H.R. 1652, the Rectifying Undefined Descriptions of Abusive Acts and Practices Act (Rectifying UDAAP Act), would substantially reshape how the Consumer Financial Protection Bureau (CFPB) enforces UDAAP (Unfair, Deceptive, or Abusive Acts or Practices) in consumer financial markets. The bill tightens the definition of “abusive,” requires formal rulemaking with cost-benefit analyses, and introduces procedural changes intended to bring greater clarity and constraints to UDAAP enforcement. Key ideas include narrowing what counts as abusive, requiring a good-faith compliance standard before monetary relief can be pursued, introducing a notice-and-cure process, mandating particularity in enforcement actions, limiting discrimination claims under UDAAP, and imposing look-back penalties restrictions tied to a consumer compliance rating. Overall, the bill aims to reduce ambiguity in UDAAP outcomes and provide more procedural guardrails for both the Bureau and regulated entities. If enacted, the bill could lessen CFPB’s leverage in some UDAAP cases by requiring more precise definitions and pre-emptive curative steps, while also adding procedural predictability for regulated firms. It would also formalize cost-benefit analyses for new rules and potentially limit penalties for conduct occurring before the most recent compliance rating, shifting how and when penalties can be imposed.
Key Points
- 1Rulemaking and definitional clarifications for UDAAP
- 2- The Bureau may issue rules identifying unfair, deceptive, or abusive practices and must include a cost-benefit analysis for final rules. The bill also requires the Bureau to define “abusive act or practice” within 180 days and to solicit public comment on any confusion about the Bureau’s authority.
- 3Narrowed and clarified abusive standard
- 4- Abusive acts/practices would require either: (A) intentional and material interference with a consumer’s understanding of terms/conditions, or (B) taking unreasonable advantage of consumer lack of understanding or reliance on a covered person’s misrepresentations. Conduct is abusive if it causes substantial, unavoidable injury or if such injury is not outweighed by benefits to consumers or competition. A “good-faith effort to comply” is required before monetary relief can be pursued.
- 5Prohibition on discrimination within UDAAP
- 6- The Bureau may not interpret UDAAP authority to include discriminatory practices, narrowing the scope of what can be challenged under UDAAP.
- 7Notice and cure mechanism (self-identification pathway)
- 8- If a covered person self-identifies a potential UDAAP, the Bureau must issue a cure notice within 90 days, giving the entity 180 days to cure before pursuing other action. The statute of limitations would be tolled only in specified cure-related circumstances.
- 9Enforcement actions and procedural safeguards
- 10- Enforcement actions under UDAAP would be filed in a federal district court where the entity’s headquarters is located or in the District of Columbia. Enforcement actions must state with particularity the alleged violations, and the Bureau may not pursue competing or alternative claims (e.g., cannot claim abusive and unfair/deceptive for the same conduct in the same action).
- 11Look-back penalties limitations
- 12- The Bureau may not seek civil monetary penalties for conduct occurring before the most recent consumer compliance rating assignment; however, other forms of relief (damages, restitution, etc.) may still be available for earlier conduct.