The Differences Between UDAP & UDAAP

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Consumers in California and across the U.S. have protection against dishonest practices by merchants under section 5 of the Federal Trade Commission Act. This act, commonly known as Unfair and Deceptive Acts and Practices (UDAP), protects consumers from wrongdoing in the consumer marketplace. While every state has their own interpretation of UDAP laws, in general, it prohibits unlawful acts by merchants. This act in 1938 prohibits unfair methods of competition and unfair and deceptive practices that affect consumers. In 2010, Congress passed the Dodd-Frank Act which prohibits a person from engaging in unfair, deceptive, or abusive acts or practices (UDAAP). While both should protect consumers from dishonest practices, they are not the same. Each act has distinct differences that allow them to protect different classes of consumers.

What is UDAP?

UDAP serves as the basis to describe factors that can be dishonest, deceptive, or unfair practices. As stated earlier, each state will have its own interpretation of UDAP. However, the Federal Deposit Insurance Corporation (FDIC) applies the same standards as the FTC to determine if an act is unfair. According to the FDIC a practice that is to be unfair must satisfy three requirements. First, it must cause or be likely to cause substantial injury to customers. Second, consumers cannot reasonably avoid the danger. Third, it cannot outweigh its benefits to consumers or to competition. The FTC uses a three-part test to determine if a practice is in violation. To determine a UDAP violation, a practice must mislead the consumer, the consumer must observe it, and be material. In most cases, these requirements can protect most consumers from dishonest or unfair practices but mostly consumer focused.

What is UDAAP?

UDAAP is similar to UDAP but has some notable differences that set the two apart from one another. The foundations set for UDAAP follow that of UDAP closely, but with modifications that allow it to focus its protection. With this protection, financial product or service providers cannot deceive consumers into making unwanted purchases. In addition, the providers may not make misleading statements about their products and services to consumers. This protection, following the 2008 financial crisis, allows more consumer confidence in financial transactions. For UDAAP, an unfair practice is one that can harm consumers financially and that consumers cannot reasonably avoid.

Key Differences of UDAP & UDAAP

Although UDAP and UDAAP do share similarities on how they are structured, they provide unique protections for consumers. UDAP protects consumers from damages in a wide range of industries while UDAAP specifically defends a consumer’s rights when seeking services from financial service providers. Both are equally important and essential, without these acts business and large corporations could act unfairly without repercussions.

MWA Fights Against Dishonest Acts or Practices

McCune Wright Arevalo, LLP’s, UDAP lawyers have over thirty years of experience in representing clients who have experienced UDAP and UDAAP violations. Businesses or large corporations that employ dishonest practices should be held accountable. Our attorneys pursue all compensation avenues to ensure maximization of our client’s recovery.  

Have your rights as a consumer been violated? Contact McCune Wright Arevalo to schedule a free consultation by completing the form or calling (909) 345-8110 today!

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