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Earlier this week, the Consumer Financial Protection Bureau released the Fall 2021 edition of its Supervisory Highlights (“Supervisory Highlights” or “Report”). This marks the first edition issued under Director Rohit Chopra, President Biden’s pick to head the agency. The press release accompanying this edition of Supervisory Highlights cites “wide-ranging violations of law” and asserts that “irresponsible or mismanaged firms harmed Americans during the COVID-19 pandemic,” statements that signal that the Chopra-led Bureau is taking an aggressive approach to supervision and is scrutinizing supervised entities closely.

Supervisory Observations

This edition of Supervisory Highlights covers examinations completed between January 2021 and June 2021 and identifies violations in eight areas: credit card account management, debt collection, deposits, fair lending, mortgage servicing, payday lending, prepaid accounts, and remittance transfers. As is the Bureau’s common practice, the Report refers to institutions in the plural even if the related findings pertain to only a single institution.

  • Credit Card Account Management. The Report details several findings related to credit cards, including violations of Regulation Z and the prohibition against unfair, deceptive, and abusive acts and practices (“UDAAPs”). With respect to Regulation Z, Bureau examiners determined that creditors failed to comply with requirements related to billing errors. Specifically, the Bureau details alleged failures concerning the timing of resolving notices of billing errors (within two complete billing cycles), reimbursing late fees when payment had not been credited to an account, and conducting reasonable investigations based on consumer allegations of missing payments and unauthorized transactions. The Report indicates that creditors are working to identify and remediate affected customers and develop training on Regulation Z’s billing error resolution requirements for employees.

The Bureau also alleged deceptive practices relating to the marketing of credit card bonus offers in two separate instances. First, examiners determined that credit card issuers engaged in deceptive acts by failing to provide advertised bonuses to existing customers who satisfied the bonus program requirements of opening a new account and meeting the spending requirements. Moreover, the Bureau noted that issuers failed to ensure employees followed procedures to enroll existing consumers correctly. Second, the examiners determined that issuers also engaged in deceptive acts when their advertising to consumers failed to disclose or adequately disclose material information about qualifying for the bonus. In this situation, the bonus was tied to applying for the card online, so consumers who otherwise satisfied advertised requirements, but applied through a different channel, did not receive the bonus. In response to these findings, issuers are modifying applicable advertisements and undertaking remedial and corrective actions.

  • Debt Collection. According to the Report, examiners found that larger participant debt collectors were at risk of violating the Fair Debt Collection Practices Act (“FDCPA”) as it relates to using false representations or deceptive means to collect a debt. The Report explained that debt collectors, in the context of discussing the consumer restarting a payment plan, represented that making the final payment of the plan would improve the consumer’s creditworthiness. The Bureau, however, indicated that this could lead the least sophisticated consumer to assume that deleting derogatory information would result in improved creditworthiness, when in fact numerous factors influence a consumer’s creditworthiness and making a final payment may not necessarily improve a person’s credit score. As a result of the findings, the debt collectors revised their FDCPA policies and procedures and enhanced their training and monitoring systems.


Continue Reading First CFPB Supervisory Highlights Issued Under Director Chopra Cites “Wide-Ranging Violations of Law”

Earlier this week, the U.S. Department of Housing and Urban Development (HUD)’s Office of General Counsel (OGC) published guidance on the Fair Housing Act’s treatment of Special Purpose Credit Programs (SPCPs). An SPCP is a tool that lenders can use to target underserved communities without violating the Equal Credit Opportunity Act (ECOA) and its implementing

Mortgage servicers should prepare for increased scrutiny of their default servicing activities.  Earlier this week, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”), along with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators, issued a statement that the agencies would resume their full supervision and enforcement of mortgage servicers, ending the flexible approach the agencies announced at the onset of the COVID-19 pandemic.  This move is consistent with the Bureau’s March 2021 rescission of similar statements issued during the pandemic that provided temporary flexibilities to financial institutions.
Continue Reading CFPB Announces Return to Mortgage Servicing Enforcement

On Monday, New York Governor Kathy Hochul signed legislation to expand the state’s community reinvestment law to cover nonbank mortgage lenders who are licensed in the state of New York. Effective November 2022, the New York Department of Financial Services (“DFS”) will begin considering nonbank lenders’ performance in meeting community credit needs. The new law

Three federal agencies announced a coordinated settlement today with a Mississippi-headquartered bank for allegedly redlining predominantly Black and Hispanic neighborhoods in the Memphis, Tennessee area. The action was the result of the OCC’s examination of the bank’s lending activities from 2014 to 2016. The OCC found that the bank had engaged in a “pattern or

On September 7, 2021, the CFPB announced that it had entered into a consent order with an education finance nonprofit (“nonprofit”) in connection with the nonprofit’s offering of income share agreements (“ISAs”). In the consent order, the CFPB asserted that ISAs are extensions of credit covered by the Consumer Financial Protection Act and the Truth in Lending Act (“TILA”) as well as TILA’s requirements with respect to “private education loans.” Because the CFPB asserts in the consent order that it views the nonprofit’s ISAs as credit, the CFPB takes the position that they are also subject to numerous other federal consumer financial protection laws that impose requirements and restrictions on student loan products. This consent order has significant implications for those in the ISA market, as it indicates how the CFPB views re-characterization for ISAs and similar products.
Continue Reading CFPB Finds that Income Share Agreements are Credit Products

Today the Bureau finally released its long-awaited proposed rulemaking on small business lending data collection. Section 1071 of the Dodd-Frank Act mandated that the CFPB collect data about small business lending to facilitate enforcement of fair lending laws.

After ten years of fits and starts on this topic, the Bureau ultimately was pressured by a lawsuit filed against it to make forward progress on a proposal. As we previously reported, a court settlement last year mandated a timeline for the CFPB to take certain steps to initiate a Section 1071 small business lending data collection rulemaking. Among other steps, the settlement required the CFPB to convene a Small Business Advocacy Review panel (“Panel”) by October 15, 2020. The Panel met and provided feedback on the CFPB’s proposals under consideration and released its report in December.

The 918-page proposed rule issued today is the culmination of years of research and CFPB engagement with stakeholders.
Continue Reading CFPB Issues Proposed Small Business Lending Rule

On August 10, 2021, the CFPB’s Office of Supervision Policy published a report titled Mortgage Servicing COVID-19 Pandemic Response Metrics: Observations from Data Reported by Sixteen Servicers (“Servicing Metrics Report”).  Although the Servicing Metrics Report doesn’t allege any compliance deficiencies in the servicers’ performance, the topics addressed in the report and the CFPB’s accompanying press release indicate areas of focus for the CFPB, and servicers should take note.

Continue Reading CFPB Report on Servicers’ COVID-19 Response Signals Enforcement Priorities

On February 4, 2021, the California Department of Financial Protection and Innovation (DFPI or the Department) issued an invitation for stakeholder comments on potential rules that will govern the operations and authority of the Department. This invitation is the first opportunity for industry participants to weigh in on the functions of the DFPI—a newly reconstituted regulator whose oversight will significantly affect many financial services companies operating in California.

The DFPI (formerly known as the Department of Business Oversight) was established by the California Consumer Financial Protection Law (CCFPL), which was enacted last September. In addition to renaming and reorganizing one of California’s financial regulators, the CCFPL grants the DFPI authority very similar to that granted to the CFPB under the Dodd-Frank Act, including expanded regulatory and enforcement powers. And while many licensees are exempt from these new authorities—e.g., mortgage lenders licensed under the state’s Real Estate Law—uncertainty around their scope and implementation should lead all potentially relevant market participants to monitor and consider participating in the rulemaking process.
Continue Reading California DFPI Invites Comments on Rules Governing its Operations and Authority

On January 4, 2021, Representative Al Green of Texas, the Chairman of the Subcommittee on Oversight and Investigations for the House Financial Services Committee, re-introduced H.R. 166, titled the Fair Lending for All Act, a bill he previously introduced in 2019. The proposed bill would significantly revise the application and enforcement of the Equal Credit Opportunity Act (ECOA) and would further expand lenders’ collection and reporting obligations under the Home Mortgage Disclosure Act (HMDA).
Continue Reading Re-introduced Fair Lending for All Act Proposes Stiffer ECOA Penalties and CFPB Testing Office