WE’RE HEARING that while UDAAP has primarily shown itself to be a credit card concern so far, mortgage lenders could be next.
“On the mortgage side, I think a lot of institutions have been anticipating it,” Ed Kramer, executive vice president of regulatory affairs at Wolters Kluwer Financial Services, tells us. “I don’t want to be pessimistic, but I wouldn’t doubt that we’re going to see some sort of action by the bureau in the near future.”
What separates UDAAP from a host of other compliance concerns in the industry today is that according to a recent WKFS survey it is at the top of the priority list for large players in the business.
This part of the Dodd-Frank Act, which adds an “A” (which stands for “abusive”) to UDAP—turning the Federal Trade Commission’s “unfair or deceptive acts or practices” provisions into provisions against “unfair, deceptive or abusive acts or practices”—is “a heck of a challenge,” Kramer tells us.
“I think the biggest problem is the whole concept of UDAAP and abusiveness…a lot of it depends on the consumer’s…ability to understand what it is in fact that is being presented to them,” he says.
The gap between what is presented to customers and how they perceive what they get as well as its value is where the danger appears to lie, Kramer tells us.
“So I think from the moment that that mortgage product is developed and the process begins, I think compliance folks have to have a seat at the table,” he says.
“The description of what it is you are going to get to be clear and understandable by the consumer,” Kramer tells us, adding, “I think there is going to have to be some testing that takes place to be sure (the information being conveyed) is perceived by the consumer the way it was meant to be.”
He warns, “If there is a complaint, and that complaint goes to the bureau, the lender is going to have to be prepared to defend his ability to provide a product that was not unfair, that was not deceptive and certainly was not abusive. I think that’s a major challenge.”
“That is my interpretation,” Kramer adds. “The industry is craving for standard definitions around abusive and there isn’t a lot out there. If you take a look at Dodd-Frank you will find some of the standard legal language [around] abuses, but I think the industry has been looking for more guidance and that guidance hasn’t been provided. Unfortunately I think the guidance is going to be provided through an enforcement action.”
Bonnie Sinnock is managing editor of National Mortgage News and editor of Origination News. She has been covering the mortgage industry since 1995.