WASHINGTON (11/9/15)--How is the Consumer Financial Protection Bureau interpreting its enforcement authority under the Dodd-Frank Act to prohibit “unfair, deceptive or abusive acts or practices” (UDAAP)? What can credit unions learn from the regulator's recent enforcement actions? What are examiners looking for?
CUNA Senior Compliance Counsel Whitney Nicholas attended the latest Capital Area Compliance Roundtable (CACR), which addressed the above questions and many other top compliance challenges for credit unions.
The Maryland & DC Credit Union Association hosted the CACR to give credit unions a fresh look at the latest UDAAP issues, processes and mitigation strategies.
The presenter was Jane Pannier, senior vice president for AffirmX and past faculty member at CUNA’s Mortgage Lending School.
Section 1031 of the Dodd-Frank Act added the concept of an “abusive” act to create UDAAP. An “abusive” act or practice is something that materially interferes with the ability of a consumer to understand a term or condition of a product or service or takes unreasonable advantage of the consumer.
This “unreasonable advantage” can come from a lack of understanding by the consumer, an inability for a consumer to protect his or her interests when selecting a product or service, or when there is a reasonable reliance by the consumer on a party covered by the act to act in the consumer’s best interests.
Consumer complaints are a primary means for detecting unfair, deceptive or abusive acts at a financial institution. Examiners will investigate complaint trends, complaints against credit union service organizations or third-party vendors, and the credit union’s internal complaint process.
Certain complaint types are considered “high-risk” and will likely trigger additional scrutiny. These types of complaints include false or misleading statements in marketing and advertising materials, missing disclosures, omissions of material information, previously undisclosed or unauthorized charges and excessive fees. Examiners may look at a credit union’s fee income to determine whether it is appropriate for a credit union of its size.
Credit unions can mitigate the risk of a UDAAP violation by: