Introducing “Abusive”: A New and Improved Standard for Consumer Protection

27 Sep 2012 11:06pm Rebecca Schonberg 

The economic downturn of 2008 made the American consumer a focus of intense curiosity and concern. Responding to this concern, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, introducing a new standard for consumer financial protection: "abusive." This standard is distinct from existing standards because it recognizes the imbalance between consumers and lenders in terms of understanding contract terms, obtaining information, altering the terms of an agreement, and evaluating and bearing risk. In doing so, it pushes back against narratives that lay the blame for the financial collapse at the feet of consumers without taking into account the structure of the consumer financial products market.

Over eighty years after their introduction in consumer financial protection legislation, the terms "deceptive" and "unfair" no longer define the limits of consumer protection. Now, both advocates and policy makers must begin the long, collaborative endeavor of shaping what lies beyond those bounds. Reading the text of Dodd-Frank against its legislative history and social context suggests three ways the new "abusive" standard can be used. First, it can make consumer choices more meaningful by enhancing consumer understanding of contractual language-either directly or by motivating lenders to better inform their customers. Second, the "abusive" standard can give the Consumer Financial Protection Bureau power to modify products and take the most dangerous ones off the market entirely. Finally, the standard can impose a greater obligation on lenders to act in the interests of consumers. Exploring these avenues for implementation is the first step in developing a new framework for consumer financial protection.



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