Understanding UDAP Frameworks: A Key to Privacy Compliance

In the ever-evolving landscape of consumer privacy laws, businesses often focus on new state regulations and legislation. However, it’s equally important not to overlook classic UDAP (Unfair and Deceptive Acts and Practices) regulatory frameworks. These foundational marketing regulations remain crucial, as businesses can inadvertently violate them through their privacy practices. Understanding and adhering to UDAP frameworks is key to maintaining compliance and protecting consumer trust.

Let’s break down both components of UDAP:

Unfair Acts and Practices: An unfair act or practice is one that is harmful to consumers, is outside of the consumer’s control, and isn’t offset by countervailing benefits to consumers or to commerce. In a privacy context, issues can arise, for example, with a business that employs a vendor to process personal consumer data. If the business fails to conduct proper due diligence and the vendor misuses that data—such as selling it to a third party or improperly profiling individuals—this can result in consumer harm. The vendor’s actions are beyond the consumer’s control, and the benefits of using the vendor are primarily for business efficiency, not consumer advantage. This scenario exemplifies an unfair practice.

Deceptive Acts and Practices: Under UDAP regulations, deception can occur in two forms: by misrepresentation and by omission.

• Misrepresentation: This happens when a business tells consumers something untrue or that a reasonable consumer might misinterpret in a way that, had they known the truth, they might have acted differently – they might not have purchased that service or agreed to share their data with that vendor. For example, a company might claim in its privacy policy that it uses “industry-standard security practices” or that their privacy practices are “secure.” If a data breach or other event reveals that the company’s security measures were, in fact, not as tight as claimed to be, that’s a misrepresentation to the consumer. The consumer may have decided not to disclose their personal information to that business had they known the truth about that business’s security systems.
• Omission: Deception by omission involves withholding a piece of information that could influence a reasonable consumer’s decision. In privacy matters, this can come up when a business fails to disclose that they sell the consumer data, or when it omits sharing how consumer data will be used.

Why UDAP Frameworks Matter

Compliance with UDAP frameworks is vital to a robust privacy program for multiple reasons. First, UDAP laws in some states allow consumers to bring private lawsuits, which can lead to costly litigation, including class actions, for privacy violations. Second, in states or at the federal level where comprehensive privacy regulations are lacking, regulators may turn to UDAP frameworks to address privacy issues. In particular, the Federal Trade Commission often relies on its UDAP authority for its privacy and data breach enforcement actions. That means that even if your business is in a state that doesn’t have a comprehensive privacy law and you only work with consumers in that state, your privacy policies and practices will still be under regulatory scrutiny.

Wondering if your business’s data privacy practices are in compliance with applicable laws? We can help! Learn about our regulatory compliance audit services.