Unfair or deceptive acts or practices (UDAP) & unfair, deceptive, or abusive acts or practices (UDAAP)

Position

• ICBA advocates for immediate reform to UDAP/UDAAP.
• Congressional and regulatory action is needed to remove the strict liability nature of UDAAP; to prohibit agencies from retroactively alleging UDAP/UDAAP violations; to require a notice of a potential UDAP/UDAAP concern followed by a defined/reasonable amount of time to cure that concern; require agencies to assess mitigating factors before a determination of a violation; and prohibit agencies from asserting a violation or assessing a fine while a community bank works to cure the matter at issue.
• Agencies should be required to demonstrate, through evidence and during the proper proceedings, negligence, gross negligence, willful disregard, failure to cure after notice, or something similar before assessing a fine.
• ICBA opposes any retroactive and punitive action on lawfully disclosed deposit account fee practices, especially where those practices were never subject to examiner or regulatory scrutiny.

Background

Section 5 of the FTC Act prohibits unfair or deceptive acts or practices (UDAP) in or affecting commerce. The OCC, FDIC, and FRB apply UDAP standards to their supervised institutions. Sections 1031 and 1036 of the Dodd–Frank Act prohibit unfair, deceptive, or abusive acts or practices (UDAAP). The CFPB applies UDAAP standards to their supervised institutions.

A bank’s advertising, promotional materials, and disclosures must comply with applicable laws and regulations. Yet, in spite of providing compliant disclosures in a clear, balanced, and timely manner,

ICBA members across the country have been threatened with UDAP/UDAAP violations during examinations and have been subject to lawsuits in several states.

Prudential regulators have recently characterized certain legally disclosed and allowed fees as “unavoidable,” “a surprise,” and therefore illegal. Under the threat of UDAP/UDAAP violations, community banks have been forced to conduct look-backs and provide restitution on practices previously examined without prior scrutiny, criticism, warnings, or findings. ICBA is aggressively pushing back on the punitive and retroactive nature in which UDAP/UDAAP has been used by federal regulators.