UDAAP

What is UDAAP?

UDAAP stands for unfair, deceptive, or abusive acts or practices. It is illegal for providers of financial products and services to engage in UDAAP. The rules are intended to protect consumers from practices that coerce, mislead, or take advantage of them when buying or using financial products.

Legal basis and purpose

Following the 2007–2008 financial crisis, the Dodd‑Frank Wall Street Reform and Consumer Protection Act gave regulators authority to define and prohibit UDAAP. The goal is not to prescribe the “best” financial products for consumers but to ensure consumers have truthful, clear information and a fair opportunity to make informed choices without unreasonable barriers.

What constitutes UDAAP?

• Unfair practices: actions that cause substantial consumer harm that consumers cannot reasonably avoid and that are not outweighed by countervailing benefits to consumers or competition. Harm can be financial even if not large.
• Deceptive practices: representations, omissions, or practices likely to mislead a consumer acting reasonably under the circumstances. This includes both false statements and failures to disclose material information.
• Abusive practices: acts that materially interfere with a consumer’s ability to understand a product or service, or that take unreasonable advantage of a consumer’s lack of understanding, inability to protect their interests, or other vulnerabilities.

Common prohibited behaviors include coercing or pressuring consumers into purchases, using bait‑and‑switch tactics, and failing to disclose key costs or terms.

Role of regulators

• Consumer Financial Protection Bureau (CFPB): primary rulemaking and enforcement authority for UDAAP under Dodd‑Frank for entities within its jurisdiction.
• Federal Trade Commission (FTC): shares enforcement authority and enforces consumer protection laws, including investigating complaints and taking action (fines, penalties, litigation) against violators.

Both agencies monitor financial products and services for potential consumer harm and may take enforcement action when violations are found.

Examples of UDAAP

• Keeping a lien on a home after the mortgage has been paid off.
• Issuing convenience checks and then refusing to honor them without notifying consumers.
• Advertising $0 down car leases without clearly disclosing associated fees.
• Promoting fixed‑rate mortgages but only offering adjustable‑rate loans.
• Persisting in business with a customer who repeatedly commits fraud without proper safeguards.

What to do if you suspect UDAAP

If you believe you have been subject to an unfair, deceptive, or abusive act or practice, you can file a complaint with the CFPB or the FTC. Regulators use complaints to investigate patterns and, when warranted, pursue enforcement actions.

Bottom line

UDAAP rules require financial service providers to treat consumers fairly, provide clear and complete information, and avoid practices that mislead or exploit consumers. These protections are enforced primarily by the CFPB and the FTC to reduce consumer harm and promote confidence in financial markets.

Sources

• Consumer Financial Protection Bureau — Unfair, Deceptive, or Abusive Acts or Practices
• Federal Trade Commission — Overview of enforcement authority
• Federal Deposit Insurance Corporation — UDAAP guidance