The Dodd-Frank Act introduced a new concept to the regulatory scheme, hoping to prohibit abusive acts or practices by providers of consumer financial products or services. While DFI statutes uniformly prohibit unfair or deceptive acts or practices, known as UDAPs, the new Consumer Financial Protection Bureau (CFPB), which oversees non-depository financial institutions, may write rules prohibiting unfair, deceptive, or abusive acts or practices, known as UDAAPs.
So what is an abusive act or practice? Essentially, the issue is one of fairness: was the provider of the consumer financial product or service fair in its treatment of the consumer? Under the Dodd-Frank Act, an abusive act or practice is one which:
Licensees should consider taking the following steps to ensure compliance:
For more information, see the CFPBís UDAAP Examination Procedures Manual at www.consumerfinance.gov/guidance/supervision/manual/udaap-narrative/