CFPB Releases Fall 2021 Supervisory Highlights

The CFPB recently issued its Fall 2021 Supervisory Highlights, discussing findings from its examinations in connection with credit card account management, debt collection, fair lending, mortgage servicing, deposits, prepaid accounts, and remittance transfers.

This is the 25th edition of the CFPB’s Supervisory Highlights and it covers the examinations that were completed between January 2021 and June 2021.  Some of the key findings in the Fall 2021 Supervisory Highlights include:

• Fair Lending. The CFPB discovered that some mortgage lenders violated ECOA by discriminating against African American and female borrowers in the granting of pricing exceptions based on competitive offers.  Examiners noted that, among other things, lenders did not have a formal policy on the use of this exception and relied on managers to promulgate a “verbal policy that a consumer must initiate or request a competitor price match exception.”  The CFPB also stated that lenders had unexplained statistically significant disparities for the incidence of pricing exceptions for African American and female applicants compared to similarly situated non-Hispanic white and male applicants.  Moreover, examiners found that some lenders improperly inquired about small business applicants’ religion and considered an applicant’s religion in their credit decision, in violation of ECOA and Regulation B.

• Mortgage Servicing. The Bureau stated that certain mortgage servicers engaged in unfair acts or practices by (i) charging delinquency-related fees to borrowers in CARES Act forbearances, (ii) assessing fees that were higher than the actual cost for the services performed, and (iii) failing to terminate electronic fund transfers (EFTs) after receiving a notice that the consumer’s account had been closed and a fee for insufficient funds had been charged to the consumer.  Examiners also discovered that some servicers incorrectly disclosed transaction and payment information in borrowers’ online mortgage loan accounts.  Furthermore, the CFPB stated that it found violations of “Regulation X requirements to evaluate borrowers’ complete loss mitigation applications within 30 days of receipt, Regulation Z requirements relating to overpayments to borrowers’ escrow accounts, and Homeowners Protection Act (HPA) requirements to automatically terminate private mortgage insurance[.]”

• Debt Collection. The CFPB found that various debt collectors, in part, misrepresented to consumers that restarting and completing a payment plan would improve the consumer’s creditworthiness upon final payment under the plan and the deletion of the tradeline.  The Bureau noted that there are several factors that influence an individual’s creditworthiness, including the tradelines previously furnished by prior owners of the same debt, and that completing a repayment plan does not guarantee an improved credit score.

• Remittance Transfers. Examiners found that some remittance transfer providers violated the Remittance Rule. Specifically, the CFPB stated that providers received notices of errors alleging that remitted funds had not been made available to the designated recipient by the disclosed date of availability. However, these providers then failed to investigate whether a deduction imposed by a foreign recipient bank constituted a fee that the providers were required to refund to the sender. 

• Deposits. The Bureau discovered that, in some cases, due to incorrect or outdated information in the digital payment network directory, some consumers’ EFTs were sent to unintended recipients.  This occurred even though the consumer provided the correct identifying token information for the recipient. Moreover, in violation of Regulation E, certain institutions failed to conduct reasonable error investigations when they received error notices from consumers indicating that the consumers had sent funds via a person-to-person payment network, but the intended recipients had not received such funds.

• Credit Card Account Management. Examiners stated that certain credit card issuers engaged in deceptive acts or practices by advertising, but not granting, bonus offers to existing customers for opening a new credit card account and meeting certain spending requirements.  The Bureau also discovered that credit card issuers misled consumers who responded to advertisements offering incentives for opening a new account and spending a minimum amount. Furthermore, examiners found that creditors violated Regulation Z’s billing error resolution requirements by failing to: (i) resolve a dispute within two complete billing cycles after receiving a billing error notice regarding the failure to credit a payment made by the consumer; (ii) reimburse a consumer for a late fee after it determined a missed payment had not been properly credited to the consumer’s account; and (iii) conduct reasonable investigations after receiving billing error notices related to a missing payment and unauthorized transactions.

• Prepaid Accounts. The CFPB noted that some financial institutions included language in their Terms of Use agreements that forfeited the consumer’s rights provided by EFTA and Regulation E.  The Bureau also stated that certain financial institutions failed to comply with Regulation E’s requirements related to investigating alleged EFT errors.

• Payday Lending. Examiners found that certain lenders engaged in deceptive acts or practices by debiting or attempting to debit from consumer’s accounts the remaining balance of their loans on the original due date after the consumers  applied for a loan extension, and received a confirmation email stating that only an extension fee would be charged on the due date.  The CFPB also stated some lenders engaged in unfair acts or practices by debiting or attempting one or more additional, identical, unauthorized debits “from consumers’ bank accounts after consumers called to authorize a loan payment by debit card and lenders’ systems erroneously indicated the transactions did not process.”

Similar to past Supervisory Highlights, the Fall 2021 report includes information about recent public enforcement actions that were a result, at least in part, of CFPB’s supervisory work.