As someone who works in the financial advising industry, you’re likely well aware that there’s no real cap on income. You likely know that your ability to continue generating income is contingent upon your ability to keep a steady flow of customers coming in your door, though.
Interest in securing customers shouldn’t motivate people to engage in unfair business practices. This concept is also often referred to as unfair or deceptive trade practices.
What activities fall under the umbrella of unfair business practices?
Any business practices that may be unethical, fraudulent or deceptive may also be unfair. Some examples of these techniques include:
- False advertising.
- Misrepresentation of goods or services
- Deceptive pricing
- Manufacturing practices that fail to comply with safety standards
All of these techniques generally violate consumer protection laws.
What does federal law say about unfair trade practices in the banking sector?
Section 5(a) of the Federal Trade Commission Act outlines how certain behaviors commercial entities, including banking institutions, might engage in may constitute unfair or deceptive trade practices.
That federal statute refers to an entity’s actions as being potentially deceptive if:
- A practice, omission or representation has a strong likelihood of or misleads a consumer.
- The omission, practice or representation of misleading information is material.
- A consumer has a reasonable interpretation of the practice, omission or representation based on the circumstances.
That same statute describes what constitutes unfair trade practices. It outlines how the following circumstances rise to such a level:
- Consumers can’t reasonably avoid such an outcome.
- The situation is likely to or causes a customer significant injuries.
Any situation in which customers or the competition don’t derive any countervailing benefits by a business engaging in such activities may also constitute unfair trade practices.
What penalties might you face for engaging in unfair trade practices?
You may face disciplinary action on behalf of your industry’s regulatory licensing board for engaging in unfair trade practices. You may also expose yourself to legal action taken by customers. They may be able to recover both compensatory and punitive damages if they’re successful in filing a lawsuit against you.
Both of these factors may impact your reputation among colleagues in the financial services industry and affect your ability to land customers for your business.