The CFPB is calling on state governments to increase their focus on consumer financial protection laws.

“Enforcing consumer protection law has long been a state-federal partnership in which the states have often taken the lead,” the CFPB said, in a report that includes legislative and regulatory language that states may use. “Over the last century, in response to evolving markets, states have refreshed the core standards of fair dealing that form the bedrock of consumer protection law. States should once again refresh their UDAP statutes to address the challenges of the modern economy.”

Many of the suggestions mirror the CFPB’s work, the bureau said. Those suggestions include addressing so-called “junk fees” in consumer financial products and services, and the banning of abusive practices to prevent companies from obscuring product features or exploiting their market power.

Many of the suggestions mirror legislative language in the federal Consumer Financial Protection Act (CFPA), according to the CFPB.

With regard to “junk fees,” the CFPB recommends that states add the following prohibition to their UDAP laws:

“(a) Hidden Fees Prohibited. It is an unfair and deceptive practice for any business to offer, display, or advertise any price of a good or service without clearly and conspicuously disclosing the total price.

(1) In any offer, display, or advertisement that represents any price of a good or service, a business must disclose the total price more prominently than any other pricing information. However, where the final amount of payment for the transaction is displayed, the final amount of payment must be disclosed more prominently than, or as prominently as, the total price.

(2) A business must disclose clearly and conspicuously, before the consumer consents to pay for any good or service:

i. The nature, purpose, and amount of any fee or charge imposed on the transaction that has been excluded from total price and the identity of the good or service for which the fee or charge is imposed; and

ii. The final amount of payment for the transaction.”

While the suggested language appears to be aimed at fees that are not disclosed, in various statements, such as regarding mortgage loan closing costs, the CFPB has appeared to label any fee, even if for valid and necessary services, as a “junk fee:” “Families who manage to save up for a down payment and get approved for a mortgage often get an unwelcome surprise: closing costs that all too often are full of junk fees.” The Mortgage Bankers Association found the CFPB statements on mortgage closing costs to be “baffling” and that “[t]he illogical use of the term ’junk fee’ contradicts even the White House’s own definition, which cites the lack of disclosure of the fee being charged.”

The Dodd-Frank Act provides that the CFPB shall have no authority to declare an act or practice abusive in connection with the provision of a consumer financial product or service, unless the act or practice:

“(1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or

(2) takes unreasonable advantage of—

(A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;

(B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or

(C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.”

With regard to the CFPB encouraging states to incorporate the abusive concept into their UDAP laws, the report provides:

“The prohibition on “abusive” practices has some advantages over unfairness and deception that can be useful for dealing with contemporary problems, and the CFPB recommends that states incorporate it into their consumer protection statutes.

For example, “material interference,” which is one form of abusive acts or practices, accurately describes many common tactics used online against consumers, such as pop-up or drop-down boxes, multiple click-throughs, or dark patterns. Although these practices can often be described as a deceptive act or practice under the CFPA, the FTC Act, and similar state statutes, an “abusive” claim can more easily capture modern dark pattern schemes than a theory of deception.”  (Footnote omitted.)

In addition to cracking down on “junk fees” and abusive acts, the CFPB urges states to:

  • Ensure that Attorneys General have adequate investigatory authorities and can pursue remedies that protect consumers and make them whole.
  • Remove various evidentiary hurdles to protecting consumers. For instance, some states require that plaintiffs prove individual monetary harm, that frustrates private rights of action, the CFPB said.
  •  Guarantee that consumer financial protection laws also protect businesses.
  •  Authorize forms of private enforcement that can remain viable despite requirements for forced arbitration.
  •  Ban common schemes in the modern economy, including the abuse of personal data.
  • Provide consumers with the right to direct a company to delete the nonpublic personal information the company has about them, and require companies to only collect the minimum data necessary to provide their product or service.
  • Allow for consumers to obtain equitable relief, punitive damages, and other remedies to deter misconduct.

The report does not discuss how the Trump Administration may manage the CFPB once President-Elect Donald Trump takes office on January 20. Trump transition officials have made it clear that they do not like CFPB Director Rohit Chopra’s aggressive regulatory regime.