FRB: Consumer Affairs Letter CA 07 - 08 - Consumer Compliance Examination Procedures for the Unfair or Deceptive Acts or Practices Provisions of Section 5 of the Federal Trade Commission Act

SUBJECT: Consumer Compliance Examination Procedures for the Unfair or Deceptive Acts or Practices Provisions of Section 5 of the Federal Trade Commission Act

This letter issues consumer compliance examination procedures for Section 5 of the Federal Trade Commission Act regarding potential findings of unfair or deceptive acts or practices (UDAP).

On March 11, 2004 (CA 04-2), the Board issued a joint statement (Joint Statement) with the Federal Deposit Insurance Corporation outlining the standards to be used in determining whether specific acts or practices by state-chartered banks are unfair or deceptive. The Joint Statement also includes general guidance on measures that state banks can take to avoid engaging in such acts or practices. The attached examination procedures incorporate the guidance in the Joint Statement and provide further assistance to examiners in analyzing potential UDAP issues during a consumer compliance examination or a complaint investigation.

When a Reserve Bank encounters a situation that may be indicative of an unfair or deceptive practice, the Reserve Bank should promptly contact its district analyst in the Division of Consumer and Community Affairs. The district analyst will work with the Reserve Bank to obtain the necessary facts and information critical to making a determination regarding whether a UDAP violation has occurred. Given the case-specific nature of UDAP determinations, early contact with Board staff and the exchange of information described herein are essential.

If you have any questions, please contact Paul Robin, Manager, Oversight and Policy, at (202) 452-3140, or Timothy R. Burniston, Assistant Director, at (202) 452-3488.

Sincerely,
(signed)

Sandra F. Braunstein
Director
Division of Consumer and Community Affairs