WASHINGTON, D.C. -

Finance companies and other service providers involved with auto financing now have a bit more clarity about what the Consumer Financial Protection Bureau constitutes as abusive practices.

Last week, the bureau issued a policy statement providing what the regulator called a “common-sense framework” on how it intends to apply the “abusiveness” standard in supervision and enforcement matters.

Officials reiterated the Dodd-Frank Act is the first federal law to broadly prohibit “abusive” acts or practices in connection with the provision of consumer financial products or services. However, nearly a decade after the act became law, the CFPB acknowledged that uncertainty remains as to the scope and meaning of abusiveness.

“This uncertainty creates challenges for covered persons in complying with the law and may impede or deter the provision of otherwise lawful financial products or services that could be beneficial to consumers,” the bureau said in a news release.

Through this policy statement, the bureau explained that it is providing clarification on how it intends to apply abusiveness in order to promote compliance and certainty. Starting immediately the bureau intends to apply the following principles during supervision and enforcement work by:

— Focusing on citing or challenging conduct as abusive in supervision and enforcement matters only when the harm to consumers outweighs the benefit

— Generally avoiding “dual pleading” of abusiveness and unfairness or deception violations arising from all or nearly all the same facts, and alleging “stand alone” abusiveness violations that demonstrate clearly the nexus between cited facts and the Bureau’s legal analysis

— Seeking monetary relief for abusiveness only when there has been a lack of a good-faith effort to comply with the law, except the Bureau will continue to seek restitution for injured consumers regardless of whether a company acted in good faith or bad faith

“I am committed to ensuring we have clear rules of the road and fostering a culture of compliance – a key element in preventing consumer harm,” CFPB director Kathleen Kraninger said.

“We’ve developed a policy that provides a solid framework to prevent consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future,” she continued

In the policy statement that’s available here, the bureau pointed out that it left open the possibility of engaging in future rulemaking to further define the abusiveness standard.

Consumer Bankers Association president and chief executive officer Richard Hunt welcomed the CFPB’s latest actions involving “abusiveness” standard in supervision and enforcement matters.

“Defining the CFPB’s interpretation of its UDAAP authority will assist consumers as well as financial institutions working to meet their customers’ needs by offering safe and sound banking products within a well-regulated industry,” Hunt said in a statement. “We applaud the bureau for issuing this statement that provides regulatory clarity.”

Last year, the bureau held a symposium on abusive acts or practices with academics and practitioners. These experts provided a variety of perspectives on the need and benefits in developing a clearer understanding of the abusiveness standard and most agreed that the bureau should seek to resolve the uncertainty.

Officials noted that the symposium, along with other feedback from stakeholders, was an important part of the process leading to the bureau’s decision to issue the policy statement.

The symposium archived webcast can be found here