High rates and a steep reduction in mortgage refinance applications have created stiff competition for the origination of purchase-money mortgages. Settlement service providers often seek creative strategic alliances to help secure more business. Companies can refer to recent informal guidance from the Consumer Financial Protection Bureau relating to marketing services agreements and other promotional opportunities.
Much has been written about Rohit Chopra’s tenure as Director of the Consumer Financial Protection Bureau (CFPB or Bureau). While many expected an aggressive enforcement posture, in part because of an aggressive hiring spree in enforcement, his tenure has been marked more by an aggressive use of guidance and exhortation. Recently released statistics bear this…
The Consumer Financial Protection Bureau issued its latest set of Supervisory Highlights and reminded us that “unforeseen” means “unforeseen.”
The CFPB’s regulations generally prohibit reducing a loan originator’s compensation in selective cases. While lower compensation sounds good for consumers, the CFPB asserts that allowing loan originators to decrease their compensation in selective cases is actually…
After an almost two-year regulatory process, the California Department of Financial Protection and Innovation (DFPI) adopted final administrative regulations to implement the state’s 2018 commercial financing disclosure law. Most importantly, the final rules come with a long-awaited effective date: December 9, 2022. The effective date honors prior DFPI statements that a six-month window for compliance…
On May 2, 2022, the Consumer Financial Protection Bureau released the Spring 2022 edition of its Supervisory Highlights (“Supervisory Highlights” or “Report”). This edition covers examinations completed between July 2021 and December 2021, and notably is the first edition that covers some examinations completed during Director Rohit Chopra’s tenure at the Bureau.
Interestingly, although the Bureau recently has emphasized fair lending and anti-discrimination concerns and the Report itself states that an important goal of the Bureau’s supervisory work “is to foster financial inclusion and racial equity,” this edition does not include any fair lending-related findings. The Report also does not include any mortgage servicing-related findings despite the Bureau’s recent focus on servicing for borrowers impacted by the COVID-19 pandemic.
The Supervisory Highlights identifies violations of law in nine areas: auto loan servicing, consumer reporting, credit card account management, debt collection, deposits, mortgage origination, prepaid accounts, remittances, and student loan servicing. 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.
As we point out below, many of the issues discussed in this edition of Supervisory Highlights are issues the CFPB has addressed in other recent editions of Supervisory Highlights or other recent guidance. Supervised entities should take note of the Bureau’s continued focus on these issues.
- Auto Loan Servicing. This edition of Supervisory Highlights discusses several violations of the prohibition on unfair, deceptive, or abusive acts or practices (“UDAAPs”) related to auto loan servicing. Among other things, CFPB examiners identified wrongful repossessions at auto servicers. According to the Bureau, servicers engaged in unfair acts or practices when they repossessed vehicles after consumers took action that should have prevented the repossession. Along these lines, the CFPB released a bulletin earlier this year that focused on mitigating the harm of repossession.
In addition, according to the Report, some servicers engaged in a deceptive act or practice in connection with deferrals offered to consumers. The deferrals at issue were likely to increase consumers’ final payment amounts, and the servicers sent consumers notices stating that their final payment “may be larger.” In fact, consumers’ final payments often increased dramatically. The CFPB determined that the “imprecise conditional statements” in the notices the servicers sent to consumers misled consumers about the amount of their final loan payment after the deferral. In response to these findings, servicers updated their notices and practices. For example, some servicers included estimated final payment amounts in the deferral notices.
Continue Reading Latest CFPB Supervisory Highlights Cites Violations in Auto Servicing, Consumer Reporting, Debt Collection, and Other Areas
Marketplace lender Opportunity Financial, LLC has gone on the offensive against the California Department of Financial Protection and Innovation to protect its bank partnership program against challenge on a “true lender” theory. On March 7, 2022, OppFi filed suit against the DFPI to ask the state court to declare that FinWise Bank, a Utah-chartered bank,…
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.
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.
Recent developments indicate that credit reporting concerns are likely to be at the forefront of the CFPB’s agenda in the coming months. Last month, CFPB Director Rohit Chopra spoke before the House Committee on Financial Services and discussed several key topics, including credit reporting issues. Earlier this month, the CFPB published a report called “Disputes on Consumer Credit Reports” that discusses trends in consumer credit disputes and how such disputes are resolved. Shortly after the CFPB published its report, a group of Democratic senators sent a letter to Director Chopra, urging the CFPB to address credit reporting issues within the industry. This blog post highlights some of the key points in Director Chopra’s testimony, the CFPB report, and Senate Democrats’ letter to Director Chopra.
Continue Reading Credit Reporting in the Crosshairs?
Statistics obtained through a FOIA request confirm what everyone expected – an uptick in CFPB enforcement activity that coincides with the beginning of the Biden Administration. Last year, we reported on statistics showing the number of new enforcement investigations opened every fiscal year through FY2019. Those statistics showed that new enforcement investigations had dropped significantly…
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