Last week, the Consumer Financial Protection Bureau (“CFPB”) reached an agreement with a Florida debt collection company to settle the agency’s first case involving “abusive” acts or practices prohibited by the Dodd-Frank Act (“DFA”). The agreement has broad implications for entities subject to the CFPB’s enforcement authority and indicates how the regulatory landscape may be shifting with respect to consumer protection enforcement actions.
The company, American Debt Settlement Solutions Inc. (“ADSS”), agreed to pay damages of $499,248 and a civil money penalty of $15,000, in response to a complaint the CFPB filed in federal district court in May. The complaint alleged that ADSS and its president misled consumers regarding the extent of the debt settlement services ADSS could provide, enrolled consumers in the ADSS programs despite knowing the consumers could not afford to complete the programs, collected inappropriate fees for services that would not benefit consumers, and failed to settle the consumers’ debts as promised.
The case highlights an interesting development that results from the creation of, and nonbank jurisdiction of, the CFPB under the DFA. Prior to the DFA’s creation of the CFPB, a case such as this would have fallen within the FTC’s jurisdiction over unfair or deceptive acts and practices (“UDAP”). As the CFPB’s action demonstrates, these types of consumer protection claims now fall within the jurisdiction of more than one federal agency. The settlement illustrates the increased overlap between the FTC’s and CFPB’s enforcement authority – a trend that is likely to continue.
Additionally, the DFA expanded the scope of the consumer protection agencies’ collective enforcement authority from UDAP to UDAAP – that is, unfair, deceptive, or abusive - acts and practices. The ADSS case is the first to highlight this new “abusive” standard under which the CFPB can bring claims. Until now, “abusive” has been a relatively novel and uncertain concept; however, the case provides some insight as to how the CFPB intends to apply the new standard.
Given the number of federal and state regulators with the authority to enforce UDAP laws and regulations, it is likely that there will be increasing activity among regulators concerned with consumer financial protection. With the addition of the abusive standard, the CFPB’s UDAAP authority and broad jurisdictional reach over nonbank financial firms will further fuel their activity.