States Fear Consumer Harm From CFPB Innovation Proposals

The Consumer Financial Protection Bureau’s effort to spur financial services innovation could hinge on whether companies are exempted from a powerful enforcement tool protecting customers from abusive practices.

Industry groups say limited protection from the CFPB’s unfair, deceptive, or abusive acts or practices (UDAAP) standard is critical for companies to participate in the agency’s programs to test new technologies and products without fear of enforcement reprisals.

But 22 Democratic attorneys general led by New York’s Letitia James say the CFPB can’t just issue immunity from UDAAP, a unique enforcement authority that enables the bureau to punish actions or practices that ...