The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits mortgage lenders and servicers (and other covered persons or service providers) from committing unfair, deceptive or abusive acts or practices (UDAAPs).1 The same act grants the Consumer Financial Protection Bureau (CFPB) authority to implement and enforce federal consumer financial laws to prevent UDAAPs.2 The CFPB has supervisory authority to monitor covered entities’ compliance with consumer financial laws through periodic supervisory examinations3 and has sweeping authority to prescribe rules “identifying as unlawful unfair, deceptive, or abusive acts or practices”4 and to seek restitution, consumer refunds, damages and penalties for UDAAP violations through enforcement actions.
Identifying UDAAPs
Although the CFPB Supervision and Examination Manual describes the standards examiners apply to identify UDAAPs, it also acknowledges that the facts and circumstances surrounding particular practices are key to making such a determination.5 The CFPB has also issued several bulletins that identify certain practices as UDAAPs.6 While this provides some guidance, each bulletin makes it clear that the examples contained therein are not exhaustive.
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