A Brief History of UDAP Laws and Predictions for Post-Dodd Frank Developments

Since the Dodd Frank Wall Street Reform Act was enacted, consumer advocates, the private bar and financial providers are reviewing unfair and deceptive acts and practices laws, seeing them as the potentially most far reaching enforcement tools in the government’s consumer protection arsenal. One mortgage broker trade group calls UDAP laws the "law of choice for enforcement."

Beginning in mid-2011, the newly created Consumer Financial Protection Bureau will lead federal efforts to regulate financial products. As it assumes its responsibilities, the CFPB may be faced with the advocacy community’s criticisms of UDAP laws, including claims that industries are inappropriately exempted (e.g., insurance and utility companies), and that some state UDAP laws prohibit recovery of attorneys’ fees in private lawsuits. UDAP laws, having evolved over more than 80 years, are likely to evolve again as interpreted by the CFPB.

This article reviews the history of UDAP from its antitrust origins to today’s consumer protection focus, and outlines the Federal Trade Commission’s test for unfair trade practices. The authors believe UDAP’s history is not yet entirely written and that the CFPB will increasingly apply UDAP law in the consumer protection arena. To prepare for renewed UDAP enforcement, consumer financial service providers must make knowledge of, and compliance with these laws, their highest priority.