# What Are Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)?

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## What Is UDAAP?

For those who offer financial products or services to consumers, it is illegal to engage in unfair, deceptive, or abusive acts or practices (UDAAP). The [Consumer Financial Protection Bureau](https://www.investopedia.com/terms/c/consumer-financial-protection-bureau-cfpb.asp) (CFPB) and the [Federal Trade Commission](https://www.investopedia.com/terms/f/ftc.asp) (FTC) are responsible for ensuring that these entities follow the rules, so that consumers are protected from unscrupulous lenders and financial institutions.

### Key Takeaways

*   The acronym UDAAP refers to unfair, deceptive, or abusive acts or practices. It's illegal for those who offer financial products to engage in UDAAP.  
    
*   Financial product and service providers cannot coerce or deceive consumers into making unwanted purchases and are prohibited from making misleading statements about products and services to consumers.
*   The Consumer Financial Protection Bureau (CFPB) has the authority to regulate UDAAPs. The CFPB shares enforcement responsibilities with the Federal Trade Commission (FTC).
*   Regulators evaluate financial products and services for consumer harm on a regular basis.

## Understanding UDAAP

After the 2008 [financial crisis](https://www.investopedia.com/terms/c/credit-crisis.asp), regulators created new laws and regulations to protect consumers and boost consumer confidence in financial transactions. The most notable piece of legislation was the [Dodd-Frank Wall Street Reform and Consumer Protection Act](https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp), which defined and outlawed UDAAP.

An unfair practice is one that harms consumers financially and that consumers cannot reasonably avoid. The harm does not have to involve a large amount of money. Financial product and service providers are not allowed to:

*   Coerce or deceive consumers into making unwanted purchases
*   Mislead consumers through specific statements or through a lack of clear and [full disclosure](https://www.investopedia.com/terms/f/fulldisclosure.asp)

The government does not determine which financial products and services are best for consumers, but it does require that consumers have access to information that lets them choose the best options for their situations. Consumers should only have to take reasonable measures—not impractical or expensive ones—to determine whether purchasing certain financial products or services is in their best interests.

### The Role of the CFPB

The Consumer Financial Protection Bureau (CFPB) has a key role when it comes to UDAAP. Dodd-Frank gives the agency the authority to make rules about these practices. The act also includes the authority to enforce any violations as long as the entity falls within the CFPB's jurisdiction.  

### The Role of the FTC

The CFPB also grants enforcement authority to the Federal Trade Commission (FTC). The FTC ensures that financial products and service providers adhere to consumer protection laws by being truthful and ethical in their offerings and practices. As such, it is responsible for investigating complaints, enforcing regulations, and taking any action against entities that violate the law. This includes issuing fines and penalties and prosecuting offending service providers.

> **Tip**
>
> You can review the Consumer Financial Protection Bureau's definition of UDAAP on its website. If you feel that you've been affected, contact the CFPB or the FTC to file a complaint.

## Examples of UDAAP

The following are examples of unfair or deceptive practices:

*   A lender keeping a [lien](https://www.investopedia.com/terms/l/lien.asp) on a house that is fully paid for by a consumer
*   A credit card company issuing convenience checks to consumers, then refusing to honor them without notifying those consumers
*   A bank maintaining a relationship with a customer who has repeatedly committed fraud
*   A car dealership advertising $0 down payment car leases without clearly disclosing the associated fees
*   A mortgage lender advertising [fixed-rate mortgages](https://www.investopedia.com/terms/f/fixed-rate_mortgage.asp) but only selling [adjustable-rate mortgages](https://www.investopedia.com/terms/a/arm.asp)

Regulators routinely evaluate financial products and services for potential sources of consumer harm.

## What Does UDAAP Stand for?

UDAAP is an acronym that stands for unfair, deceptive, or abusive acts or practices. It is illegal for providers of financial products and services to engage in UDAAP.  

## What Constitutes a UDAAP Violation?

Examples of UDAAP include failing to provide customers with promised services, using bait-and-switch tactics, and misleading consumers about costs and prices for products and services.

## Who Has the Rulemaking Authority for UDAAP?

The Dodd-Frank Wall Street Reform and Consumer Protection Act was established following the 2007-2008 financial crisis. The act charged the Consumer Financial Protection Bureau (CFPB) with coming up with rules governing UDAAP. The CFPB and the Federal Trade Commission (FTC) enforce these regulations.

## The Bottom Line

The financial crisis of 2007-2008 brought to light many failures of the financial system. The Dodd-Frank Act established rules to protect consumers and ensure that lenders, banks, and other financial service providers deal with consumers fairly and ethically. If you feel that you've been deceived or are the victim of unfair practices, contact the CFPB or FTC to file a complaint.

> **Article Sources**
>
> 1.  Consumer Financial Protection Bureau. "[Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in the Collection of Consumer Debts](https://files.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-deceptive-abusive-practices.pdf)."
>     
> 2.  Consumer Financial Protection Bureau. "[Unfair, Deceptive, or Abusive Acts or Practices](https://files.consumerfinance.gov/f/documents/cfpb_unfair-deceptive-abusive-acts-practices-udaaps_procedures.pdf)," Page 1.
>     
> 3.  FDIC. "[Unfair, Deceptive, Or Abusive Acts Or Practices](https://www.fdic.gov/resources/bankers/consumer-compliance/unfair-deceptive-abusive-acts-practices/)."
>     
> 4.  Federal Trade Commission. "[A Brief Overview of the Federal Trade Commission's Investigative, Law Enforcement, and Rulemaking Authority](https://www.ftc.gov/about-ftc/mission/enforcement-authority)."