BACKGROUND
According to the Consumer Financial Protection Bureau (CFPB), unfair, deceptive, or abusive acts and practices (UDAAP) can cause significant financial injury to consumers, erode consumer confidence, and undermine the financial marketplace. Under the Dodd-Frank Act, it is unlawful for any provider of consumer financial products or services or a service provider to engage in any unfair, deceptive, or abusive act or practice. Its purpose is to ensure that consumers have access to the information they need in order to choose the best product or service for their individual situations and needs and to prevent organizations from harming consumers.
UDAAP can be difficult to identify and monitor because of its broad definition. UDAAP is ambiguous by nature to cover a wide range of potential wrongdoings by organizations or their partners. There are many ways in which these rules can be interpreted, and previous regulatory standards aren’t always consistent.
Failure to comply with UDAAP can lead to severe enforcement actions from the regulators, including both monetary fines and more “structural” remedies, including bans on business practices, caps on size or growth, etc. Keen attention to UDAAP compliance is critical in today’s turbulent regulatory environment where consumer protection is top of mind.
METHODOLOGY
PerformLine monitors thousands of marketing assets daily for UDAAP compliance using proprietary technology and expert rulebooks to search for potential violations. Assets include published content on web pages, including known and referring URLs, and social media posts and profiles across a wide variety of industries, including banking, mortgage, buy now, pay later (BNPL), credit cards, fintechs, partner banks, and higher education institutions.
This study was conducted over a 12-month period reviewing hundreds of thousands of pieces of published content across the web and social media. This study reveals the top five monitored and remediated terms and categories that companies use to ensure that their marketing materials are free from any potential unfair, deceptive, or abusive acts or practices.
For additional insights, each of these findings also include a list of industries in which these terms were most flagged and remediated.
FINDINGS
#5 - SUBJECTIVE LANGUAGE
The fifth most commonly monitored and remediated category for UDAAP is subjective language, which includes terms like “lowest,” “affordable,” and “bad,” with “lowest” being the top remediated term for this category. In these cases, claims such as “low rates” or “affordable rates” are subjective to the consumers’ perception of what low and affordable mean to them.
Using these terms in marketing materials could result in a violation of UDAAP because consumers may be misled or deceived about the nature of the product or service(s) they’re receiving. For example, the term “lowest” is subjective because organizations cannot claim to have the lowest rates as it would require substantiation.
Instead, many clients instruct their merchants to replace language like “instant approval” or “instant financing” with phrases such as “instant decision” or “instant loan decisioning.” This way, consumers won’t be misled into thinking that they’ll get approval no matter what and level sets their expectations.
Most Impacted Industries: BNPL, Personal Loans, Mortgage Loans
#4 - NO BARRIER TO ENTRY
The fourth most remediated category for UDAAP is “no barrier to entry,” which would lead consumers to believe that they’ll be approved no matter what, even if that might not be the case. This includes terms like “guarantee(d),” “100%,” “approval,” and “no credit check.”
If these types of terms are present without the presence of certain disclosures (or if they’re not presented in a way that’s easy for the consumer to see and understand), consumers are likely to be misled by the language.
Most Impacted Industries: Mortgage Loans, Banking, Personal Loans, Partner Banks
#3 - CREDIT DECEPTION
The third most remediated category for UDAAP is credit deception, which in this case, flags a list of terms in proximity to the word "credit" that could be potentially misleading. Terms here include “credit rating,” “help your credit,” “bad credit,” and “repair credit.” While some products may actually help repair and improve credit, that may not be the case for every consumer.
Most Impacted Industries: Mortgage, Personal Loans, Partner Bank
#2 - PAYDAY
The second most remediated compliance term for UDAAP is “payday.” In this context, we’ve seen instances where external entities use brand names to falsely promote certain products or services as “payday” loans, quick cash, instant money, etc., and encourage consumers to apply for a loan. The consumer thinks they’re applying for a product from a certain company, but instead, they’re giving their information to a fraudulent third party that has no relation to the brand that they are promoting.
In this example, the call-to-action “request a payday loan” does not bring the consumer to the mortgage company’s website.
The company is responsible for understanding who is using their brand and ensuring that it’s being promoted properly—which is why it’s critical to monitor not just the known third parties, but the unknown as well.
Regulators will often work with a company if it is proven that they were a victim of a bad actor, however, this cannot be the excuse every time something is found. A regulator will likely require that the company sets up a process to ensure that they are monitoring their brand across the web and external sites.
Most Impacted Industries: Mortgage Loans, Personal Loans, BNPL
#1 -OFFER INFLATION / INCENTIVIZATION
The most commonly remediated UDAAP compliance terms discovered during the study were rules associated with offer inflation and incentivization. This includes terms like “discount,” “the best,” “free,” and “savings.”
In most cases, it’s difficult to promise these types of outcomes to all consumers. For example, a consumer might see a product marketed as having “the best rates” and take that at face value. That consumer doesn’t shop around because the consumer trusts that the claim is true. The consumer signs up for the product, which turns out to not be the best product for them and causes more harm in the long run.
Most Impacted Industries: Mortgage Loans, BNPL, Partner Banks
TAKEAWAYS
Substantiate claims. When making a claim about the nature of the product or service, it must be accurate and truthful. Don’t make claims that can’t be delivered.
Don’t overpromise. Take caution when making claims about approval, credit repair, or other benefits of a product or service to avoid misleading and deceiving consumers.
Monitor your brand. You are responsible for understanding who is using your brand and ensuring that it’s being promoted properly. Continuous monitoring of your brand across marketing channels is critical.
