What Is UDAAP?

UDAAPs Explained in Less Than 4 Minutes

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UDAAP is an acronym in the consumer finance industry that stands for “unfair, deceptive, or abusive acts or practices.”

Definition and Examples of UDAAPs

UDAAPs are actions that harm consumers who use financial products and services, and are illegal under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. 

The Dodd-Frank Act’s definitions for unfair, deceptive, and abusive acts and practices are:

  • Unfair: An act is unfair if it’s likely to substantially harm customers, typically by making them lose money, and customers can’t reasonably avoid injury. A practice can be unfair if it puts consumers at substantial risk, too. The harm must also outweigh any potential benefits to consumers for the practice to be unfair.
  • Deceptive: An act is deceptive if it misleads or is likely to mislead customers. Examples include making misleading statements about the cost of a product or service, omitting important information, or failing to provide the service promised.
  • Abusive: An act is abusive if it interferes with a customer’s ability to understand a product or service, or it takes advantage of the customer’s lack of understanding.


The CFPB points out that a consumer can’t reasonably avoid injury if the financial company withholds important information about a product, or a transaction takes place without the customer’s consent. If avoiding injury would require a consumer to hire independent experts to test a product or bring legal action, the company’s practices are considered unfair.

How Do UDAAPs Work?

The Consumer Financial Protection Bureau (CFPB) makes and enforces UDAAP rules for financial institutions. However, it shares enforcement authority with the Federal Trade Commission (FTC) for non-bank financial institutions.

Complaints from customers play a key role in helping authorities identify UDAAPs. If you think a practice violates consumer finance laws, you can report it to a number of agencies, including the CFPB Consumer Response Center, FTC’s Consumer Sentinel, and other federal or state agencies, or your state’s attorney general.

A good example of how UDAPPs work is the regulatory process that occurred when Wells Fargo employees opened more than two million bank and credit card accounts that customers didn’t authorize. In 2016, the CFP fined Wells Fargo $100 million and required it to fully refund customers. The bank later agreed to pay an additional $3 billion to resolve criminal and civil charges in 2020.

There have been many cases in which the CFPB and FTC have ruled against a company because of the company's unfair or deceptive acts.

Unfair Acts or Practices

  • Capital City Mortgage Corporation refused to release a lien after a customer made the final payment: The harm wasn’t reasonably avoidable because the customer couldn’t know in advance that their servicer would improperly refuse to release the lien, and lenders, rather than borrowers, choose the servicer.
  • American Express issued convenience checks to customers, then refused to honor them without notice: Customers were harmed because they paid returned check fees, and in some cases, their credit reports were adversely affected.
  • Wachovia Bank processed payments for companies involved in fraudulent activities: Consumers lost money because the companies regularly deposited unauthorized checks from telemarketers. The bank failed to establish practices that would prevent these fraudulent actions.

Deceptive Acts or Practices

  • Mazda, Mitsubishi, Honda, General Motors, and Isuzu advertised vehicle leases with “$0 down” without adequately disclosing additional costs of at least $1,000: The $1,000 cost was disclosed in blurry, difficult-to-read print at the end of the TV advertisement. Because the disclosures weren’t clear, audible, or prominently displayed, the FTC ruled that they were deceptive.
  • Chase Financial Funding misrepresented loan terms: A mortgage broker advertised “3.5% fixed payment 30-year loan” or “3.5% fixed payment for 30 years.” However, the broker also offered adjustable-rate mortgages with an option for interest-only payments. The FTC said the ads were misleading because a customer would reasonably believe they were getting a fixed-rate mortgage instead of a non-amortizing mortgage with payments that increased after a year.

Key Takeaways

  • Unfair, deceptive, or abusive acts or practices, abbreviated as “UDAAPs,” are illegal under the Dodd-Frank Act.
  • The CFPB sets the rules to prevent UDAAPs and shares enforcement responsibilities with the FTC.
  • Past UDAAP violations have included banks opening accounts for customers without the customer’s consent, mortgage servicers refusing to release a paid-off lien, and lenders misrepresenting loan terms.
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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer Financial Protection Bureau. "Unfair, Deceptive, or Abusive Acts or Practices," Pages 3-4. Accessed July 28, 2021.

  2. Consumer Financial Protection Bureau. "Unfair, Deceptive, or Abusive Acts or Practices," Pages 5-6. Accessed July 28, 2021.

  3. Consumer Financial Protection Bureau. "Unfair, Deceptive, or Abusive Acts or Practices," Page 9. Accessed July 28, 2021.

  4. Consumer Financial Protection Bureau. "Unfair, Deceptive, or Abusive Acts or Practices," Pages 3-8. Accessed July 13, 2021.

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