UDAAP Violation Example
We recently spotted several potential Unfair, Deceptive or Abusive Acts of Practices (UDAAP) violations. The potential for UDAAP violations is so great because UDAAP touches on all products, services, and departments. It is not the most clearly defined regulatory requirement and is quite subjective. Still, there are instances where it is readily apparent that an examiner or third party plaintiff attorney will deem something a UDAAP violation if they find it. Particularly when it occurs in relation to a product under strict scrutiny by regulators. One example is how fees are described in courtesy pay or overdraft protection programs. We find the initial disclosure calls a courtesy pay/overdraft protection fee by one name, the periodic statement uses another, while the fee page on the website lists it by yet a third name. This can be very confusing to consumers and viewed as a deceptive manner of disclosing a costly fee. Go back and examine how you disclose and advertise fees for courtesy pay/overdraft protection services and ensure that you consistently do so.
CLA’s financial institution regulatory compliance team assists banks and credit unions nationwide in establishing regulatory compliance programs, conducting compliance testing, and training staff on regulations. Justin Robinson is a member of CLA’s regulatory compliance team and can be reached at justin.robinson@CLAconnect.com.
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