Subcommittee wrestles with CFPB’s UDAAP ‘abusiveness’ standard and calls for clearer rulemaking

Several witnesses told the House subcommittee that the CFPB’s prohibition on “abusive” acts or practices (the second prong of the UDAAP standard) remains insufficiently defined and leads to enforcement uncertainty.

“The concept of abusive does not [have] a long history,” Rebecca Keane said, and the bureau’s cases “have been inconsistent in applying the abusiveness prongs to similar facts and circumstances.” Keane recommended that the CFPB “be required to clearly define the standard for finding an act or practice abusive through a notice and comment rulemaking.”

Brian Schneider said enforcement under broadly phrased authorities should be constrained pending development of formal rules: enforcement is essential for stopping bad actors, he said, but “enforcement should be undertaken only when the actions violate clearly articulated statutory or regulatory requirements.” David Pomeran and other industry witnesses favored statutory clarifications and supported the chairman’s “Rectifying UDAAP Act” as a pathway to clarity.

Seth Frotman, a former CFPB general counsel, pushed back on proposals that he said would diminish the bureau’s ability to protect consumers. Frotman argued the CFPB’s enforcement record had returned substantial relief to consumers and warned that narrowing UDAAP or postponing enforcement while rules are developed could let harmful practices persist.

Witnesses and members discussed trade-offs: requiring formal rulemaking for abusive determinations would increase predictability for regulated entities but could slow the bureau’s response to new harms. Several witnesses suggested incremental approaches — developing rules where feasible while allowing targeted enforcement where clear, demonstrable consumer harm exists.

No statutory changes were voted on at the hearing; bills to clarify UDAAP were discussed by members and witnesses.