UDAP: Transparency, consistency and navigating the gray areas

by 12 Feb 2015
By David Lykken
 Special to MPA

The CFPB has recently been appealing to Unfair Deceptive Acts and Practices (UDAP) in some cases in the mortgage industry. Understandably, the UDAP is unpopular among many in the industry due to its ambiguity. What exactly qualifies as unfair or deceptive? The ruling seems to be missing the clear lines our businesses often need to function properly.

How can we follow rules when we aren't really sure how to interpret them?

I definitely agree that we need more clear standards to go by if we are going to alter the structures of our businesses to satisfy the demands of the CFPB. That being said, I think more transparency and more consistency is always a good thing for our industry. CFPB or no CFPB, we should always be vigilant about keeping ourselves on our toes. If we are engaged in clearly deceptive practices, we are ruining the industry for everyone else. Deception is not sustainable. Integrity isn't just good for the consumer; it's good for the industry as well.

Navigating the gray areas of compliance can be a challenge for us in the mortgage industry. It's hard to know exactly what to do when the rules are unclear. What seems unfair to someone else may seem perfectly fair to us. All we can do is instill the values of integrity, transparency, and consistency deeply in our organizations. In that case, our organizations will be less likely to fall under suspicion in the first place. There will always be gray areas, but we can minimize them by creating cultures of integrity. That's what we want our industry to be known for.

A regular contributor on CNBC and Fox Business News, David also hosts a successful weekly radio program called “Lykken On Lending” (www.LykkenOnLending.com) that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals. Recently he started producing a 1-minute video called “Today’s Mortgage Minute” that appears on hundreds of television, radio and newspaper websites daily across America.


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