You may have heard that the CFPB recently committed to defining “abusive” when it comes to identifying practices that fall on the wrong side of that UDAAP line. Now where this goes and what this means, who knows. What we do know, of course, is that we probably haven’t seen the end of any potential UDAAP issues.
When I think of UDAAP and its impact on the deposit side, especially, two areas immediately come to mind:
Overdrafts and Rewards Programs
First off with overdrafts, you obviously need to do what you say and say what you do. Take every opportunity you can to explain how your program or process works and really how customers can avoid fees and charges. Like it or not, you’re really put in the position here to protect your customer from overdrafts. Now, another thing to note, if you are an OCC Bank, make sure you’re aware that the OCC recently updated their Deposit-Related Credit booklet. You’ll want to be sure to check it out.
Another area that UDAAP easily sneaks in on the Deposit side is any rewards programs you may have. If you have one of these programs, you of course want to promote it. Often, complying with Regulation DD isn’t even the issue. It’s making sure that customers understand what they have to do and when they have to do it by to get whatever you’re giving. For example, does a debit card transaction have to “settle” by a certain date – good luck explaining that by the way. For that reason the FTC came up with a “Four Ps” test to determine if information is clearly laid out in promotional materials. This is important because the CFPB actually references this Four P’s test in their Supervision and Exam Manual for UDAAP: Is the information 1) Prominent Enough to be noticed; 2) Presented in an easy-to-understand format; 3) Placed where someone can be expected to look; and 4) Is it in close proximity to the claim it supports. Probably some good reminders regardless of what you’re promoting.
So, whether you’re a consumer trying to figure out how a product works or our industry trying to stay on the right side of the UDAAP line, more information is seemingly always better. Stay tuned as we learn to see how the CFPB defines abusive.