This column is part of a series of articles on the new Consumer Financial Protection Bureau and the upcoming wave of regulations affecting the consumer financial industry.
There is little doubt that, with the recent opening of the Consumer Financial Protection Bureau, one of the top new compliance risks for the providers and servicers of consumer financial products and services is UDAAP. “What is UDAAP,” you say?
A lot of words, yes; but not much shape. Consider, for example, the indefiniteness of concepts like “substantial injury,” “not reasonably avoidable,” “not outweighed by countervailing benefits,” “material interference,” “unreasonable advantage,” “lack of understanding,” “material risks, costs, or conditions,” “inability of the consumer to protect the interests of the consumer,” and “reasonable reliance” —all of which are embedded in these definitions. Further, to make things even more opaque, Title X leaves the term deceptive undefined.
Is UDAAP to the bureau as pornography was to United States Supreme Court Justice Potter Stewart: The bureau will know it when it sees it? With these UDAAP terms, that is certainly a plausible risk.