12 U.S.C. § 5531 — Prohibiting unfair, deceptive, or abusive

Page 1971 TITLE 12—BANKS AND BANKING § 5531 1 See References in Text note below. 2 So in original. The period probably should be a comma. (B) in which— (i) the extension of retail credit or retail leases are provided directly to consumers; and (ii) the contract governing such exten- sion of retail credit or retail leases is not routinely assigned to an unaffiliated third party finance or leasing source; or (3) offers or provides a consumer financial product or service not involving or related to the sale, financing, leasing, rental, repair, re- furbishment, maintenance, or other servicing of motor vehicles, motor vehicle parts, or any related or ancillary product or service. (c) Preservation of authorities of other agencies Except as provided in subsections (b) and (d), nothing in this title,1 including subtitle F, shall be construed as modifying, limiting, or super- seding the operation of any provision of Federal law, or otherwise affecting the authority of the Board of Governors, the Federal Trade Commis- sion, or any other Federal agency, with respect to a person described in subsection (a). (d) Federal Trade Commission authority Notwithstanding section 57a of title 15, the Federal Trade Commission is authorized to pre- scribe rules under sections 45 and 57a(a)(1)(B) of title 15.2 in accordance with section 553 of title 5, with respect to a person described in sub- section (a). (e) Coordination with Office of Service Member Affairs The Board of Governors and the Federal Trade Commission shall coordinate with the Office of Service Member Affairs, to ensure that— (1) service members and their families are educated and empowered to make better in- formed decisions regarding consumer financial products and services offered by motor vehicle dealers, with a focus on motor vehicle dealers in the proximity of military installations; and (2) complaints by service members and their families concerning such motor vehicle deal- ers are effectively monitored and responded to, and where appropriate, enforcement action is pursued by the authorized agencies. (f) Definitions For purposes of this section, the following definitions shall apply: (1) Motor vehicle The term ‘‘motor vehicle’’ means— (A) any self-propelled vehicle designed for transporting persons or property on a street, highway, or other road; (B) recreational boats and marine equip- ment; (C) motorcycles; (D) motor homes, recreational vehicle trailers, and slide-in campers, as those terms are defined in sections 571.3 and 575.103 (d) of title 49, Code of Federal Regulations, or any successor thereto; and (E) other vehicles that are titled and sold through dealers. (2) Motor vehicle dealer The term ‘‘motor vehicle dealer’’ means any person or resident in the United States, or any territory of the United States, who— (A) is licensed by a State, a territory of the United States, or the District of Colum- bia to engage in the sale of motor vehicles; and (B) takes title to, holds an ownership in, or takes physical custody of motor vehicles. (Pub. L. 111–203, title X, § 1029, July 21, 2010, 124 Stat. 2004.) Editorial Notes REFERENCES IN TEXT This title, referred to in subsec. (c), is title X of Pub. L. 111–203, July 21, 2010, 124 Stat. 1955, known as the Consumer Financial Protection Act of 2010, which en- acted this subchapter and enacted, amended, and re- pealed numerous other sections and notes in the Code. For complete classification of title X to the Code, see Short Title note set out under section 5301 of this title and Tables. Subtitle F, referred to in subsec. (c), is subtitle F (§§ 1061–1067) of title X of Pub. L. 111–203, July 21, 2010, 124 Stat. 2035, which is classified generally to part F (§ 5581 et seq.) of this subchapter. For complete classi- fication of subtitle F to the Code, see Tables. Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective on the designated transfer date, see section 1029A of Pub. L. 111–203, set out as a note under section 5511 of this title. PART C—SPECIFIC BUREAU AUTHORITIES § 5531. Prohibiting unfair, deceptive, or abusive acts or practices (a) In general The Bureau may take any action authorized under part E to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any trans- action with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service. (b) Rulemaking 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 prod- uct or service, or the offering of a consumer fi- nancial product or service. Rules under this sec- tion may include requirements for the purpose of preventing such acts or practices. (c) Unfairness (1) In general The Bureau shall have no authority under this section to declare an act or practice in connection with a transaction with a con- sumer for a consumer financial product or service, or the offering of a consumer financial product or service, to be unlawful on the grounds that such act or practice is unfair, un- less the Bureau has a reasonable basis to con- clude that— Page 1972 TITLE 12—BANKS AND BANKING § 5532 (A) the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by con- sumers; and (B) such substantial injury is not out- weighed by countervailing benefits to con- sumers or to competition. (2) Consideration of public policies In determining whether an act or practice is unfair, the Bureau may consider established public policies as evidence to be considered with all other evidence. Such public policy considerations may not serve as a primary basis for such determination. (d) Abusive The Bureau shall have no authority under this section to declare an act or practice abusive in connection with the provision of a consumer fi- nancial 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 pro- tect the interests of the consumer in select- ing or using a consumer financial product or service; or (C) the reasonable reliance by the con- sumer on a covered person to act in the in- terests of the consumer. (e) Consultation In prescribing rules under this section, the Bu- reau shall consult with the Federal banking agencies, or other Federal agencies, as appro- priate, concerning the consistency of the pro- posed rule with prudential, market, or systemic objectives administered by such agencies. (f) Consideration of seasonal income The rules of the Bureau under this section shall provide, with respect to an extension of credit secured by residential real estate or a dwelling, if documented income of the borrower, including income from a small business, is a re- payment source for an extension of credit se- cured by residential real estate or a dwelling, the creditor may consider the seasonality and irregularity of such income in the underwriting of and scheduling of payments for such credit. (Pub. L. 111–203, title X, § 1031, July 21, 2010, 124 Stat. 2005.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 111–203, title X, § 1037, July 21, 2010, 124 Stat. 2011, provided that: ‘‘This subtitle [subtitle C (§§ 1031–1037), enacting this part] shall take effect on the designated transfer date.’’ [The term ‘‘designated transfer date’’ is defined in section 5481(9) of this title as the date established under section 5582 of this title.] § 5532. Disclosures (a) In general The Bureau may prescribe rules to ensure that the features of any consumer financial product or service, both initially and over the term of the product or service, are fully, accurately, and effectively disclosed to consumers in a manner that permits consumers to understand the costs, benefits, and risks associated with the product or service, in light of the facts and cir- cumstances. (b) Model disclosures (1) In general Any final rule prescribed by the Bureau under this section requiring disclosures may include a model form that may be used at the option of the covered person for provision of the required disclosures. (2) Format A model form issued pursuant to paragraph (1) shall contain a clear and conspicuous dis- closure that, at a minimum— (A) uses plain language comprehensible to consumers; (B) contains a clear format and design, such as an easily readable type font; and (C) succinctly explains the information that must be communicated to the con- sumer. (3) Consumer testing Any model form issued pursuant to this sub- section shall be validated through consumer testing. (c) Basis for rulemaking In prescribing rules under this section, the Bu- reau shall consider available evidence about consumer awareness, understanding of, and re- sponses to disclosures or communications about the risks, costs, and benefits of consumer finan- cial products or services. (d) Safe harbor Any covered person that uses a model form in- cluded with a rule issued under this section shall be deemed to be in compliance with the disclosure requirements of this section with re- spect to such model form. (e) Trial disclosure programs (1) In general The Bureau may permit a covered person to conduct a trial program that is limited in time and scope, subject to specified standards and procedures, for the purpose of providing trial disclosures to consumers that are de- signed to improve upon any model form issued pursuant to subsection (b)(1), or any other model form issued to implement an enumer- ated statute, as applicable. (2) Safe harbor The standards and procedures issued by the Bureau shall be designed to encourage covered persons to conduct trial disclosure programs. For the purposes of administering this sub- section, the Bureau may establish a limited period during which a covered person con- ducting a trial disclosure program shall be deemed to be in compliance with, or may be exempted from, a requirement of a rule or an enumerated consumer law. (3) Public disclosure The rules of the Bureau shall provide for public disclosure of trial disclosure programs,