The Consumer Financial Protection Bureau's proposed rules on small-dollar loans are significant not only because they are sprawling, complex and tough, but also because they are the first rules the CFPB has issued pursuant to its powers to prohibit unfair, deceptive or abusive acts or practices.
Before the small-dollar proposal, the consumer bureau had used this authority only as the basis of enforcement actions against specific companies, not industrywide rules. Proponents of the CFPB extol its so-called UDAAP powers as being among the bureau's most versatile and potent weapons. Indeed, they assert that these authorities are crucial to ensure that the CFPB can be nimble in addressing developments and innovations in consumer finance markets without having to wait for Congress to decide what conduct or products the agency may target.
Critics of the CFPB, meanwhile, view its UDAAP powers with dread. They fear that the expansive, malleable and often subjective nature of these powers, when combined with the CFPB's unique autonomy and broad discretion in wielding them, allows for the prospect of unchecked regulatory overreach.
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