'Abusive' Acts and Practices: Dodd-Frank's Behaviorally Informed Authority Over Consumer Credit Markets and its Application to Teaser Rates
60 Pages Posted: 20 Jul 2015 Last revised: 2 Jul 2017
Date Written: July 18, 2015
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in 2010, authorizes the Consumer Financial Protection Bureau (CFPB) to prohibit abusive acts and practices that, among other things, materially interfere “with the ability of a consumer to understand a term or condition” as well as acts and practices that take “unreasonable advantage of a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service.” The project of this Note is to understand Congress’s grant of abuse authority to the CFPB. The thesis is that the statutory language of the abuse authority, and particularly its focus on consumer “understanding,” rejects traditional neoclassical economic logic. Instead, the abuse authority directs the CFPB to regulate problems articulated by the burgeoning literature of behavioral law and economics, particularly problems of imperfect rationality. Drawing on lessons from antitrust law, this paper proposes a legal standard for operationalizing the abuse standard. Putting this standard into practice, the paper asks whether the CFPB might be justified in regulating a common pricing structure in credit card markets — credit card teaser rates — under its abuse authority.
Keywords: behavioral law and economics, abusive acts and practices, CFPB, Consumer Financial Protection Bureau, Dodd-Frank, Wall Street Reform, UDAAP, UDAP, Unfair acts and practices, deceptive acts and practices
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