# Plain Language Summary: Rectifying UDAAP Act

This bill makes significant changes to how the Consumer Financial Protection Bureau (CFPB) can enforce rules against unfair, deceptive, or abusive financial practices. Think of it as setting new guardrails around the CFPB's power to punish banks, credit card companies, and other financial firms.

The core issue is that the term "abusive" has been vague and hard to define. Under current law, the CFPB can take action against financial companies for practices it considers abusive, but there's no clear definition of what "abusive" actually means. This bill tries to fix that by requiring the CFPB to create a specific definition within six months. It says an act is abusive only if it either intentionally confuses consumers about important terms, or takes unreasonable advantage of a consumer's lack of understanding about risks and costs. The bill also says that if a company clearly and conspicuously disclosed something to consumers, any harm is considered avoidable—meaning the CFPB can't punish them for it.

The bill also gives companies more breathing room when they mess up. If a company discovers its own violation and reports it to the CFPB, the company gets 180 days to fix the problem before facing penalties. Additionally, the CFPB can only go back and penalize conduct from the most recent time it rated a company's compliance—essentially limiting how far back the agency can look for violations. The bill also prevents the CFPB from using discrimination laws as a basis for "abusive practice" enforcement, and requires the CFPB to do cost-benefit analyses before issuing new rules.

For consumers, this could mean less aggressive enforcement against financial companies, potentially allowing some questionable practices to continue if they're disclosed upfront. For financial companies, it means more predictability and more opportunities to fix problems before facing fines.

Rectifying UDAAP Act

Barr, Andy

Rectifying Undefined Descriptions of Abusive Acts and Practices Act or the Rectifying UDAAP Act This bill restricts the Consumer Financial Protection Bureau’s (CFPB’s) authority to deem a financial act or practice abusive for purposes of enforcement activities. Currently, the CFPB may take enforcement action against a financial product or service provider in connection with any transaction with a consumer for a consumer financial product or service that is unfair, deceptive, or abusive.Specifically, the bill prohibits the&nbsp;CFPB from including discrimination as an abusive practice. Further, the bill revises what an abusive practice is, including by additionally requiring the practice to intentionally interfere with the ability of a consumer to understand a term or condition.The bill also establishes additional criteria for abusive practices. Particularly, a practice is considered abusive if (1) it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers, where timely disclosed&nbsp;conduct is presumed to be reasonably avoidable; or (2) the substantial injury is not outweighed by countervailing benefits to consumers or to competition.The bill also eliminates the&nbsp;CFPB’s ability to seek monetary relief for unfair, deceptive, or abusive practices if the provider establishes a good faith effort to comply with requirements.&nbsp;The bill establishes rulemaking requirements, including requiring a cost-benefit analysis for a rule relating to unfair, deceptive, or abusive practices.Finally, the bill establishes the right for providers to cure violations if they self-report and limits the CFPB’s use of alternative claims in court.