What Is UDAP?

The Federal Trade Commission Act (FTC Act) is the FTC’s chief consumer protection statute. In 1938, the U.S. Congress broadened the FTC Act to protect consumers by combating unfair competition and unfair or deceptive acts or practices (UDAP).

UDAP laws forbid various unfair or deceptive business practices, including:

• Advertising goods or services without the ability to meet the demand for them and failing to advise that “quantities are limited”
• Claiming that goods came from a specified location when they did not
• Falsely stating that goods or services are a certain quality, grade, style or model
• Making untrue statements about another company or its products or services
• Misrepresenting that goods or services manufactured by one company when they were made by another company
• Passing used goods off as new ones
• Providing false or misleading information regarding sale prices
• Selling goods or services that are not as advertised, e.g., using “bait-and-switch” techniques

The FTC has the authority to investigate, report illegal activity and enforce laws when organizations use unfair or deceptive acts or practices against consumers.

UDAP vs. UDAAP

UDAP and Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) are not the same. UDAP laws arose when Congress expanded the FTC Act over 80 years ago. Business participation in “unfair, deceptive or abusive acts or practices” was forbidden when Congress passed the Dodd-Frank Act in 2010.

Common UDAAP violations include:

• Extending misleading cost or price statements
• Leaving out limitations or conditions in an offer
• Not providing a service that was promised
• Promising to provide a product or service that is not available
• Using bait-and-switch tactics

The standards for deceptive and unfair acts are much the same for UDAP and UDAAP. A violation can contain all or a combination of prohibited conduct. The FTC enforces UDAP violations under the FTC Act. The Dodd-Frank Act gives the Consumer Financial Protection Bureau (CFPB) the right to publish rules recognizing certain acts or practices as UDAAP violations.

In 2023, the CFPB reviewed fees connected to deposit accounts for potential UDAAPs. The agency identified insufficient fund penalties, overdraft fees, automobile loan and mortgage servicing practices and deposits as violations.

The FTC does not generally have the right of enforcement over financial institutions, with notable exceptions. However, banking regulators, including the Federal Deposit Insurance Corporation (FDIC) and other Federal banking agencies, can take action against financial institutions for unfair or deceptive acts or practices that violate the FTC Act. UDAP violations may also breach various other federal and state laws and lead to a claim. Some examples of UDAP violations that could result in a claim include:

• Failing to reveal when fees or prepayments were assessed to obtain the product or service
• Not offering adequate information to help consumers understand the terms of a product or service to avoid being misled
• Not disclosing the drawbacks or confines of the product or service

These and other UDAP violations may be included in lawsuits as a part of a larger product liability case. The consumer fraud team at Motley Rice seeks damages for consumers harmed by unfair or deceptive practices. We strive to make a significant impact that will discourage businesses from attempting to undertake the same illicit practices in the future.

UDAP and social media harm

Social media harm lawsuits making claims of UDAP violations are becoming a hot-button issue. States, school districts and individuals are filing teen mental health lawsuits alleging Instagram, Snapchat, TikTok and YouTube are addictive and harmful to the mental health of youth.

These apps may also intentionally prompt businesses to engage in unfair trade practices by creating “challenges” as a form of marketing to increase the return on advertising spending. Although social media use offers substantial rewards for businesses, using it for marketing purposes can expose an organization to significant risk. As a result, states are using their own UDAP laws targeting unfair trade practices as a way to recover monetary damages and injunctive relief.

Individuals who want to file a UDAP case should contact a consumer protection attorney or the attorney general in their state. A consumer protection attorney can advise if a state’s UDAP statute allows a private right of action. Attorneys general receive and review UDAP claims to determine whether the case can be mediated or should be referred to another agency.

Although mediation may be used to resolve disputes, many consumers hire an attorney for assistance and to help protect their interests.

Anyone who purchases a product or service is potentially at risk of fraud. Even the most financially savvy customer can unknowingly fall victim to it. Fraud can present in a number of ways, from purchasing a defective car that leads to an accident to unexpected exposure to toxic materials.

Our attorneys have litigated diverse and complicated consumer fraud matters against industries and companies that exploit unsuspecting customers, including cases against:

• Automobile manufacturers and dealers
• Banks
• Brokers
• Credit reporting agencies
• Drug makers
• Food manufacturers and distributors
• Financial consultants
• Insurance companies
• Medical device manufacturers
• Mortgage lenders
• Title insurers

We have also worked with numerous state attorneys general who have retained our attorneys to represent their states in a range of legal matters, including consumer rights and consumer protection.

Read more about our consumer protection experience.