The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) empowers the Consumer Financial Protection Bureau (CFPB) to prohibit unfair, deceptive or abusive acts or practices (UDAAP). Abusive acts or practices under Dodd-Frank are those that:
1. materially interfere with the ability of a consumer to understand a term or condition of a consumer financial product or service; or
Another concept that might fall within abusive is the burgeoning concept of suitability: Are your consumer financial products suitable to specific consumers? What happens if you put your product or service into the hands of someone who is financially illiterate? How would a consumer financial services company even measure financial literacy? Is it abusive for you not to take into account a consumer’s age? It could be.
Several years ago, a Federal Reserve Bank economist conducted a survey and concluded that as we age, our ability to process information related to financial transactions diminishes. Consider an example. Five people purchase a lottery ticket and agree that they will split the winnings equally among themselves. As it turns out, they have a winning ticket worth $2 million. How much money would each individual receive?