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5 Essential tips to avoid UDAAP violations

5 Essential tips to avoid UDAAP violations 2017-05-26T02:22:25+00:00

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Since UDAAP was enacted in 2013, regulations are increasingly affecting how banks engage with customers.

Compliance today goes beyond following prescriptive regulations to avoid paying hefty fines and penalties. The focus has shifted to protecting customers from any practices considered to be unfair, deceptive, or abusive. However, UDAAP guidelines are non-specific, and the resulting room for interpretation can leave banks vulnerable to potential unintended violations.

As competition becomes fiercer in the financial services industry, regulatory compliance becomes more critical to your company’s survival. To compete with the expansion of non-traditional companies, it’s essential to deliver exceptional customer experiences across all touch points, especially in your marketing communications. We’re providing tips below to help you reduce UDAAP risk and assure customers you’re on their side.

5 tips to avoid UDAAP violations in your marketing communications

  1. Be clear

    Make sure your communications use plain language and terms that will be familiar to most customers. Read the communication out loud, and consider if a friend or acquaintance would be able to understand it. Pay particular attention to vulnerable populations, such as students and the elderly. Explicitly describe any risks, costs and conditions associated with the products and services you’re offering.

  2. Be transparent

    Always include material information associated with your products and services. What is material information? It’s information that would influence a consumer’s choices, such as their decision to buy. Be up front about all aspects of the purchase to ensure customers make decisions that are in their best interest. Thoroughly explain costs and other critical information before the customer makes a purchase. Disclosing these after they’ve purchased is considered a deceptive practice.

  3. Focus on the customer experience

    When creating a marketing campaign, picture the customer’s response. Could they easily determine if the product or service would be of value to them and help them achieve their goals? Do they have all the information they need to make an informed decision? Ask your Customer Experience partners to review the end-to-end “net impression” of your marketing campaign, from online purchase to inbound call handling.

  4. Back up any guarantees

    Can you back up your marketing claims? Don’t guarantee a result unless you’re certain it can be delivered. In the past, marketers used to promote interest rates while knowing that some customers wouldn’t qualify for them. Now banks must notify customers of the qualifying requirements up front in their marketing materials, before the point of purchase. If you’re unclear about the way you’re presenting an offer, be sure to have your regulatory team review it.

  5. Don’t create false time-limits

    Stating a deadline to enroll in a product or service when the time limit is not valid, pressures customers into making a decision – and is a clear violation of UDAAP. Taking advantage of customers by urging them to make a quick decision when they haven’t had time to make an educated choice is considered “abusive.” This practice is simple – never include a time-limitation unless it actually exists.

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