30 Hoosier Banker October 2015 OPERATIONS / TECHNOLOGY UDAAP: Is there a more confusing acronym in current financial regulatory jargon? This all-encompassing regulation is relatively new, but its bite is proving as injurious as its initial bark had foreshadowed. The Consumer Financial Protection Bureau (CFPB) continues to use the Unfair, Deceptive, and Abusive Acts or Practices (UDAAP) regulation as a primary tool for safeguarding consumers against harmful practices surrounding the collection of consumer debt. Its resulting enforcement actions—which in 2014 led to $2.5 billion in civil money penalties—serve as a reminder of the regulation’s severity. Unfortunately the CFPB’s definition of what constitutes a UDAAP remains vague, by design, to encourage financial institutions to consider consumer protection through an enterprise-wide lens— leaving many of them chasing their tails in an effort to stay compliant. As something of a peace offering, the CFPB has made public its Supervision and Examination Manual1 to help financial institutions learn about UDAAP and prepare for exams. What else can you do to prevent accidental violations? PassingYour Next UDAAP Exam Regulators expect financial institutions to complete risk assessments to ensure every product and service takes UDAAP into account. This can be difficult— because you don’t really know what you’re looking for—but making the effort to protect confidential information and IT assets goes a long way. Additionally financial institutions should: 1. Evaluate new products and services. Review new solutions to ensure all related, proper disclosures are included. Disclosures should be completely clear, so there is no question as to whether consumers can fully understand them. This process should occur each time a new solution is introduced, as well as for such add-on offers as rewards and “no transfer fee” programs. 2. Review advertising materials. As a best practice, ensure all advertisements are reviewed by both your marketing department and your compliance officer to safeguard against misleading or deceptive verbiage. 3. Create a UDAAP policy. Go beyond the risk assessment to create formal UDAAP policies and procedures. Since there’s no clear path to doing so, it’s a good idea to incorporate UDAAP language—for Seven Steps to Steering Clear of the UDAAP Trap IS YOUR MERCHANT SERVICE PROGRAM RELEVANT? Jim Fisher • 888.311.7248 ext. 108 • jfisher@apsolutions.net • Are YOU maximizing your Revenue Stream? • Are YOU confidently using your program as an Acquisition & Retention Tool? • We will consult with YOU to tailor a Turn-Key Solution! The Partnership Approval Payment Solutions, Inc has been selected as the “Preferred Service Provider,” for IBA for merchant services/payment processing. APS will collaborate with bank partners to tailor a flexible program that will complement the bank’s goals and business model. APS offers a turn-key solution to bank partners with no liability or underwriting responsibilities while still providing back office support. Most importantly, APS maximizes non-interest revenue stream back to its bank partner and helps solidify existing relationships. Jim Fisher earned his BS in Business Administration from the University of Evansville and his MBA from the University of Southern Indiana. Jim has applied his 14 years’ of experience and in depth knowledge in the financial services industry. He joins Approval Payment Solutions as the Regional Director of Agent Bank Relationships for the Midwest. Jim Fisher, Director of Agent Banks (MW) The time to discuss your current scenario and needs is NOW!
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