Deceptive Practices

Unfair And Deceptive Practices in the United States

Unfair Acts or Practices

The Dodd-Frank Act prohibits conduct that constitutes an unfair act or practice. An
act or practice is unfair when:

  • It causes or is likely to cause substantial injury to consumers;
  • The injury is not reasonably avoidable by consumers; and
  • The injury is not outweighed by countervailing benefits to consumers or to competition. Dodd-Frank Act §§ 1031, 1036, 12 U.S.C. §§ 5531, 5536)

A “substantial injury” typically takes the form of monetary harm, such as fees or costs paid by consumers because of the unfair act or practice. However, the injury does not have to be monetary (CFPB Exam Manual at UDAAP 2). See also FTC v. Accusearch, Inc., 06-cv-105-D, 2007 WL 4356786, at *7-8 (D. Wyo. Sept. 28, 2007); FTC Policy Statement on Unfairness (Dec. 17, 1980). Although emotional impact and other subjective types of harm will not ordinarily amount to substantial injury, in certain circumstances emotional impacts may amount to or contribute to substantial injury (CFPB Exam Manual at UDAAP). In addition, actual injury is not required; a significant risk of concrete harm is sufficient (CFPB Exam Manual at UDAAP).

An injury is not reasonably avoidable by consumers when an act or practice interferes with or hinders a consumer’s ability to make informed decisions or take action to avoid that injury (CFPB Exam Manual at UDAAP). Injury caused by transactions that occur without a
consumer’s knowledge or consent is not reasonably avoidable (CFPB Exam Manual at UDAAP).Injuries that can only be avoided by spending large amounts of money or other significant resources also may not be reasonably avoidable. Finally, an act or practice is not unfair if the injury it causes or is likely to cause is outweighed by its consumer or competitive
benefits (Dodd-Frank Act § 1031(c)(1)(B), 12 U.S.C. § 5531(c)(1)(B); see also CFPB Exam Manual at UDAAP 2).
Established public policy may be considered with all other evidence to determine
whether an act or practice is unfair, but may not serve as the primary basis for such
determination (Dodd-Frank Act § 1031(c)(2), 12 U.S.C. § 5531(c)(2); see also CFPB Exam Manual at UDAAP 3).

Deceptive Acts or Practices

The Dodd-Frank Act also prohibits conduct that constitutes a deceptive act or practice. An act or practice is deceptive when:

  • The act or practice misleads or is likely to mislead the consumer;
  • The consumer’s interpretation is reasonable under the circumstances; and
  • The misleading act or practice is material.The standard for “deceptive” practices in the Dodd-Frank Act is informed by the standards for the same terms under Section 5 of the FTC Act. See CFPB Exam Manual at UDAAP 5.

To determine whether an act or practice has actually misled or is likely to mislead a consumer, the totality of the circumstances is considered (CFPB Exam Manual at UDAAP 5). Deceptive acts or practices can take the form of a representation or omission (CFPB Exam Manual at UDAAP 5). The CFP Bureau also looks at implied representations, including any implications that statements about the consumer’s debt can be supported. Ensuring that claims are supported before they are made will minimize the risk of omitting material information and/or making
false statements that could mislead consumers.

To determine if the consumer’s interpretation of the information was reasonable under the circumstances when representations target a specific audience, such as older Americans or financially distressed consumers, the communication may be considered from the perspective of a reasonable member of the target audience. A statement or information can be misleading even if not all consumers, or not all consumers in the targeted group, would be misled, so long as a significant minority would be misled. Likewise, if a representation conveys more than one meaning to reasonable consumers, one of which is false, the speaker may still be liable for the
misleading interpretation. Material information is information that is likely to affect a consumer’s choice of, or conduct regarding, the product or service. Information that is likely important to consumers is material.

Sometimes, a person may make a disclosure or other qualifying statement that might
prevent consumers from being misled by a representation or omission that, on its
own, would be deceptive. The Bureau looks to the following factors in assessing
whether the disclosure or other qualifying statement is adequate to prevent the
deception: whether the disclosure is prominent enough for a consumer to notice;
whether the information is presented in a clear and easy to understand format; the
placement of the information; and the proximity of the information to the other
claims it qualifies. See also CFPB Bulletin 12-06, Marketing of Credit Card Add-On Products (July 12, 2012)).

The United States Deceptive and Unfair Business Practices

General overview of the United States laws prohibiting businesses from engaging in unfair and deceptive trade tactics and practices, such as false advertising in the United States, bait and switch, or tampering with a car's odometer, with cross-references to additional information and resources on related topics in the United States.


Further Reading

Deceptive Practices: Open and Free Legal Research of US Law

Federal Primary Materials

The U.S. federal government system consists of executive, legislative, and judicial branches, each of which creates information that can be the subject of legal research about Deceptive Practices. This part provides references, in relation to Deceptive Practices, to the legislative process, the federal judiciary, and the primary sources of federal law (cases, statutes, and regulations).

Federal primary materials about Deceptive Practices by content types:

Laws and Regulations

US Constitution
Federal Statutory Codes and Legislation

Federal Case Law and Court Materials

U.S. Courts of Appeals
United States courts of appeals, inclouding bankruptcy courts and bankcruptcy appellate panels:

Federal Administrative Materials and Resources

Presidential Materials

Materials that emanate from the President’s lawmaking function include executive orders for officers in departments and agencies and proclamations for announcing ceremonial or commemorative policies. Presidential materials available include:

Executive Materials

Federal Legislative History Materials

Legislative history traces the legislative process of a particular bill (about Deceptive Practices and other subjects) for the main purpose of determining the legislators’ intent behind the enactment of a law to explain or clarify ambiguities in the language or the perceived meaning of that law (about Deceptive Practices or other topics), or locating the current status of a bill and monitoring its progress.

State Administrative Materials and Resources

State regulations are rules and procedures promulgated by state agencies (which may apply to Deceptive Practices and other topics); they are a binding source of law. In addition to promulgating regulations, state administrative boards and agencies often have judicial or quasi-judicial authority and may issue administrative decisions affecting Deceptive Practices. Finding these decisions can be challenging. In many cases, researchers about Deceptive Practices should check state agency web sites for their regulations, decisions, forms, and other information of interest.

State rules and regulations are found in codes of regulations and administrative codes (official compilation of all rules and regulations, organized by subject matter). Search here:

State opinions of the Attorney General (official written advisory opinions on issues of state law related to Deceptive Practices when formerly requested by a designated government officer):

Tools and Forms

Law in Other Regions

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