United States: What's In A Name? That Which We Called The CFPB Is Still Bringing UDAAP Claims

Last Updated: November 1 2018
Article by Ori Lev

The Bureau of Consumer Financial Protection ("Bureau") announced its latest enforcement action earlier this week, and it demonstrated yet again that, notwithstanding Acting Director Mick Mulvaney's rhetoric, the Bureau intends to continue to pursue claims of unfair, deceptive and abusive acts and practices ("UDAAP"). Indeed, just days after announcing that the Bureau will consider rulemaking to define "abusiveness"—because the standard is not well developed in the law in the same way that unfairness and deception are—the Bureau brought its first new abusiveness claim of the Mulvaney era. This continues a trend where on the one hand Mulvaney announces the end of "regulation by enforcement" and on the other hand continues to assert the same substantive legal claims that have been the Bureau's bread and butter since it was formed. While the volume of enforcement actions has dropped, the substance of the actions that are brought hasn't changed.

The latest action was against Cash Express, a small-dollar lender based in Tennessee. The Bureau asserted three claims, which we discuss below, in a consent order issued against the company. The consent order requires the company to pay a $200,000 civil money penalty and to provide approximately $32,000 in consumer restitution. While those are relatively modest sums, there are several surprising aspects to the Bureau's order, when considered against the backdrop of its public pronouncements over the past year.

The first claim asserted by the Bureau was that the company engaged in deceptive conduct by sending consumers debt collection letters that threatened suit when the company had either no legal right to file suit (because the statute of limitations had expired) and/or no intent to file suit. The consent order notes that the company sued only five consumers out of more than 11,0000 to whom it sent collection letters with respect to time-barred debt. The Bureau found this to be a deceptive practice. This is not a novel claim and is one in a series of cases in which the Bureau has made similar allegations. The claim itself, therefore, is not surprising.

What is surprising is the remedy—a requirement that the company reimburse consumers for the debt payments they made in response to such letters. There is no allegation in the consent order that the amounts paid by consumers were not in fact owed. The only allegations related to the misrepresentations in the collections letter, which, according to the Bureau, would reasonably affect consumers' decisions by encouraging them to pay their debts to Cash Express in an effort to avoid being sued. The Bureau under Richard Cordray's leadership often—but not always—required consumer redress in similar debt collection cases. But the two prior debt collection actions brought under Mulvaney's leadership did not require consumer redress—even in a case in which the Bureau alleged that the debt collectors improperly inflated the amounts due to them. That such redress would be required in this case—essentially returning to consumers moneys that they had in fact owed the company—is surprising given the lack of such redress in the prior debt collection cases brought under Mulvaney's leadership.

The second claim in the recent enforcement action was also a rather straightforward deception claim based on the Bureau's findings that the company told consumers that it may furnish information about borrowers to consumer reporting agencies ("credit bureaus") when in fact it did not do so. The inclusion of this claim is not noteworthy; it simply suggests that the Bureau will enforce the law when companies affirmatively misrepresent material information to consumers. It demonstrates that the old rule "do what you say and say what you do" still applies.

The third claim was the most surprising. It involved the company's set-off practices. According to the consent order, when the company cashed a check for a consumer who had an outstanding debt to the company, its practice was to use the check proceeds to pay off the outstanding debt and provide only the remaining funds to the consumer. The consent order notes that this practice was disclosed to consumers at the time they took out a loan with the company and that consumers signed an acknowledgement in the application that they had received these disclosures.

Nevertheless, the Bureau found the company's set-off practices illegal for several reasons. First, the Bureau noted that the disclosures sometimes occurred months or years before a consumer presented a check to be cashed. Second, the Bureau recounted in detail the company's policies and procedures to not inform consumers coming in for check cashing services that their check proceeds may be set off against any outstanding debt. In addition to these policies, the Bureau cited a company training document that instructed employees not to leave the check in a place where it could be retrieved by the consumer. These practices, in the Bureau's words, "nullified" the disclosures that consumers had been provided. As a result, the Bureau concluded that these practices constituted abusive conduct because they took unreasonable advantage of a consumer's lack of understanding of the material risks, costs or conditions of the company's check cashing service.

There are several surprising aspects to this claim. The first is that the Mulvaney-led Bureau would disregard the disclosures provided to consumers about the possibility of set-off. While the company took affirmative steps to not inform consumers of the possibility of set-off at the time they presented a check to be cashed, there are no allegations that the company made affirmative misrepresentations to consumers regarding set-off. The Bureau nevertheless found the company's conduct to have "nullified" the disclosures previously provided. One might expect such a result from a regulator focused on substantive unfairness—indeed, the Cordray-led Bureau brought several cases in which contractual language was deemed insufficient to protect a company from UDAAP claims—but it is surprising that a believer in the power of markets such as Mulvaney would authorize such a claim.

The second surprising aspect of this claim is that the Bureau chose to bring it as an abusiveness claim just days after Mulvaney's speech noting that abusiveness is not a well-defined legal concept and stating that the Bureau would consider rulemaking to define its contours. There are two ways that agencies make law—through rulemaking and through adjudication. The latter has been criticized—most prominently by Mulvaney himself— as "regulation by enforcement." Yet that is precisely the route Mulvaney chose to take in this case. This is all the more surprising because the Bureau could just as easily have labeled the company's conduct as unfair or deceptive. A practice is unfair where it causes substantial injury not reasonably avoidable by consumers and not outweighed by benefits to consumers or competition. To the extent that the Bureau found the company's practice of going out of its way to not inform consumers that their checks might be subject to set-off troubling, the Bureau could readily have found that the practice would cause substantial injury to consumers (the proceeds consumers did not receive) not reasonably avoidable by consumers (because the company took steps to not inform them of the possibility of set-off and physically kept the check away from the consumer) and not outweighed by benefits to consumers or competition. Alternatively, the Bureau could have found that failing to inform consumers of the possibility of set-off at the time of check cashing was a material omission that rendered the transaction a deceptive practice because it created the net impression that consumers would receive the full value of their checks. That would certainly have been less novel than claiming that the company's conduct "nullified" valid disclosures and constituted abusive practices.

The only reason to frame this claim as abusive conduct is to continue to provide additional contours to the meaning of abusiveness. In this respect, the Bureau's claims is similar to the abusiveness claim that the Bureau brought in a prior check-cashing case that also involved allegations of affirmative steps to keep relevant information away from consumers—in that case, the applicable fees. To the extent the Bureau was seeking to provide greater clarity to the meaning of abusiveness, however, it helped muddy the waters by pleading its claims against the company under a different prong of abusiveness than it had previously used in similar circumstances. In the prior case, the Bureau claimed that taking affirmative steps to hide check cashing fees from consumers was abusive because it "materially interfere[d] with the ability of a consumer to understand a term or condition" of the cash checking service under prong (d)(1) of the abusiveness standard. 12 U.S.C. § 5531(d)(1). In its most recent action, by contrast, the Bureau claims that taking affirmative steps to not inform consumers about the possibility of set-off is abusive because it "takes unreasonable advantage of a lack of understanding on the part of the consumer of the material risks, costs or conditions" of the check cashing service under prong (d)(2)(A) of the abusiveness standard. 12 U.S.C. § 5531(d)(2)(A). Although these standards are both defined as abusive conduct under the Dodd-Frank Act, they represent separate legal theories and separate legal claims. To the extent the Bureau believes that the kind of intentional obfuscation at issue in both cases is abusive because it prevents consumers from understanding the terms of the service they are purchasing, one would expect the agency to settle on a view as to which prong or prongs of abusiveness apply and then consistently rely on that prong(s) as a way of educating the marketplace about the meaning of abusiveness. Instead, the only thing consistent about the Bureau's approach is its inconsistency in determining what prong of abusiveness applies to similar sets of facts. We previously discussed this phenomenon under Cordray; it is apparently continuing under Mulvaney.

Mulvaney talks a good game about changing the nature of enforcement at the Bureau. But his actions have not always matched his rhetoric. We have written previously (here and here) about how the Bureau under Mulvaney has continued to assert novel claims of abusiveness brought under Cordray. Now it seems that Mulvaney is going to bring such claims himself, while continuing the Bureau's tradition of inconsistent pleading, which does little to clarify the Bureau's understanding of what the different prongs of abusiveness mean. There is no doubt that the pace of enforcement under Mulvaney has slowed dramatically. But the substance of enforcement actions has not changed nearly as much as Mulvaney seems to want you to think.

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2018. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions