The CFPB recently released its Spring 2022 oversight highlights, discussing the results of its reviews as they relate to automotive care, consumer reporting, credit card account management, debt collection, deposits, mortgage origination, prepaid accounts, remittances and student loan servicing.
This is the 26th edition of the CFPB’s Surveillance Highlights and it covers reviews that were completed in the second half of 2021. Some of the key findings from the Spring 2022 Surveillance Highlights include:
- Mortgage arrangement. The reviewers noted, among other things, that certain loan indemnification agreements entered into by lenders provided for higher indemnification when Fannie Mae’s conforming fixed rate loans exceeded a designated threshold percentage of total loans entered into by the originator of the loan. ready. The CFPB found that these practices constituted the payment of compensation based on the type of credit product, which violates Regulation Z as compensation based on the duration of a transaction. The CFPB also said that some lenders did not retain sufficient documentation to establish the validity of changes in circumstances which were used to justify a reset of tolerances related to amounts recorded on the LE. Specifically, the violations were found in relation to the assessment fee that was increased on the revised LEs following an urgent assessment. Additionally, reviewers identified instances where lenders’ CDs did not reflect the fully indexed rate as required by the promissory note because the lenders’ software miscalculated the disclosed rates. Accordingly, the CDs did not reflect the terms of the legal obligation between the parties.
- Consumer reports. The Bureau said that certain consumer reporting companies (i.e. consumer reporting agencies or “CRAs”) violated the FCRA and its implementation of Regulation V by failing to: (i ) conduct reasonable investigations into disputes, including removing thousands of disputed trade lines, (ii) send dispute notifications to suppliers within five business days of receipt of the dispute, and (iii) send a statement of result FCRA-compliant within the required five business days after the dispute is investigated. The reviewers also found that some vendors, who are required to investigate disputed information, violated Regulation V by not: (i) conducting reasonable investigations into collateral disputes, (ii) reporting the results of direct investigations on consumer disputes before the expiration of the required time, (iii) promptly notify the CRA of a determination that the information provided to the CRA is not complete or accurate, (iv) provide the CRA any corrections or additional information that is necessary to make the information provided by the Supplier to the CRA complete and accurate, and (v) establish and implement reasonable policies and procedures regarding the accuracy and integrity of information provided.
- Automatic maintenance. The CFPB also found that some auto repairers violated UDAAP provisions. Specifically, the reviewers noted that auto repairers: (i) repossessed vehicles after consumers took actions that should have prevented repossession, (ii) misled consumers about the final amount of their loan payment after a deferral, and (iii) failed to seek reimbursement from third-party administrators for certain unearned fees and failed to apply applicable refunds to accounts after repossession and cancellation of contracts.
- Discounts. With respect to remittance providers, the reviewers identified instances where providers: (i) engaged in deceptive acts or practices by making false and misleading representations of “instant” and “30 second” transfers , (ii) used remittance service agreements with consumers that violated EFTA, (iii) failed to comply with the disclosure and timing requirements set out in the Remittance Rule, (iv) failed to has not developed and maintained written policies and procedures designed to ensure compliance with the error resolution requirements of the Rebate Rule, and (v) has failed to comply with their obligation to provide notice of the results of investigation of errors, including notice of available remedies.
- Debt recovery. The Bureau also noted that some debt collectors violated the FDCPA by misrepresenting or implying to consumers that they were responsible for paying charges on their accounts that were incurred as a result of fraudulent activity. Examiners specifically found violations where the debt collector continued to attempt to collect a debt and offered a settlement even after the consumer informed debt collectors of the fraud. In addition, some debt collectors failed to repay overpayments and credit balances to consumers in a timely manner.
- Deposits. With respect to deposits, CFPB examiners found that institutions: (i) engaged in unfair acts or practices by mistakenly placing multiple holds on certain mobile check deposits deemed suspicious rather than placing the only scheduled holds, resulting in the charging of an overdraft charge, (ii) violated the stop payment requirements of Regulation E by not honoring stop payment requests for pre-authorized transfers related to debit cards, ( (iii) failed to comply with the error resolution procedures of Regulation E, and (iv) failed to provide adequate notices of revocation of provisional credit to consumers in connection with investigations of errors regarding deposits of checks at ATMs as required by Regulation E.
- Credit card account management. With respect to the credit card account management operations of certain supervised entities, the examiners noted that these entities violated the billing error resolution requirements of Regulation Z. The examiners also found that issuers of credit cards had failed to comply with their obligation under Regulation Z to periodically assess whether it was appropriate to reduce an account’s APR after the APR was increased. Additionally, the CFPB reported that some entities engaged in deceptive acts or practices by advertising the interest-free financing feature of their credit card without adequately disclosing the conditions precedent to obtaining the financing.
- Prepaid accounts. With respect to prepaid accounts and prepaid account service providers, the examiners found that the institutions violated Regulation E by failing to: (i) submit prepaid account agreements to the CFPB within 30 days of the date effective after amending certain prepaid account agreements, (ii) honor oral chargeback requests regarding payments from certain bill payment systems, including those initiated with the merchant, as well as in the bill payment system hosted by the prepaid account program manager, and (iii) include a statement indicating the consumer’s right to request the documents upon which the institution relied in making its decision after determining that no error or that a different error has occurred as part of the results report.
- Student Loans Service. Finally, the reviewers identified instances where service agents engaged in unfair acts or practices related to the service of private student loans by failing to: (i) make the inducement payments they offered in advertisements and accepted to make in relevant contracts with consumers; and (ii) issue repayment payments in a timely manner in accordance with payment schedules in loan modifications.
Like past Surveillance Highlights, the Spring 2022 report includes information on recent enforcement actions resulting, at least in part, from the CFPB’s surveillance work. The report also includes some supervisory program developments, including the CFPB’s recent announcement that it will begin expanding its supervisory reviews to other non-bank financial companies, which WBK reported on here.