Yesterday, the Consumer Financial Protection Bureau (CFPB) announced that it had released its Fall, 2016 Supervisory Highlights report. The latest report is the thirteenth edition of Supervisory Highlights. The findings reported reflect information obtained from supervisory activities completed during the period from May through August of this year. [Editor’s Note: The CFPB issues a report every quarter. The last report was issued in the Summer of 2016.] A complete copy of the latest report can be found here.
In this report the CFPB shares recent supervisory observations in the areas of automobile loan origination, automobile loan servicing, debt collection, mortgage origination, mortgage servicing, student loan servicing and fair lending.
The headline in the CFPB press release was that the supervisory actions during this last period returned more than $11 million to more than 225,000 harmed consumers.
The report notes that the CFPB uncovered student loan servicer violations, such as failing to enroll qualified borrowers in affordable federal loan repayment plans, and is issuing updated procedures for student loan servicing exams. The report also outlines violations found in auto loan origination and servicing, debt collection, and mortgage origination. Additionally, the report provides information on compliance with CFPB rules and regulations, new exam policies, and best practices for better communication with non-English-speaking consumers.
Specific issues uncovered by CFPB examiners being addressed through supervisory or enforcement action include:
- Student loan servicers unfairly denying or failing to approve qualified students’ affordable payment plans: Eligible borrowers with federal student loans have a legal right to affordable payments based on their monthly income. A recent Bureau report found student loan borrowers may face needless hurdles and wrongful rejections when trying to enroll in these plans. CFPB examiners have found that one or more servicers are regularly and illegally denying applications from qualified borrowers. These practices could trap borrowers in payment plans they cannot afford, delay access to important benefits, increase costs for consumers, and contribute to avoidable defaults. The Department of Education has issued guidance saying servicers must be more actively engaged with borrowers who do not have complete applications.
- Auto loan servicers illegally keeping borrowers’ belongings: CFPB examiners found one or more auto loan servicers refused to return personal belongings from a borrower’s repossessed car unless the borrower paid a storage fee. If borrowers did not pay the fee in the allotted time, usually 30-45 days, depending on the state, the companies would dispose of the property instead of returning it to the borrower. It is an illegal and unfair practice to refuse to return a consumer’s personal property until a fee is paid.
- Debt collectors charging illegal fees, misleading consumers: Examiners found one or more debt collectors charged illegal payment processing fees and made misleading collection calls about consumers’ credit scores or reports. For instance, some debt collection employees misled consumers by falsely claiming immediate payments were needed to prevent damage to the consumer’s creditworthiness. The CFPB also found one or more collectors revealed information about debts to consumers’ friends and family during debt collection attempts, and failed to investigate consumer reporting disputes. These actions violate the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.
Some problems found during CFPB supervisory examinations are resolved without an enforcement action. Where Bureau examiners find violations of law or other significant problems or weaknesses, they alert the institution to these concerns, direct the institution to change its conduct, and outline necessary remedies.
The press release announcing the Supervisory Highlights also provided additional compliance information. It noted that the Bureau released new information on compliance with CFPB rules and regulations, new exam policies, and best practices for improving communication with non-English-speaking consumers. The additional information included the following:
- Revised exam procedures for student lending and servicing: The Bureau’s revised exam procedures enhance those that were devised in 2013, and are informed by more than two years of supervisory and enforcement actions. They address the gamut of servicing practices affecting borrowers from payment processing and routine communications with borrowers, to the handling of requests for payment relief by distressed borrowers. It will also guide how examiners assess risks to consumers and review student loan servicers’ compliance with federal consumer financial law. These procedures build on the ongoing work by federal agencies and regulators to strengthen student loan servicing practices, and note that servicers’ adherence to Department of Education contracts and regulations may figure into Bureau compliance reviews. They also provide a roadmap for state and local partners implementing student loan servicing examination programs.
- Updates to CFPB guidance on compliance for service providers: Under amended Bureau guidance for service providers, risk management programs may be tailored to the size, market, and level of risk for consumer harm the service provider presents. The bulletin also notes that appropriate risk management programs enhance compliance with federal consumer financial laws and help avoid consumer harm. [Editor’s Note: insideARM previously wrote about this change on October 27, 2016.
- Language services for non-English-proficient consumers: The report includes findings on how institutions provide access to credit in languages other than English in a way that benefit both consumers and the institution, while helping ensure the actions comply with the law. These findings include marketing and servicing loans in languages other than English, translating financial documents sent to borrowers, providing language services to consumers with limited English language skills, and using bilingual customer service agents.
The Education Loan Servicing Examination Procedures can be found here.
The Service Provider Bulletin can be found here.
insideARM always recommends that compliance professionals thoroughly review the quarterly Supervisory Highlights reports. The reports provide excellent guidance on important issues and offer insight into CFPB thinking on issues that may ultimately be addressed in the debt collection rulemaking process. You can find many important Bureau documents here on our CFPB Resource Portal.