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HUD Housing Programs: Tenants’ Rights (The Green Book): 12.8.3 Section 104(d)

In addition to the URA, certain HUD programs are also subject to section 104(d) of the Housing and Community Development Act of 1974.739 Section 104(d) provides relocation assistance to low-income tenants displaced due to the demolition or conversion of affordable housing funded by740 the Community Development Block Grant, Urban Development Action Grant, HOME Investment Partnerships, Neighborhood Stabilization, and Section 108 Loan Assistance programs.

Federal Deception Law: 3.1.2.1 Removal Authority

The CFPB director is appointed by the president of the United States (“the president”) for a term of five years,41 and the Act states that the director may be removed only for cause for inefficiency, neglect of duty, or malfeasance in office.42 On June 29, 2020, the Supreme Court ruled in Seila Law L.L.C. v.

Federal Deception Law: 3.1.2.2 Appointment Authority

On January 4, 2012, President Obama, relying on his recess-appointment power, named Richard Cordray as the CFPB’s initial director. The same day, the president appointed individuals to the National Labor Relations Board (NLRB) also as recess appointments.

Federal Deception Law: 3.1.3 The Scope of This Chapter

The CFPB has extensive rule-writing and enforcement authority concerning consumer financial services. For example, it has authority to issue rules under the Truth in Lending Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, and other federal consumer credit statutes.

Federal Deception Law: 3.1.4 CFPB Rules Not Covered in This Chapter

The Act transfers to the CFPB authority to issue many other regulations that were previously issued by the Federal Reserve Board, the Department of Housing and Urban Development, or other federal agencies, interpreting what are called the “enumerated statutes.” Rules interpreting enumerated statutes will not be discussed in this chapter, as they are analyzed in other NCLC treatises:

Federal Deception Law: 3.2.1 General

The Consumer Financial Protection Act of 2010 authorizes the CFPB to take action against any entity under its jurisdiction that engages in an unfair, deceptive, or abusive act or practice (UDAAP) in connection with any transaction with a consumer for a consumer financial product or service or the offering of such a product or service.93 The Act also authorizes the CFPB to write rules and issue guidance to prevent unfair, deceptive, or abusive acts or practices in connection with a broad array of consumer financial products and services.

Federal Deception Law: 3.2.2 Deception

The Act does not include a definition of “deception,” but the FTC102 and a large body of decisions have interpreted the deception standard under the Federal Trade Commission Act (FTC Act) and state UDAP statutes.103 (UDAP is a term referring to state statutes that prohibit unfair or deceptive acts and practices. Because the CFPB can also prohibit abusive practices, its authority is termed UDAAP authority.)

Federal Deception Law: 3.2.3 Unfairness

The statutory definition of “unfair” incorporates the definition found in the FTC Act:

(A) the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers; and

(B) such substantial injury is not outweighed by countervailing benefits to consumers or to competition.110

Federal Deception Law: 3.2.4.2 Material Interference with a Consumer’s Understanding

To be abusive, a practice only needs to satisfy one of four tests. The first test is whether the practice materially interferes with a consumer’s ability to understand a term or condition of a consumer financial product or service.

The CFPB has said that:

Material interference may include actions or omissions that obscure, withhold, de-emphasize, render confusing, or hide information relevant to the ability of a consumer to understand terms and conditions.

Federal Deception Law: 3.2.4.4.1 General

The second test for an abusive practice (and the first based on taking unreasonable advantage) concerns a financial services provider taking unreasonable advantage of the consumer’s lack of understanding of material risks, costs, and conditions of a consumer financial product or service. This test is similar to the first test, which addressed interference with a consumer’s understanding. The first test, however, requires a company’s affirmative action in interfering with that understanding.

Federal Deception Law: 3.2.4.5.1 General

A third way a practice can be abusive—and a second way of taking unreasonable advantage—is if a financial services provider takes unreasonable advantage of consumers’ inability to protect their own interests when selecting or using a product or service.

Federal Deception Law: 3.2.4.6 Taking Unreasonable Advantage of the Consumer’s Reliance on the Financial Services Provider

A fourth way a practice can be abusive—and the third way of taking unreasonable advantage—is if a financial services provider takes unreasonable advantage where the consumer relies on the financial service provider. “First, reasonable reliance may exist where an entity communicates to a person or the public that it will act in its customers’ best interest, or otherwise holds itself out as acting in the person’s best interest . . .

Federal Deception Law: 3.2.5 Distinguishing Deceptive, Unfair, and Abusive Practices

Deception, unfairness, and abusive practices are separate concepts, and practices can violate any one of these standards without violating the others—or a practice can violate more than one of them. Unfairness does not rely on the financial provider’s bad conduct or a consumer being misled, but instead involves a balancing of interests between a practice’s injury to the consumer that cannot be avoided and the benefits to competition.

Federal Deception Law: 3.3 UDAAP Rules

The CFPB has issued one final rule using its UDAAP authority—its regulation on Payday, Vehicle Title, and Certain High-Cost Installment Loans—which occurred under Director Cordray.227 However, before the rule went into effect (the rule had been stayed pending the outcome of litigation228), the CFPB, under Director Kraninger, rescinded most of the rule, leaving just the pre-authorized payment provisions intact.

Federal Deception Law: 3.4.1 General

The CFPB has issued a limited number of guidance bulletins dealing with UDAAP.236 Guidance bulletins tend to be less specific than rules and address concerns about problematic practices without specifically identifying those practices as violations of the Act. Guidance documents are also generally addressed only to institutions that the CFPB supervises.

Federal Deception Law: 3.9 State Enforcement of CFPB Standards

State attorneys general and regulators309 may enforce CFPB rules against any actor in their state, including national banks and federal savings associations.310 Even absent a specific rule, states can also enforce the general UDAAP prohibition against nonbanks or state-chartered entities.311

Federal Deception Law: 3.10 CFPB Rules’ Relationship to State Law

CFPB rules do not preempt state law, except to the extent that the state law is inconsistent with the CFPB rule and then only to the extent of the inconsistency.325 The Consumer Financial Protection Act specifies that state law is not inconsistent with a CFPB rule if it provides greater consumer protection than the CFPB rule.326

Federal Deception Law: 3.4.2 Collection of Consumer Debts

In 2013, the CFPB issued a bulletin on collection of consumer debts.238 After describing general standards as to unfair, deceptive or abusive practices, the bulletin provides a non-exhaustive list of ten examples of conduct related to the collection of consumer debts that could constitute an unfair, deceptive, or abusive practice:

Federal Deception Law: 3.4.3 Mortgage Servicing for Military Homeowners Ordered to Relocate

The CFPB, together with the banking agencies, has issued guidance on mortgage servicing practices arising when dealing with military homeowners who have received Permanent Change of Station orders.240 The guidance directs servicers to ensure that employees are adequately trained to avoid misleading or harmful practices. The guidance raises concerns about practices including:

Federal Deception Law: 3.4.4 Marketing and Sales of Credit Card Add-On Products

The CFPB has addressed troubling practices in connection with products like debt protection, identity theft protection, credit score tracking, and other products that are supplementary to the credit provided by a credit card.241 The guidance is primarily addressed under the CFPB’s authority to prevent deceptive practices, but it also cites the CFPB’s Truth in Lending Act (TILA) and Equal Credit Opportunity Act (ECOA) authority.