Today's Trends in Credit Regulation

Unfair, Deceptive or Abusive?
By Michael A. Benoit

As some of you might agree, the biggest arrow in the Consumer Financial Protection Bureau's quiver is its ability to declare acts and practices unfair, deceptive, or abusive - or UDAAP as many of us frequently refer to it. UDAAP is a handy catch-all for conduct that doesn't neatly violate one of the enumerated statutes over which the CFPB has jurisdiction, and the CFPB's UDAAP authority pretty much gives it the means to attack any behavior it thinks wrongs consumers.

Until recently, the CFPB focused much of its UDAAP authority on practices it deemed unfair or deceptive. Reasonable minds can differ over its analysis in various instances, but, as a general matter, one can safely say that, to date, the CFPB's view of what might be unfair or deceptive more or less conforms to the standards that industry is familiar with from years of Federal Trade Commission enforcement. And in any given case in which unfairness or deception was alleged, the CFPB has generally addressed the alleged unfairness or deception in both its press release and corresponding consent order. I won't get into whether the press release portrayed such behavior in a manner consistent with the consent order, but the allegations generally appear in both publications.

Since industry is pretty much up to speed about what the terms "unfair" and "deceptive" mean, we've all been waiting with bated breath for some guidance from the CFPB on what the term "abusive" means. In particular, inquiring minds would like to know how "abusive" conduct is different from unfair and deceptive conduct. The Dodd-Frank Act imposes a bit of a squishy standard for "abusive" conduct, but it's hard to see how something deemed abusive wouldn't also be unfair or deceptive. What sense does it make to treat conduct as violative of two (or three) separate standards when the remedy for all three is the same? Was it Congress's intent to have the CFPB "pile on," so to speak? Is the addition of "abusive" meant to authorize double - or treble - damages? Or was it Congress's intent to provide for another avenue of enforcement when the unfair or deceptive standards didn't quite fit?

Who knows?

Until recently, the CFPB has been somewhat sparing in its use of its "abusive" authority (perhaps because the CFPB itself is a bit fuzzy about what it means). I'm not sure we have any more guidance than we did before, but one case stands out to me.

In May, the CFPB took action against PayPal, alleging a variety of bad acts committed by a company it acquired called "Bill Me Later." One allegation in particular - that PayPal "abusively charged consumers deferred interest" - was rather prominent in the CFPB's press release. While an allegation to that effect was addressed in the complaint filed simultaneously with the consent order, any mention of "abusive" behavior is curiously absent from the consent order - i.e., the document that provides for relief to allegedly harmed consumers. Why would the settlement of an abusive practice allegation not be identified as such?

Even more curious is the way the consent order addresses the conduct in question. On the one hand, the press release and the complaint alleged "abusive" behavior, but the section of the consent order that addresses deferred interest merely enjoins PayPal from "misrepresenting" the terms or conditions of a deferred interest offer. In the consumer credit world, a misrepresentation is typically associated with a deception claim. Is the CFPB trying to send a message that "deception" and "abuse" are one and the same? Or that alleged deception becomes alleged abuse if the CFPB decides to sue you?

I'm scratching my head and wondering if the CFPB even knows what it's trying to accomplish or what message it's trying to send. If it's shooting for guidance - which would be helpful to everyone, the CFPB included - it failed here. The only thing that got shot - besides PayPal - was the CFPB's foot.

Michael A. Benoit is a partner in the Washington, D.C., office of Hudson Cook, LLP. Michael can be reached at 202.327.9705 or by email at

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