On October 17, 2018, Acting Director of the Bureau of Consumer Financial Protection (BCFP) (previously the Consumer Financial Protection Bureau – CFPB), Mick Mulvaney, announced at the Mortgage Bankers Association, that the Bureau has set out on an agenda to better define the term “Abusive” in the Unfair, Deceptive, and Abusive Acts or Practices (UDAAP).
The first version of UDAAP, formerly referred to as Section 5 of the Federal Trade Commission (FTC) Act, was introduced in 1938. In 2004, the FTC expanded the section to include deceptive and unfair acts and practices, and UDAP was born. After that, the 2010 Dodd-Frank Wall Street Reform Act introduced the “abusive” statutory standard, changing UDAP to UDAAP, and refocused regulatory attention on this area of compliance. When the law was enacted, it also gave the primary UDAAP rulemaking authority to the CFPB. Now, enforcement of UDAAP for institutions over $10B is done by the CFPB, while institutions under $10B are enforced by FTC, the Attorney General, as well as Federal and State Regulators. The overall intent of UDAAP is to detect and prevent misleading or harmful behaviors by those who offer financial products or services to consumers.
This new agenda to clarify the standards has caused many questions and struggles as financial institutions try to understand UDAAP. The challenges are due in part to any number of factors, such as:
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