momentum in public speeches, and the President signed an Executive Order (EO) encouraging the CFPB to revive enforcement of the law. UDAAP Today Since the EO and the permanent appointment of a new director, the CFPB’s UDAAP Examination Procedures manual was updated to reflect a commitment to enforcement upon industry players accused of being unfair, deceptive, or abusive to consumers. A UDAAP violation is independent of other regulatory violations, and the CFPB has made it very clear that discrimination associated with any financial product, not just credit, is illegal. This includes deposit accounts, payments, and debt collections expanding further to include marketing, incentive programs, and any area of operations. The CFPB has publicly stated it will crack down on violations in home loans and small business loans. Even lending decisions using artificial intelligence and machine learning will be evaluated for UDAAP violations. Managing UDAAP Risk During Times of Uncertainty Although the UDAAP journey has provided both haze and clarity, success is achieved by continually wearing the UDAAP lens. Considering UDAAP at all stages of product evolution and throughout a consumer’s entire banking journey with your institution is key. From the first introduction of your brand and offerings through marketing and advertising to the loan collections process and beyond, understand each area’s susceptibility to UDAAP risk. A stand-alone UDAAP risk assessment is not required, but consideration should be incorporated in all risk assessments, such as Fair Lending, Product and Services Development, Vendor Management, and others unique to your institution. Educate the team and encourage them to speak up when something is confusing or unclear. Often those who are implementing strategy, marketing, lending programs, and policies are not doing so with malicious intent. It’s similar to having someone else proofread a document; the writer of the document becomes blind at times to grammatical errors because of prolonged exposure to the words. Create a policy, and take the time to educate the Board of Directors on potential red flags or areas most susceptible to UDAAP claims. Learn from others. While several recent UDAAP consent orders were imposed on non-traditional lenders or “big banks,” being attentive to these actions will only enhance your knowledge of how the regulators are thinking. Review your processes, looking for similarities to the accused. Avoid an “it can’t happen to us” attitude. Most importantly, ask the difficult questions around whether products, marketing, disclosures, lending, etc. could be perceived as harmful to consumers and dedicate resources to a robust complaint management system to aid in the early detection of issues that could heighten UDAAP risk. Building a reputation and brand takes years of dedicated effort, and one UDAAP claim, even if disputable or unwarranted, can wreak havoc on all preceding success. Adjust them when necessary, but keep your UDAAP lens well-positioned and clear. Create a policy, and take the time to educate the Board of Directors on potential red flags or areas most susceptible to UDAAP claims. The Community Banker 25
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