UDAP/UDAAP (AI Context)
Unfair, deceptive, or abusive acts and practices standards applied to AI systems.
Definition
UDAP (Unfair or Deceptive Acts or Practices) and UDAAP (Unfair, Deceptive, or Abusive Acts or Practices) are consumer protection standards enforced by the FTC and CFPB respectively. In the AI context:
- Unfair: AI causing substantial injury not reasonably avoidable by consumers
- Deceptive: Misleading representations about AI capabilities, accuracy, or data use
- Abusive (CFPB): AI exploiting consumer lack of understanding or inability to protect their interests
Regulators have applied these standards to: AI-powered lending discrimination, chatbot misrepresentations, automated debt collection, algorithmic pricing, and AI customer service failures. Financial institutions face heightened scrutiny under UDAAP for AI used in consumer financial products.
Sources
- •FTC Act Section 5
- •Dodd-Frank Act Section 1031
Related Terms
FTC Act Section 5 (AI Enforcement)
Federal authority prohibiting unfair or deceptive AI practices affecting consumers....
Fair Lending (AI Context)
Anti-discrimination requirements in credit decisions as applied to AI lending systems....
AI Liability
Legal frameworks determining responsibility and compensation when AI systems cause harm or damage....