Consumer Financial Protection Bureau (“CFPB”) Continues to Focus on Informed Decisions
This month the Consumer Financial Protection Bureau (“CFPB”) prevailed on a motion to dismiss brought by Navient, which was founded, at least partially, on constitutional challenges. The case is Consumer Fin. Prot. Bureau v. Navient Corp. (M.D.Pa. Aug. 4, 2017, No. 3:17-CV-101) 2017 U.S.Dist.LEXIS 123825.
The CFPB’s arguments in Consumer Fin. Prot. Bureau v. Navient Corp. reveals a continued focus on consumers’ ability to make informed decisions. The CFPB argued if Navient provided enough information about different repayment options, consumers would be able to make informed decisions about repayment plans for their student loans. [See Consumer Fin. Prot. Bureau v. Navient Corp. (M.D.Pa. Aug. 4, 2017, No. 3:17-CV-101) 2017 U.S.Dist.LEXIS 123825, at *58.).]
However, the plain text of Unfair, Deceptive, or Abusive Acts or Practices (“UDAAP”) under the Dodd-Frank Act, Title X, Subtitle C, Sec. 1036; PL 111-203 (July 21, 2010) does not set measures for sufficient information to make informed decisions.
Unfair acts or practices is divided into 3 prongs. An act or practice is unfair when:
(1) It causes or is likely to cause substantial injury to consumers;
(2) The injury is not reasonably avoidable by consumers; and
(3) The injury is not outweighed by countervailing benefits to consumers or to competition.
[The standard for unfairness in the Dodd-Frank Act has the same three-part test as the FTC Act. This standard was first stated in the FTC Policy Statement on Unfairness (Dec. 17, 1980), available at: FTC's website. Congress later amended the FTC Act to include this specific standard in the Act itself. 15 U.S.C. § 45(n).]
Deceptive acts or practices are also divided into 3 prongs:
(1) The representation, omission, act, or practice misleads or is likely to mislead the consumer;
(2) The consumer’s interpretation of the representation, omission, act, or practice is reasonable
under the circumstances; and
(3) The misleading representation, omission, act, or practice is material.
[See FTC v. Pantron I Corp., 33 F.3d 1088, 1095 (9th Cir. 1994); Consumer Fin. Prot. Bureau v. Navient Corp. (M.D.Pa. Aug. 4, 2017, No. 3:17-CV-101) 2017 U.S.Dist.LEXIS 123825, at *65.); and FTC Policy Statement on Deception, available at FTC's website.]
One of the CFPB’s arguments in Consumer Fin. Prot. Bureau v. Navient Corp. focused on Navient’s representations contained within its webpage, which indicated that borrowers can call Navient for repayment options. The CFPB further alleged that when borrowers called they did not receive information about all options. [Id. *58.] What’s unclear is how the CFPB is able to establish that the callers received and understood Navient’s website-representations, and, later relied on those representations to call Navient for repayment options. It’s also inconceivable how a business that falls under the purview of the CFPB can know all information necessary for a consumer to make an informed decision about its dealings with that business.
Consumer Fin. Prot. Bureau v. Navient Corp. is a good roadmap for accounts receivable management (“ARM”) businesses. It provides a framework of the CFPB’s focus with ARM businesses. The case reflects the CFPB’s continued focus on reviewing business practices to determine if consumers are being provided with all the information necessary to make informed decisions. While UDAAP does not set measures for ARM businesses searching for a guide on providing sufficient information to pass the CFPB’s examination, Consumer Fin. Prot. Bureau v. Navient Corp. at least details how the CFPB identifies practices that fall short of what it believes is sufficient.
NOTICE: This is an attorney communication and a news article. It does not create a legal relationship, nor is it intended to be legal advice. It simply reflects the opinions of the author.
ABOUT THE AUTHOR: Alan Fassonaki, Attorney at Law
Alan Fassonaki served as Director of Operations for a Los Angeles company before going to law school. He graduated law school with magna cum laude honors. After law school, Alan took on employment at a public company in the East Bay Area as in-house counsel. Alan’s legal focus was contracts law, regulatory compliance, federal and state litigation, and corporate governance (policies, procedures, and the like). Afterwards, Alan started his law practice in Woodland Hills, California, where he now serves businesses with legal matters related to business law and business litigation.
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