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”

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 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

The CFPB announced today that it expects to propose a rule to delay the July 1, 2021 date to comply with the new Qualified Mortgage (“QM”) rule.

The CFPB’s statement provides that the extension would allow lenders more time to make QM loans based on their debt-to-income ratio (and Appendix Q), or based on the

In response to the significant impacts of the COVID-19 pandemic, the US Consumer Financial Protection Bureau (“CFPB”) announced in July 2020 that it would shift its supervisory priorities and begin performing Prioritized Assessments instead of planned examinations. On January 19, 2021, the CFPB issued its findings in a COVID-19 Prioritized Assessments Special Edition of Supervisory

On January 28, 2021, the Consumer Financial Protection Bureau (CFPB or the Bureau) provided the first official details regarding its new direction under the Biden administration. In a statement originally issued internally to Bureau employees, Acting Director Dave Uejio outlined his two main priorities: (1) relief for consumers facing hardship due to COVID-19 and the related economic crisis and (2) racial equity. While these two areas of focus were largely expected, the details of Acting Director Uejio’s statement provide helpful clarity to companies subject to the Bureau’s supervisory and/or enforcement jurisdiction.
Continue Reading CFPB will Prioritize COVID-19 Relief and Racial Equity under Acting Director Uejio

Earlier this week the CFPB released an interim final rule that allows mortgage servicers flexibility to offer additional short-term loss mitigation options to borrowers impacted by the COVID-19 pandemic.  The mortgage servicing rules include many requirements for the servicing of mortgage loans in default, including limitations on the types of loss mitigation that may be offered in certain instances.  The unique challenges facing servicers and borrowers in the wake of the pandemic, as well as the unique loss mitigation options being announced by federal housing agencies designed to assist borrowers negatively impacted by COVID-19 that do not fit neatly into the CFPB’s existing servicing requirements, have prompted the CFPB to amend those rules to provide servicers with additional flexibility.
Continue Reading CFPB Provides Relief to Servicers Offering Loss Mitigation in Wake of Pandemic

In recent weeks, the US federal housing agencies and government-sponsored enterprises (GSEs) that insure, guarantee, or purchase “federally backed mortgage loans” covered by Section 4022 of the CARES Act (Act) have continued their intense pace of issuing temporary measures, and updates to such measures, intended to implement the Act’s provisions applicable to such loans. These

In a new era of double-digit unemployment resulting from the COVID-19 pandemic, it may be tough for a mortgage lender to predict the amount and stability of someone’s income in order to determine qualification for a home loan. Neither past nor even present levels of income may be reliable indicators of income levels going forward, at least in the short run or until the economic dislocations are substantially behind us. That is why Fannie Mae and Freddie Mac (the “government-sponsored enterprises,” or “GSEs”) recently issued enhanced documentation requirements and considerations for verifying and predicting the income of a self-employed applicant for a mortgage loan. While the GSEs’ documentation requirements apply via contract to approved lenders/sellers, whether those requirements will morph into legal requirements under the Dodd-Frank Act’s “ability to repay” requirements is something to watch in the coming months.

Revised GSE Underwriting Requirements for Eligible Loan Purchases

A determination of whether an applicant has the ability to repay a loan from his or her income or assets is a basic component of loan underwriting – as required both by federal (and sometimes state) law, and by a lender’s investors or insurers. In addition, federal regulations prohibit a lender of closed-end residential mortgage loans from relying on any income that is not verified by reliable documentation. Predicting whether that income will continue into the future takes skill when lending to self-employed borrowers under any circumstances, and is particularly tricky during this unique coronavirus economy. The now-waning government stay-at-home orders and other quarantining efforts may or may not have affected a particular borrower’s business operations, and the scale and duration of those effects going forward are difficult to predict.

In response to that uncertainty, on May 28, 2020 Fannie Mae and Freddie Mac issued guidance requiring that self-employed borrowers must submit a year-to-date (“YTD”) profit and loss statement (“P&L”) that reports business revenue, expenses and net income.
Continue Reading Self-Employed Borrowers’ Income – Is the Past Necessarily Prologue?

On May 15, 2020, the House of Representatives passed the Health and Economic Recovery Omnibus Emergency Solutions Act (H.R. 6800, or the “HEROES Act”). The legislation is a controversial behemoth. It would provide another round of stimulus checks and student loan forgiveness, impose a 12-month eviction moratorium, expand mortgage forbearance relief, provide a