Short title

This Act may be cited as the

Rectifying Undefined Descriptions of Abusive Acts and Practices Act

or the

Rectifying UDAAP Act

Mitigating factors in assessing civil penalties

Section 1055(c) of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5565(c)) is amended by adding at the end the following:

(6)

Rulemaking

The Bureau shall, not later than 180 days after the date of the enactment of this paragraph, issue a rule that establishes policies and procedures relating to the imposition of civil monetary penalties sought under this subsection, including the application of the mitigating factors described in paragraph (3).

Rulemaking relating to unfair, deceptive or abusive acts or practices

(a)

In general

Section 1031 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5531) is amended by striking subsection (b) and inserting the following: (b)

Rulemaking

(1)

In general

The Bureau may prescribe rules applicable to a covered person or service provider identifying as unlawful unfair, deceptive, or abusive acts or practices in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. Rules under this section may include requirements for the purpose of preventing such acts or practices. (2)

Cost benefit analysis required

Any final rule issued by the Bureau relating to abusive, unfair, or deceptive acts or practices shall include a cost-benefit analysis. (3)

Definition of abusive act or practice

The Bureau shall, not later than 180 days after the date of the enactment of this subsection, issue a rule that defines the term abusive act or practice for the purposes of this section.

(b)

Opportunity for comment

The Bureau of Consumer Financial Protection shall, not later than 180 days after the date of the enactment of this subsection, allow the public to submit comments with respect to any confusion about how the Bureau of Consumer Financial Protection uses its authority with respect to unfair, deceptive, or abusive acts or practices.

Authority to declare an act unlawful based on discrimination

The Bureau of Consumer Financial Protection may not interpret the authority of the Bureau of Consumer Financial Protection relating to unfair, deceptive, or abusive acts and practices, as such term is used in section 1031 of the Consumer Financial Protection Act of 2010, to include discriminatory practices.

Clarifying the abusive standard for the Bureau of Consumer Financial Protection

Section 1031 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5531) is amended by striking subsection (d) and inserting the following:

(d)

Abusive

(1)

In general

The Bureau shall have no authority to declare an act or practice of a covered person abusive in connection with the provision of a consumer financial product or service, unless the act or practice— (A)intentionally and materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or (B)takes unreasonable advantage of— (i)a lack of understanding by the consumer with respect to the possible impact, material risks, costs, or conditions of the product or service, or the likelihood of the risks, costs, or conditions of the product or service negatively affecting the consumer; and (ii)the reasonable reliance the consumer places on an affirmative action or representation of such covered person to induce such consumer to rely on such action or representation. (2)

Abusive actions

Conduct of a covered person shall be considered abusive if— (A)the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers, provided, however, that if the act or practice was timely, clearly and conspicuously disclosed to consumers, the injury is presumed to be reasonably avoidable; or (B)such substantial injury is not outweighed by countervailing benefits to consumers or to competition. (e)

Good-Faith effort To comply

(1)

In general

The Bureau may not seek monetary relief from a covered person under this section unless the covered person has not established by a preponderance of the evidence that they made a good-faith effort to comply. (2)

Authority to seek legal or equitable remedies

The limitation described in subparagraph (A) shall not restrict the authority of the Bureau to seek legal or equitable remedies, such as damages and restitution, to redress an identifiable consumer injury caused by the abusive acts or practices of such covered person.

Notice and opportunity to cure

Section 1031 of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5531) is amended by adding at the end the following:

(g)

Notice and opportunity To cure

(1)

In general

If a covered person self-identifies a potential unfair, deceptive, or abusive act or practice carried out by such covered person, the Bureau shall, not later than 90 days after such self-identification, provide a written notice in the form of a potential action and request for response letter or a notice and opportunity to respond and advise letter of the potential unfair, deceptive, or abusive act or practice to such covered person and inform the covered person that such person has 180 days after the date the covered person receives such notice to cure such potential unfair, deceptive, or abusive act before the Bureau may pursue other legal action. (2)

Tolling of statute of limitations

Any applicable statute of limitations that applies to conduct under which the Bureau has given notice and an opportunity to cure shall not toll until— (A)the covered person cures the potential abusive, unfair, or deceptive act or practice and notifies the Bureau that such act or practice has been cured; (B)the covered person notifies the Bureau that such covered person will not cure the act or practice; or (C)the 180-day period to cure ends.

Abusive, unfair, or deceptive acts or practices enforcement actions

(a)

In general

Subtitle E of title X of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5561 et seq.) is amended by adding at the end the following new section:

1059.

Unfair, Deceptive, or Abusive Acts or Practices Enforcement Actions

Enforcement actions brought by the Bureau under section 1031 under this title shall be brought in— (1)the United States district court located where the covered person has its headquarters location; or (2)the United States District Court for the District of Columbia.

(b)

Actions under section 1031

Section 1031 of the Consumer Financial Protection Act of 2010 is amended by adding at the end the following:

(g)

Enforcement Actions

(1)

In general

If the Bureau brings an enforcement action under this section, the Bureau shall state with particularity the circumstances that the Bureau alleges constitute violation of this section. (2)

Alternative Claims

If the Bureau brings an enforcement action under this section— (A)claiming that an activity is unfair or deceptive, the Bureau may not claim in the alternative that the activity is abusive; and (B)claiming that an activity is abusive, the Bureau may not claim in the alternative that the activity is unfair or deceptive.

Look-back provisions for the Consumer Financial Protection Bureau

Subtitle B of title X of the Consumer Financial Protection Act of 2010 (12 U.S.C. 5511 et seq.) is amended by adding at the end the following new section:

1029B

Examination period limitations

(a)

In general

When enforcing Federal consumer financial laws, the Bureau may not seek a civil money penalty for any violating conduct that occurred prior to the most recent assignment of a consumer compliance rating. (b)

Rule of construction

This limitation described in subsection (a) may not be construed to restrict the ability of the Bureau to seek other forms of legal or equitable relief available under subparagraphs (A) through (G) of section 1055(a)(2) for any violating conduct that occurred prior to the most recent assignment of a consumer compliance rating.