reduce UDAAP risk in communications UDAAP scrutiny by the CFPB puts pressure on how banks engage with customers

Do your banking communications have hidden UDAAP risks? If you haven’t performed a systematic review of your customer communications, the answer may be yes.

Compliance today goes beyond following prescriptive regulations to avoid hefty fines and penalties. With UDAAP, the focus has shifted to protecting customers from any practices considered to be unfair, deceptive, or abusive.

The slippery slope is that many UDAAP guidelines are non-specific. It leaves room for interpretation,  which means financial institutions (FIs) need to be even more careful to avoid unintended violations.

Practices and communications that may have gone unchallenged in the past now face sharp scrutiny by the Consumer Financial Protection Bureau (CFPB). The heat has been turned up with the current Director of the CFPB who “has a reputation for cracking down hard on financial services companies accused of consumer protection law violations.”1

UDAAP compliance is critical to an FI’s survival. Beyond avoiding fines, it’s essential to preserve brand reputation and consumer trust.  How can you reduce UDAAP risk? Take action centered on these five customer-focused strategies…

5 customer-centric strategies to reduce UDAAP risk

1 – Communicate with clear, plain language

A common pitfall that can introduce UDAAP risk is delivering customer service communications infused with banking jargon and legalese.

While certain phrasing or concepts may be required for regulatory reasons, it’s often possible to reword that into simple language that anyone could understand. Ensuring communications and calls to action are clear and easy to follow is an important part of avoiding risk.

For example, explicitly describe any risks, costs and conditions associated with your products and services, but do it a friendly, conversational way. Read your communications out loud, and consider if a friend or family member could easily understand them.

– Be transparent, upfront

Your communications should support customers in making decisions that are in their best interest. That means providing critical details and disclosures before they purchase a product or service. Disclosing this information after they’ve purchased is considered a deceptive practice.

Transparency also includes making important information easy to access, to improve the likelihood that customers will read it. These days, that likely includes providing easy-to-read online and mobile versions. When possible, you might also consider an email that highlights key information with links or instructions on where to learn more.

3 – Optimize across a chain of communications

When creating communications for a marketing campaign, imagine a customer’s first impressions.

  • Could they easily determine if the product or service would be of value to them?
  • Is it clear how the offering might help them meet specific financial needs or achieve their goals?
  • Does the customer have all the information they need to make an informed decision?

To help protect against UDAAP risk, ask other stakeholders in your organization to review the end-to-end “net impression” of all your campaign communications. Make sure they look at the full chain of touch points, from promotional emails to online purchase landing pages, to how customer service will handle inbound calls.

4 – Back up any guarantees and time limits

Can you back up your marketing claims? Don’t guarantee a result unless you’re certain you can deliver it.

In the past, marketers used to promote interest rates while knowing that some customers would not qualify for them. Now banks must clarify upfront about the qualifying requirements, 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.

It’s also best to avoid words that potentially over-promise, as it could be considered deceptive.  For example, be careful about claiming your solution ‘will’ achieve a desired result unless you have the user data to confirm it’s true.

Equally important is to be honest about deadlines. Stating there’s a due date to enroll in a product or service when the time limit is not valid, pressures customers into making a decision – and that’s a clear violation of UDAAP. Taking advantage of people by urging them to make a quick decision when they haven’t had time to make an educated choice is considered “abusive.” Avoiding risk is simple here – never include a time limitation unless it actually exists.

5 – Monitor and test your compliance

As part of minimizing risk, track your progress in UDAAP-related compliance:

  • CFPB complaint database can provide a wealth of information to help you monitor your performance.
  • CFPB Supervision and Examination Manual includes standards and definitions of Unfair, Deceptive, and Abusive, insights on how to interpret the standards, and case studies. The manual also has extensive checklists and risk assessment tools.

To make it easier to monitor UDAAP compliance, consider partnering with a data scientist to create an analytics dashboard for tracking your communications. Using natural language processing and text analytics, the dashboard can highlight emerging risks so you can resolve them quickly.

Avoid UDAAP risk – How Beyond the Arc can help

Minimizing UDAAP risk requires close partnership between Marketing and Compliance. People creating customer communications need to stay current with approved language and specific words to avoid.

In financial institutions, crafting compliant communications in customer-friendly language can be challenging. At Beyond the Arc, we’ve been helping banks create UDAAP-compliant communications for over 15 years.

Interested to explore how we can help you?  Tell us your challenge >


1 CFPB’s New Director is No Fan of Banks, Financial Brand, Oct 2021

Examples of UDAAP violations

We have helped financial institutions like Silicon Valley Bank, Wells Fargo, and Emprise Bank create marketing content.

Work with a marketing agency that knows how to partner with legal and compliance teams. You’ll benefit from our 15+ years of experience in developing customer communications and marketing materials for regional banks and national FIs.

Systematic marketing assessment

helps mitigate risk

Systematic marketing assessment

Identify opportunities to make existing customer communications clearer and help reduce UDAAP risk.

Editing and copywriting

make materials compliant and customer-friendly

Editing and copywriting

Improve existing marketing materials as well as customer letters and notices.

Custom UDAAP training for marketers

keep marketers up-to-date

Custom UDAAP training for marketers

Enable communicators to better identify and mitigate UDAAP, while maintaining the voice of your brand.

Large-scale communications reviews

update a library of communications

Large-scale communications reviews

Fast turnaround for editing, with engaging, consistent customer-focused messaging that aligns with your brand voice and is mindful of UDAAP.