I received a not-so-subtle hint at the Indiana Bankers Association’s Mega Conference in early May. It came when three different sessions, focused on three different areas of responsibility within the bank, all mentioned a particular topic and all three speakers told their respective audiences to pay close attention to it. Despite the fact that the speakers were discussing different subjects — one focused on directors, one focused on marketing and one focused on compliance — they each told listeners to be aware of unfair, deceptive and abusive acts and practices — UDAAP, for short. I quickly inferred that UDAAP must be important.
Prior to the Dodd-Frank Act, the Federal Trade Commission was in charge of monitoring “unfair and deceptive acts and practices.” While UDAP is still mainly the FTC’s domain for most industries, the Dodd-Frank Act added the word “abusive” to the phrase and with that one word has not only put extra pressure on financial institutions but has also created a lot of uncertainty; mostly because people are wondering, “What is considered abusive?”
Because the Consumer Financial Protection Bureau has been tasked with examining banks it regulates for UDAAP, I thought there might be a definition on its website. But all I found was guidance that said its examiners are supposed “to assess the quality of the regulated entity’s compliance risk management systems, including internal controls and policies and procedures, for avoiding unfair, deceptive, or abusive acts or practices; to identify acts or practices that materially increase the risk of consumers being treated in an unfair, deceptive or abusive manner; to gather facts that help determine whether a regulated entity engages in acts or practices when offering or providing consumer financial products or services that are likely to be unfair, deceptive or abusive; and to determine, in consultation with headquarters, whether an unfair, deceptive or abusive act or practice has occurred and whether further supervisory or enforcement actions are appropriate.”
There is not even a hint in that paragraph of what the CFPB considers to be abusive acts. I am assuming the definition will be determined as the bureau goes along; i.e., they will know it when they see it.
In an effort to guard against UDAAP violations — if that is possible without actually knowing for sure what an abusive act is — click the links below to learn more about what possibly constitutes UDAAP and tips on how to avoid violations.
Kari English is senior editor of BankNews.
Copyright (c) June 2012 by BankNews Media