Regulatory: Part 2: Unraveling UDAAP in the consumer financial services industry

UDAAP’s unfairness standard is a playground for subjective oversight

This article is the second in a series of six articles concerning UDAAP. Read part one here.

According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) can declare “unfair,” and thus unlawful, any act or practice in connection with a transaction for a consumer financial product or service, or the offering of a consumer financial product or service, so long as the CFPB has a reasonable basis to conclude that:

So, is unfairness objective or subjective? Well, it is arguably a bit of both, although one can quite readily take the position that it’s completely, inherently subjective. Below are a series of questions related to UDAAP’s “unfairness” standard, with answers derived from information the CFPB provided in version 2.0 of its Supervision and Examination Manual. 

Q: What constitutes a “substantial injury”? 

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Martin Bishop

Martin J. Bishop is a partner, litigation department vice chairman and co-chair of the consumer financial services litigation practice at Foley & Lardner LLP. He...

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