I Shine GUEST ARTICLE Imagine walking into the sweltering heat after being in an airconditioned room and your eyewear becomes incredibly foggy with condensation. Using the tail of your shirt, glasses are cleaned and repositioned on the eyes. Voila! Operations resume. Since the Consumer Federal Protection Bureau’s (CFPB) formation, the Unfair, Deceptive, or Abusive Acts and Practices (UDAAP) journey reminds me of walking out of the air conditioning and into the heat over and over due to vague guidance and mixed signals from the agency that are followed by moments of clarity. Understanding the UDAAP Evolution Let’s travel down memory lane. In 1938, Section 5 of the Federal Trade Commission (FTC) Act made it official that consumers deserve the right to be treated fairly when engaging in commerce across all industries. Sixty-six years later, the acronym “UDAP” was born, and the FTC used its authority to act on companies that treated consumers unfairly or deceptively. When Congress passed the Dodd Frank Act and the CFPB was formed in 2010, the banking industry became more up close and personal with UDAP when enforcement of its violations and rulemaking transitioned from the FTC to the CFPB. The agency’s By Kathryn “Katie” Ferrell, CRCM, CAMS, UBB RESTORING THE TO YOUR UDAAP LENS first line of business was the introduction of the “abusive” prong, which expanded the acronym to UDAAP. For those of us serving in the industry in 2011, UDAAP was the buzzword, and banks braced for impact in response to what was and is still described as a very vague regulation. Training, policies, and risk assessments were implemented, and some banks named a “UDAAP Officer.” Enforcement actions were taken under the director of the CFPB from 2012–2017 when authority was used to act on conduct that, until that time, no one knew was illegal, hence the popular “We know UDAAP when we see it” phrase. When a new administration took office in Washington in 2017, the CFPB loosened its reigns, and UDAAP enforcement declined under new directors and orders from the White House. In 2020, the acting director defined abusive in a Policy Statement which relieved institutions from civil penalties if good faith efforts to comply with the law were demonstrated. That Policy Statement was quickly rescinded when a new administration took office in 2021. UDAAP conversations regained 24 The Community Banker mibonline.org
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