UDAAP and Lending are the Mono-Twins of the Collection Industry

Did you see the adorable photos this weekend of the rare “mono mono” twins born holding hands? Did their intimate bond from birth give you a warm feeling inside? Well, I’m about to ruin it for you.

The American Bankers Association posted a blog outlining the ways that Unfair Deceptive and Abusive Acts and Practices (UDAAP) goes hand-in-hand with fair lending compliance. And when you think about it, especially because the CFPB is mandating that first-party creditors comply with the same regulations as collection agencies themselves, these issues are nearly identical in the collection industry, too.

UDAAP is unique in that – unlike the Fair Debt Collection Practices Act – it broadly outlines what a financial institution can’t do, but puts the burden of proof for compliance squarely on collectors. Even creditors need to watch out for potential UDAAP problems; in a 2013 CFPB bulletin, the Bureau stated its intent to make creditors and their service providers abide by the FDCPA – and by proxy UDAAP principles and guidance.

For collectors and creditors alike, violations are in the eye of the beholder, and the CFPB is a pretty subjective beholder. First, when regulators or investigators start reading complaints about an agency’s practices, they will see it through the eyes of the consumer. CFPB will be considering consumer harm, but may not give weight to the business issues that drove the activity or the information that was available at the time.

So what can the ARM industry as a whole do? Unfortunately, there is no safety zone, but there are ways to manage risk. Because the issues are so similar across all stages of the credit “lifecycle,” the program structure should be similar. UDAAP compliance needs to be comprehensive to cover all vulnerable practices in collection.

That’s why Compliance Overview: UDAAP gives your collection agency actionable information about why UDAAP compliance matters and how to master it. Get the top 10 compliance tips, sourced from industry experts, to make sure your agency and vendors are keeping up with UDAAP requirements. Learn how the CFPB identifies and penalizes UDAAP violations with real-world examples. Use our comprehensive checklists to ensure your compliance management system goes above and beyond the requirements for a CFPB examination.