When the concept of unfair, deceptive, or abusive acts or practices was first introduced, many assumed it would target companies that adopted practices that were either intentionally or willfully misleading.
Through various enforcement actions, it is clear that the standard for UDAAP is more akin to mere negligence. The latest enforcement under UDAAP — against JPMorgan Chase & Co. — demonstrates that UDAAP claims can be built on activities that are likely more the result of systemic failures rather than any intention to mislead consumers.
The allegations behind the CFPB's enforcement action against JPMorgan were related to credit card debt that was sold by Chase to bad debt relief or collection companies. Specifically, Chase sold debts that had been charged off, resolved via a payment plan or discount, or that included debts for incorrect amounts.
Since the bank knew that the purchasers of those debts would attempt to collect on them it was considered an unfair and deceptive act or practice.
To make matters worse, Chase used robo-signers to confirm the debts prior to sale or collection efforts. The bank was cited for that, as well.
Again, there were no allegations of wrongful intent. But Chase's systemic shortcomings and breakdowns showed a lack of care for ensuring that correct, up-to-date and verified information was being sold to parties who would ultimately be seeking collection from borrowers.
In connection with the enforcement action, Chase was required to pay $106 million to 47 states, a $30 million penalty to the CFPB, $50 million in refunds to consumers, and halt collection efforts on over 500,000 accounts.
The nature and extent of this action illustrate the fact that an entity's failures to establish systems that protect consumers from avoidable mistakes can be as significant and serious as actually misleading consumers.