Quiz Time: Unfair, Deceptive, or Abusive Acts or Practices

May 11, 2017

The Consumer Financial Protection Bureau (CFPB) has continued to expand its authority to enforce unfair, deceptive, and abusive acts or practices (UDAAP) over the past few years. While the CFPB has authority over many statutes, it has relied heavily on UDAAP. In fact, there have been reports that of all bureau enforcement actions, half included alleged UDAAP violations.

These statutes have far-reaching implications for title and settlement services providers because they provide for enforcement by the government to stop the practices, individual actions for damages brought by consumers who are hurt by the practices and even criminal liability. Unfortunately, the CFPB consent orders do not provide a factual record or legal rationale for UDAAP.  Take this quiz to help get an idea of what the CFPB considers UDAAP violations. Answers were provided by Donald Lampe of the law firm Morrison & Foerster LLP.

Q: A title company owned in part by closing attorneys, fails to give proper AfBA form notice. According to the CFPB, is this UDAAP?

  • This is an example where technical non-compliance with the law can result in a UDAAP violation. A good example of this is the Borders and Borders case. The allegations is that the failure to provide a proper form of AfBA disclosure was unfair and deceptive.

Q: A foreclosure law firm assures a consumer that his/her foreclosure will be postponed, pending a loan modification. According to the CFPB, is this UDAAP?

  • Yes and No. This is a bit of a trick question because both sides. This is a classic example of the CFPB alleging deceptive practice. The answer to this is: if the foreclosure law firm was correct and there was a pending loan modification and processed properly, it may not be a deceptive practice. But if the scenario plays out where borrower suffered harm because the postponement of the foreclosure didn’t give them the benefit that was expected, there would be a UDAAP violation.

Q: A closing agent fails to release a mortgage lien after consumer pays off mortgage. According to the CFPB, is this UDAAP?

  • The CFPB said this is a potential violation. The bureau has cited this in one of its supervisory highlights. This issue was found during an examination of settlement service providers. Most people know state laws require lien release by the responsible party. In this case, the CFPB found the practice was unfair and deceptive. This shows you how far the doctrine can go.

Q: A settlement agent marks up the cost of its closing or settlement fee and this is not disclosed to the consumer prior to closing. According to the CFPB, is this UDAAP?

  • This is one that the CFPB has been emphatic about. This gets back to the term hidden fees. Even if you comply with TRID, if you don’t inform the consumer this can be found to be deceptive.

Q: A settlement agent for lenders typically advises borrowers that closings cannot take place during the last week of the month. According to the CFPB, is this UDAAP?

  • This is another one where it depends. Everyone in this business knows how busy the last week of the month can get. There’s always a temptation to say this when you have more settlements than you can handle. If you make a blanket statement that isn’t true to a borrower who is relying on being able to close by the end of the month, there’s a chance that could be deemed deceptive. If you told a borrower you can’t do a closing during the last week of month and had valid a business reason because other closings have already scheduled or some reason to the effect that it’s already the 20th of the month and don’t have loan approval, that would be acceptable.

Contact ALTA at 202-296-3671 or communications@alta.org.