At its core, compliance is really about doing the right thing. But who gets to decide what’s right and wrong?
The legislators who drafted the Dodd–Frank Wall Street Reform and Consumer Protection Act knew what they were doing when they wrote that lenders and financial service providers were prohibited from engaging in “unfair, deceptive, and abusive acts and practices.” These words—“unfair, deceptive, and abusive”—bring to mind clear examples of wrongdoing. They remind us of our first memories of being bullied, lied to, and mistreated. Who wouldn’t want to prevent that, whenever possible?
In practice, however, consumer finance organizations—as well as the Consumer Financial Protection Bureau itself—have struggled to define and understand what actions UDAAP actually encompasses. Is a certain marketing campaign “deceptive” for what it says about a product, or because it’s targeting a vulnerable group of borrowers? Is a product “unfair” if it appeals primarily to consumers who have never taken out a loan?
In the years since the passage of Dodd–Frank and the creation of the CFPB, regulators and legal practitioners have endeavored to spell out the UDAAP doctrine for organizations at risk of violation. The latest insights offer considerable clarity, nearly a decade after the global financial crisis of 2008.
At the AFSA Compliance Roundtable this January, we heard from Tracy Hatt-Doering and Broderick Coats, two consumer compliance experts who have spent their time analyzing UDAAP risks and expectations. Here’s an overview of what Tracy and Broderick told us: