We note that the characterization of an act or practice as an unfair, deceptive or abusive act or practice (UDAAP) is highly subjective and sometimes unpredictable. We believe that agreeing to match a competitor’s CD interest rate for customers who request the match presents a relatively low risk of being considered a UDAAP violation, provided that the same criteria are used to determine whether to grant or deny all such requests. However, your bank may wish to adopt safeguards that could mitigate the risk of a UDAAP finding related to this practice.

Here, the customers who do not ask your bank to match a competitor’s higher interest rate receive the bank’s advertised rate and are unaware of the opportunity to obtain a higher interest rate. This may present a slight risk of a UDAAP violation because your customers do not have access to information that would help them obtain the most favorable CD rate from your bank. At the same time, those customers presumably have access to the same information as other customers regarding competitors’ CD rates and could choose to open their CDs with a competitor to obtain that higher rate.

Given the risk of a UDAAP finding (even if the risk is low), we recommend monitoring and tracking all requests to match higher CD interest rates and ensuring that these requests are granted or denied on a consistent basis. We also recommend verifying and documenting the competitor’s higher rate before granting it to a customer. Additionally, your bank may wish to consider advertising its policy of matching competitors’ CD interest rates, within certain parameters, to avoid any claims that your bank has omitted important information by failing to disclose this practice.

For resources related to our guidance, please see:

• Consumer Financial Protection Act of 2010, 12 USC 5536(a) (“It shall be unlawful for (1) any covered person or service provider . . . (B) to engage in any unfair, deceptive, or abusive act or practice.”)

• CFPB Supervision and Examination Manual, pages 174–75 (“The standard for unfairness in the Dodd-Frank Act is that an act or practice is unfair when: (1) It causes or is likely to cause substantial injury to consumers; (2) The injury is not reasonably avoidable by consumers; and (3) The injury is not outweighed by countervailing benefits to consumers or to competition.”)

• CFPB Supervision and Examination Manual, page 175 (“A key question is not whether a consumer could have made a better choice. Rather, the question is whether an act or practice hinders a consumer’s decision-making. For example, not having access to important information could prevent consumers from comparing available alternatives, choosing those that are most desirable to them, and avoiding those that are inadequate or unsatisfactory. In addition, if almost all market participants engage in a practice, a consumer’s incentive to search elsewhere for better terms is reduced, and the practice may not be reasonably avoidable.”)

• CFPB Supervision and Examination Manual, page 178 (“A representation, omission, act or practice is deceptive when (1) The representation, omission, act, or practice misleads or is likely to mislead the consumer; (2) The consumer’s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and (3) The misleading representation, omission, act, or practice is material.”)

• CFPB Supervision and Examination Manual, page 182 (“An abusive act or practice: . . . Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service or . . . Takes unreasonable advantage of:

• A lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;

• The inability of the consumer to protect its interests in selecting or using a consumer financial product or service; or

• The reasonable reliance by the consumer on a covered person to act in the interests of the consumer.”)