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Bureau of Consumer Financial Protection (previously the CFPB) Acting Director Mick Mulvaney said the bureau is working on a rulemaking to better clarify its definition of unfair, deceptive or abusive acts or practices (UDAAP). NAFCU has long advocated for the bureau to issue specific guidance on prohibited practices so financial institutions have more clarity.

"Regulation by enforcement is the equivalent of playing Guess Who for financial institutions," said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. "To effectively and properly serve consumers, credit unions need clarity and consistency in the laws and regulations they are required to follow. Otherwise, credit unions as well as all financial institutions, will be left spinning their wheels trying to keep up with evasive and ever-fleeting regulatory checkpoints. The bureau's decision to clearly define what practices qualify as 'abusive' under its UDAAP authority is long overdue and will go a long way towards ensuring smart and effective regulation. We thank Acting Director Mulvaney for his efforts."

Mulvaney delivered the news Monday during the Mortgage Bankers Association's annual conference.

The Dodd-Frank Act provides broad definitions of prohibited behaviors under UDAAP and gives the bureau primary rulemaking authority over the standard. In the past, financial institutions generally had to rely on individual enforcement actions to define what "abusive" meant. However, during his comments, Mulvaney said "regulation by enforcement is done." He added that the bureau will continue with its investigations and bring lawsuits based on alleged rule violations.

Earlier this year, NAFCU again asked the bureau to issue guidance to clarify the UDAAP standard. "Credit unions, as not-for-profit, member-owned community financial institutions, serve the best interests of their members," the letter stated. "Their ability to do so is hampered by the lack of clarity regarding the extent of acts or practices that may be deemed 'unfair' or 'abusive.'"  

NAFCU has resources available, including a webinar, to help credit unions avoid potential UDAAP violations.