Prohibition of abuse in Banking Acts and Practices Under U.S. Law: A Comparative Analysis with Iran's Legal System

Banking contracts, which are among the most commonly used standard contracts, are established between the credit institution (in a general sense) as the master party to the contract and the consumer. The adhesive nature of these contracts, combined with the complexity of their provisions and the dominant position of the credit institution, creates opportunities for potential abuse by the stronger party involved in the agreement. However, it is not always the case that consumers are exploited; information asymmetry can sometimes have the opposite effect, leading to moral hazards on the part of the consumer. Following the financial crisis of 2007-2008, the term "abuse" entered the legal and financial literature of the United States, largely due to the Wall Street Reform and Consumer Protection Act. The inadequacy of existing regulations in preventing the crisis, along with the failure to effectively address the financial turmoil, prompted a comprehensive review of the mechanisms for managing financial markets, particularly concerning credit contracts and the provision of financial facilities. In addition to establishing the Office of Financial Protection for Consumers, the aforementioned Act empowered this office to identify and prosecute abusive financial practices and actions. In this article, a descriptive-analytical approach is employed to examine the background and origins of abuse. The discussion includes the concept and enforcement of prohibitions within the legal system of the United States of America. Furthermore, the article evaluates existing mechanisms and examples in Iranian law in relation to the aforementioned legal framework. Finally, the expansion and enhancement of existing mechanisms within the domestic legal system to address the abuse of the more powerful party in a contract, along with a reference to general principles and the initiation of new approaches to consumer protection, can be inferred.