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#2261777 - 10/28/21 06:53 PM UDAAP issue? can you help me understand?
SmallBankBSA Offline
100 Club
Joined: May 2018
Posts: 172
I'm newer to Compliance, I've been BSA for fifteenish's the situation:

New customer is being disruptive when he goes to the branch; when things don't go his way or he's told no he threatens to sue, yells loudly etc...branch wishes to close his account...which we can do per our account disclosures....

well I've got someone in my ear telling me we can't just close his account because we don't want him as a customer, it could be a UDAAP violation...I've read the definition of UDAAP and can not see where this would be a violation, however maybe I'm wrong....we're not causing substantial injury or an unavoidable injury- he can go get an account elsewhere, we're not mis representing anything -it says right in our disclosure we can close the account nor are we being abusive.

Help me understand please!
Thank you!

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#2261778 - 10/28/21 06:56 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
BrianC Online
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Joined: Nov 2004
Posts: 6,316
There is nothing UDAAP about exiting a relationship. As long as you don't have a history of exiting relationships for customers of a particular ethnic group, religion, gender, etc., there is nothing stopping you from sending the individual packing.

If the account receives direct deposit of government benefits, then you must provide 30 days advance notice. Beyond that, a letter stating you can no longer service his account will suffice.
Sola Gratia, Sola Fides, Sola Scriptura, Solus Christus, Soli Deo Gloria!

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#2261779 - 10/28/21 06:57 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
Skittles Online
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Joined: Sep 2002
Posts: 13,963
I agree that this doesn't meet the definition of a UDAAP violation.
My Opinions Only

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#2261781 - 10/28/21 07:02 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
SmallBankBSA Offline
100 Club
Joined: May 2018
Posts: 172
Thank you both for your quick response! I was starting to question my own understanding of UDAAP....silly self doubt sneaks in! I need to be more confident.

We rarely close accounts however if this customer is being disruptive I see no reason to keep him...unfortunately he did have his direct deposit moved so we will have to wait the 30 days.

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#2263958 - 12/22/21 07:39 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,684
Cape Cod
"UDAAP" and its older sibling, "UDAP," are the bogeymen of the moment and some folks just seem to be afraid to walk in the banking woods lest one of those bogeymen leap out and cite the heck out of them. I have talked with compliance folks whose every other sentence mentions "Single A" or "Double A" as if were as threatening as, well, a virus!

I won't say that bankers can ignore UDA(A)P concerns, because they shouldn't. But let's get real!
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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#2263962 - 12/22/21 07:55 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
Adam Witmer Offline
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Joined: Sep 2010
Posts: 2,623
Great points, John. I too have seen some use UDA(A)P in every other sentence, and it bothers me because it isn't a good risk management practice. When I see someone throw the fear of UDA(A)P out too freely, it tells me they don't really understand the rules. UDAP has a clear-cut 3 prong test for both Unfair and Deceptive, and, while the "Abusive" standard of UDAAP 1) hasn't been as clearly defined, 2) is becoming an even hotter topic with the CFPB, and 3) does carry more unknown risk that Unfair or Deceptive, I don't think it is a good risk management practice to assume everything might be a UDA(A)P violation.
Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.

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#2264040 - 12/27/21 07:12 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
fmissle Offline
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Joined: Jul 2007
Posts: 995
Pac NW
Sounds to me like there is an Abusive customer that can be exited from the Bank.

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#2264054 - 12/27/21 10:00 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
Andy_Z Offline
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Joined: Oct 2000
Posts: 27,502
On the Net
You document how the customer abused staff. The bank has an obligation to them as well. You show with documentation that this was not a one-time issue. SO long as the bank doesn't have a practice of getting rid of minority, female or otherwise "protected" persons there should be no real issues here. There is no "harm" to the customer and while there is no fair banking law, if there was you'd be compliant and that should avoid some reputation risk.

Review the entire relationship, deposits, loans, potentially relationships to staff or directors, as well as profitability, and then get management blessing to work the customer out of the bank.

As Brian noted, determine your time frame and notify the customer that if they do not close the account by X date, the bank will and will send a cashier's check to the owners. Tell them they are not a good fit for your bank and wish them well.
My opinions are not necessarily my employers.
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

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#2264064 - 12/28/21 02:19 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
Inherent_Risk Offline
Gold Star
Joined: Jan 2017
Posts: 370
For reference:

The standard for unfairness in the Dodd-Frank Act is that an act or practice is unfair when:
(1) It causes or is likely to cause substantial injury to consumers;
(2) The injury is not reasonably avoidable by consumers; and
(3) The injury is not outweighed by countervailing benefits to consumers or to competition.

A representation, omission, actor practice is deceptive when
(1) The representation, omission, act, or practice misleads or is likely to mislead the consumer;
(2) The consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and
(3) The misleading representation, omission, act, or practice is material.1

An abusive act or practice:
• Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service or
• Takes unreasonable advantage of:
o A lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;
o The inability of the consumer to protect its interests in selecting or using a consumer financial product or service; or
o The reasonable reliance by the consumer on a covered person to act in the interests of the consumer.

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#2264097 - 12/29/21 03:38 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
HappyGilmore Offline
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Joined: Jun 2004
Posts: 19,531
Pulling people out of the ditc...
i don't care what the persons background is, if they are abusive to employees of the bank, they lose the privilege of banking here. They can complain to whichever regulator they choose, and i'll be happy to explain to said regulator why they lost that privilege.
Providing alternative truths since the invention of time

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#2264258 - 01/04/22 06:26 PM Re: UDAAP issue? can you help me understand? SmallBankBSA
ACBbank Online
Power Poster
Joined: Jul 2006
Posts: 4,190
New York City
Just to add to Happy's post - we closed many accounts for consumers for abusive behavior over my banking career. If in the off instance a complaint is filed and our regulatory does contact us, we had quite the file documenting the behavior. I have yet to encounter a regulator who had an issue with us closing the account of a verbally abusive, or worse, customer.
"100 victories in 100 battles isnt the most skillful. Subduing the other's military w/o battle is the most skillful." Sun-Tzu

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