts or practices in
connection with any transaction with a consumer for a consumer
finanical product or service, or the offering of a consumer
financial product or service. Rules under this section may
include requirements for the purpose of preventing such acts or
practices.
``(2) Cost benefit analysis required.--Any final rule
issued by the Bureau relating to abusive, unfair, or deceptive
acts or practices shall include a cost-benefit analysis.
``(3) Definition of abusive act or practice.--The Bureau
shall, not later than 180 days after the date of the enactment
of this subsection, issue a rule that defines the term `abusive
act or practice' for the purposes of this section.''.
(b) Opportunity for Comment.--The Bureau of Consumer Financial
Protection shall, not later than 180 days after the date of the
enactment of this subsection, allow the public to submit comments with
respect to any confusion about how the Bureau of Consumer Financial
Protection uses its authority with respect to unfair, deceptive, or
abusive acts or practices.
SEC. 4. AUTHORITY TO DECLARE AN ACT UNLAWFUL BASED ON DISCRIMINATION.
The Bureau of Consumer Financial Protection may not interpret the
authority of the Bureau of Consumer Financial Protection relating to
unfair, deceptive, or abusive acts and practices, as such term is used
in section 1031 of the Consumer Financial Protection Act of 2010, to
include discriminatory practices.
SEC. 5. CLARIFYING THE ABUSIVE STANDARD FOR THE BUREAU OF CONSUMER
FINANCIAL PROTECTION.
Section 1031 of the Consumer Financial Protection Act of 2010 (12
U.S.C. 5531) is amended by striking subsection (d) and inserting the
following:
``(d) Abusive.--
``(1) In general.--The Bureau shall have no authority to
declare an act or practice of a covered person abusive in
connection with the provision of a consumer financial product
or service, unless the act or practice--
``(A) intentionally and materially interferes with
the ability of a consumer to understand a term or
condition of a consumer financial product or service;
or
``(B) takes unreasonable advantage of--
``(i) a lack of understanding by the
consumer with respect to the possible impact,
material risks, costs, or conditions of the
product or service, or the likelihood of the
risks, costs, or conditions of the product or
service negatively affecting the consumer; and
``(ii) the reasonable reliance the consumer
places on an affirmative action or
representation of such covered person to induce
such consumer to rely on such action or
representation.
``(2) Abusive actions.--Conduct of a covered person shall
be considered abusive if--
``(A) the act or practice causes or is likely to
cause substantial injury to consumers which is not
reasonably avoidable by consumers;
``(B) such substantial injury is not outweighed by
countervailing benefits to consumers or to competition;
or
``(C) the conduct is otherwise prohibited by
Federal consumer financial law.
``(e) Good-Faith Effort To Comply.--
``(1) In general.--The Bureau may not seek monetary relief
from a covered person under this section unless the covered
person has not established by a preponderance of the evidence
that they made a good-faith effort to comply.
``(2) Authority to seek legal or equitable remedies.--The
limitation described in subparagraph (A) shall not restrict the
authority of the Bureau to seek legal or equitable remedies,
such as damages and restitution, to redress an identifiable
consumer injury caused by the abusive acts or practices of such
covered person.''.
SEC. 6. NOTICE AND OPPORTUNITY TO CURE.
Section 1031 of the Consumer Financial Protection Act of 2010 (12
U.S.C. 5531) is amended by adding at the end the following:
``(g) Notice and Opportunity To Cure.--
``(1) In general.--If a covered person self-identifies a
potential unfair, deceptive, or abusive act or practice carried
out by such covered person, the Bureau shall, not later than 90
days after such self-identification, provide a written notice
in the form of a potential action and request for response
letter or a notice and opportunity to respond and advise letter
of the potential unfair, deceptive, or abusive act or practice
to such covered person and inform the covered person that such
person has 180 days after the date the covered person receives
such notice to cure such potential unfair, deceptive, or
abusive act before the Bureau may pursue other legal action.
``(2) Tolling of statute of limitations.--Any applicable
statute of limitations that applies to conduct under which the
Bureau has given notice and an opportunity to cure shall not
toll until--
``(A) the covered person cures the potential
abusive, unfair, or deceptive act or practice and
notifies the Bureau that such act or practice has been
cured;
``(B) the covered person notifies the Bureau that
such covered person will not cure the act or practice;
or
``(C) the 180-day period to cure ends.''.
SEC. 7. ABUSIVE, UNFAIR, OR DECEPTIVE ACTS OR PRACTICES ENFORCEMENT
ACTIONS.
(a) In General.--Subtitle E of title X of the Consumer Financial
Protection Act of 2010 (12 U.S.C. 5561 et seq.) is amended by adding at
the end the following new section:
``SEC. 1059. UNFAIR, DECEPTIVE, OR ABUSIVE ACTS OR PRACTICES
ENFORCEMENT ACTIONS.
``Enforcement actions brought by the Bureau under section 1031
under this title shall be brought in--
``(1) the United States district court located where the
covered person has its headquarters location; or
``(2) the United States District Court for the District of
Columbia.''.
(b) Actions Under Section 1031.--Section 1031 of the Consumer
Financial Protection Act of 2010 is amended by adding at the end the
following:
``(g) Enforcement Actions.--
``(1) In general.--If the Bureau brings an enforcement
action under this section, the Bureau shall state with
particularity the circumstances that the Bureau alleges
constitute violation of this section.
``(2) Alternative claims.--If the Bureau brings an
enforcement action under this section--
``(A) claiming that an activity is unfair or
deceptive, the Bureau may not claim in the alternative
that the activity is abusive; and
``(B) claiming that an activity is abusive, the
Bureau may not claim in the alternative that the
activity is unfair or deceptive.''.
SEC. 8. LOOK-BACK PROVISIONS FOR THE CONSUMER FINANCIAL PROTECTION
BUREAU.
Subtitle B of title X of the Consumer Financial Protection Act of
2010 (12 U.S.C. 5511 et seq.) is amended by adding at the end the
following new section:
``SEC. 1029B EXAMINATION PERIOD LIMITATIONS.
``(a) In General.--When enforcing Federal consumer financial laws,
the Bureau may not seek a civil money penalty for any violating conduct
that occurred prior to the most recent assignment of a consumer
compliance rating.
``(b) Rule of Construction.--This limitation described in
subsection (a) may not be construed to restrict the ability of the
Bureau to seek other forms of legal or equitable relief available under
subparagraphs (A) through (G) of section 1055(a)(2) for any violating
conduct that occurred prior to the most recent assignment of a consumer
compliance rating.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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