The Consumer Financial Protection Bureau (CFPB) continues to use unfair, deceptive, and abusive acts or practices (UDAAP) as its primary enforcement tool. Over the past four years, the CFPB has used UDAAP to enforce hot button issues such as credit card add-on products, credit card advertising, debt collection, credit reporting and monitoring, auto lending, and mortgage servicing. In the coming years, credit unions should expect to see UDAAP being used as the CFPB’s enforcement wild card, as the CFPB will cite a UDAAP violation for anything it sees and doesn’t like.
To assist credit unions, NAFCU will periodically highlight key UDAAP updates in our monthly compliance newsletter and blog. As explained …show more content…
. . to engage in any . . . deceptive . . . act or practice.” 12 U.S.C. § 5536(a)(1)(B); see also 12 U.S.C. § 5531(a). According to the CFPB’s Supervision and Examination Manual and recent consent orders, an act or practice is deceptive when it meets the following three-part test: 1) the representation, omission, act, or practice misleads or is likely to mislead the consumer; 2) the consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and 3) the misleading representation, omission, act, or practice is material. See, CFPB v. Chance Gordon et al., No. CV 12-6147 RSWL (MRWx) (C.D. Cal. June 26, 2013). Below is an explanation of each of these three …show more content…
One good example of a deceptive representation is found in the Manufacturers and Traders Trust Company (M&T Bank) consent order. In the M&T Bank consent order, the CFPB cited M&T Bank for deceptively advertising free checking accounts. The CFPB found that M&T Bank advertised checking accounts to consumers with promises of “no strings attached” free checking, without disclosing key eligibility requirements or the requirement that customers had to maintain a minimum level of account activity. Below are some of the advertisements made by M&T Bank as mentioned in the consent