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February 29, 2016

Warning! This Vehicle Has Been Immobilized

Imagine my frustration when, after a long day at work followed by a nice dinner catching up with an out-of-town friend, I found my vehicle booted in a parking lot 30 miles from home, at 9 p.m. on a Tuesday. The boot immobilized my car because I violated a 6 p.m. curfew. Those details were printed in small print on the receipt I received after paying the automated kiosk and did not read. I pleaded with the boot company attendant to waive the $75 removal fee to no avail. He was a third-party to the lot owner. A man who lived in the apartment building next door was walking his dog and sympathetically shouted, "This happens all the time."

Being deceived is damaging, especially when it comes with a price tag. I felt like a victim. In fact, deceptive acts or practices are unlawful by Section 5 of the Federal Trade Commission (FTC) Act and Section 1031 of the Dodd-Frank Act. Deception is defined as representation, omission, or practice that is likely to mislead a consumer acting reasonably in the circumstances, to the consumer's detriment.

Deception—or alternatively, forthrightness—is circumstance-driven and involves subjectivity, leading us to base judgments on precedent and personal perspective. A practice can't be decidedly deceptive with a yes or no. The Federal Trade Commission (FTC) and federal banking regulators have applied deception interpretation standards through case law, official policy statements, guidance, examination procedures, and enforcement actions.

Two recent interpretations came by way of consent orders from the FDIC (or Federal Deposit Insurance Corporation) at the end of December 2015, both including deceptive practices. My analysis mixes in themes from recent proposed regulation. Deception appears to exist when layering circumstances mislead and cause injury, and when consumers may have chosen differently but for deception. The orders state that (1) consumers shouldn't be forced into receiving funds via one payment type; give them a choice; (2) before consumers make a choice, give them information about fees, features, and limitations, as well as how to use the product; (3) provide error resolution; (4) be clear about account termination and fee practices; (5) pay attention to complaints, and make this a program; and (6) you can't blame noncompliance on the third party.

I would not have parked in the lot if I had known about the 6 p.m. curfew with a $75 penalty. Will UDAAP compliance be an active project for your financial services, or could your most rewarding business vehicle get the boot?

Photo of Jessica J. Trundley By Jessica J. Trundley, AAP, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

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