Example of a Deceptive UDAAP Violation
Adam uses this Compliance Clip (video) to provide an example of a “deceptive” UDAAP violation. The example in the video relates to television advertisements and Adam breaks down the three prongs that make this a definitive UDAAP violation example. A transcript of this video is as follows:
“This Compliance Clip (video) is going to give an example of deceptive UDAAP violations. Often times, I get asked questions about what's an example of a UDAAP violation. Well first of all, Let’s talk about what the UDAAP acronym stands for: Unfair Deceptive or Abusive Acts or Practices. In simple terms, a UDAAP violation is an act or practice that causes some sort of consumer harm - it causes harm to Consumers.
One example of a “deceptive” act or practice is when there is inadequate disclosures of material terms in television advertising. This is actually a case the Federal Trade Commission found against the vehicle leasing company and what the FTC found was this vehicle leasing company had been running television advertisements saying that consumers could lease vehicles for 0% down or no money down when in fact on these ads there was this blur of disclosures. You've all seen this - its when there's this blur that can’t easily be read. Nowadays we have 4K televisions in high-definition that are as big as our living room so it's a lot easier to read the fine print, but in the old days back when the Federal Trade Commission came up with this example they saw this blur really was illegible as you could not read it. The blur was at the end of the commercial and said that consumers had to bring at least $1,000 to closing to be able to either buy or lease the advertised vehicles. So, in fact, it really wasn't no money down it was $1,000 but they were blatantly advertising no money down or zero down and this was found to be a deceptive act or practice.
Now, why was this deceptive? It was deceptive because it failed the three-prong test that was established by the Federal Trade Commission, which is also used by Regulatory Agencies. The three-prong test includes three things. First, the representation or omission was likely to mislead, which is the first “prong” test of deceptive and this act or practice did meet that test because the statements of “no money down” were not accurate. In fact, they were blatantly inaccurate because you had to actually bring $1,000 or more.
The second “prong” test is that the act or practice has to be reasonably deceptive from a consumer perspective. I don't know any consumers, such as my friends, family, or anybody that I know who is a consumer, that would think that “no money down” means anything other than zero down or absolutely no money down. Therefore, $1,000 down would be reasonably deceptive by a reasonable consumer.
The third “prong” test is that the act or practice must be a material representation - or really a misrepresentation - and this occurred because there was money involved. Whenever there's money involved and a consumer is negatively hurt because of the money being involved, then you're looking at a potential deceptive violation under the UDAAP rules. “