As you start to adapt to your new normal — whether that involves more offsite employees, shortened banking hours, new ways to work with customers — you should ensure those changes don’t inadvertently create UDAAP concerns.
This is the 10-year anniversary of the Dodd Frank Act, which gave us UDAAP (Unfair, Deceptive or Abusive Acts or Practices) to protect consumers and to increase consumer confidence in financial transactions.
So, what does it mean to be unfair, deceptive or abusive? To be considered unfair, the act would have to cause, or be likely to cause, substantial injury to consumers or the injury is not reasonably avoidable. For an act to be deceptive, it would mislead or would be likely to mislead a consumer. An abusive act or practice is one that materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service.
Most banks have had restricted lobby access since March. When you start to reopen you may be considering shortening hours or even closing branches. You may be considering new ways to do old things. So what is your plan to communicate these changes?
While you were adjusting to restricted access, loan business was ramping up. Rates dropped so refinances were up. Businesses needed help so you became SBA lenders. Now that we are approaching the new normal you may need to do an accounting of what changed and decide what you are going to continue to do and how this affects your customer base.
Did you allow you borrowers to skip a loan payment? Are you going to continue to allow this? If you allowed this, we recommend you look at what was done and what customers used it. In the confusion of COVID-19, was this new payment plan sufficiently explained so as not to be deceptive to your customers?
As other businesses get back to their new normal, that may involve not bringing back employees. It will be a good idea to decide how you are going to handle new loan requests or deferral request in the future. Perhaps you’ve decided to offer skip payment programs in the future. No matter what the changes, you have to ensure the advertisements or agreement documents could not be construed as deceptive or abusive.
Did you allow customers to receive documents electronically? Did you follow the e-sign rules? If you made the decision to email required disclosure documents such as appraisals or closing disclosures, those communications are subject to the e-sign requirements. That means you need to make sure you are complying with e-sign while not being unfair.
You should also consider looking at and updating your physical security program. The “No Hats. No Hoods. No Sunglasses.” security measures have been in place in most financial institutions.
What about masks? While they are required in some areas, they are not in others. What will your procedure be when a consumer comes in wearing a mask? Are you going to take a stance that they must be removed? That person may be immuno-compromised or that mask may simply provide them comfort. How are you going to address this and how will you train your front-line staff? Make sure the stance you take is not unfair.
As we ease back into our new normal and decide what our future is going to look like, keep UDAAP in mind. Your examiners will.
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