The Consumer Financial Protection Bureau (CFPB) continued to reassert its authority as financial watchdog this week, rescinding a Trump-era policy it said didn't go far enough to protect against abusive financial practices.
Specifically, the CFPB said Thursday it would rescind a January 2020 policy statement that undermined its authority to protect consumers of financial products and services. The statement, made when the CFPB was run by an appointee of former President Donald Trump, said the agency would only challenge conduct as abusive "when the harm to consumers outweighs the benefit" and wouldn’t seek civil penalties unless there was a lack of a good-faith effort on the part of the provider to comply with the law.
The move was widely seen as a weakening of protections for consumers. At the time, Professor Christopher Peterson, director of financial services for the Consumer Federation of America, said the action would “embolden debt collectors, payday lenders, and other finance companies to be more reckless and indifferent to the welfare of their customers.”
Now, under President Joe Biden’s administration, the CFPB is reversing course, saying the 2020 statement was inconsistent with the bureau’s duties. It said it plans to enforce the full scope of Congress’ definition of an abusive practice in order to protect both consumers and “honest companies that have to compete against those that violate the law.”
The regulatory agency said it will take action against companies that materially interfere with someone’s ability to understand a product or service or take unreasonable advantage of someone’s lack of understanding. The CFPB also said it will step in to protect those who cannot protect themselves or who reasonably rely on a company to act in their interest but are duped.