CFPB Releases Spring 2022 Supervisory Highlights

The CFPB recently issued its Spring 2022 Supervisory Highlights, discussing findings from its examinations in connection with auto servicing, consumer reporting, credit card account management, debt collection, deposits, mortgage origination, prepaid accounts, remittances, and student loan servicing.

This is the 26th edition of the CFPB’s Supervisory Highlights and it covers the examinations that were completed in the second half of 2021.  Some of the key findings in the Spring 2022 Supervisory Highlights include:

• Mortgage Origination.  Examiners noted that, among other things, certain lenders’ loan origination compensation agreements provided for higher compensation where Fannie Mae conforming fixed rate loans surpassed a designated threshold percentage of the total loans closed by the loan originator.  The CFPB found such practices to constitute paying compensation based on credit product type, which violates Regulation Z as compensation based on the term of a transaction.  The CFPB also stated that certain lenders failed to retain sufficient documentation to establish the validity of changed circumstances that were used to justify a reset of the tolerances related to the amounts listed on the LE.  Specifically, the violations were found in connection with appraisal fees that were increased on revised LEs as a result of a rush appraisal.  Moreover, examiners identified instances where lenders’ CDs failed to reflect the full-indexed-rate as required by the promissory note because the lenders’ software miscalculated the disclosed rates.  As a result, the CDs did not reflect the terms of the legal obligation between the parties.

• Consumer Reporting.  The Bureau stated that certain consumer reporting companies (i.e., consumer reporting agencies or “CRAs”) violated FCRA and its implementing Regulation V by failing to: (i) conduct reasonable investigations of disputes, including by deleting thousands of disputed tradelines, (ii) send notifications of dispute to furnishers within five business days of receiving the dispute, and (iii) send an FCRA compliant statement of result within the required five business days of completing the dispute investigation.  Examiners also discovered that certain furnishers, who are required to conduct an investigation with respect to disputed information, violated Regulation V by not: (i) conducting reasonable investigations of indirect disputes, (ii) reporting the results of direct dispute investigations to consumers before the expiration of the required time period, (iii) promptly notifying the CRA of a determination that information furnished to the CRA is not complete or accurate, (iv) providing the CRA with any corrections or additional information that is necessary to make the information provided by the furnisher to the CRA complete and accurate, and (v) establishing and implementing reasonable policies and procedures concerning the accuracy and integrity of furnished information.

• Auto Servicing.  The CFPB also found that certain auto servicers violated the UDAAP provisions.  Specifically, examiners noted that auto servicers: (i) repossessed vehicles after consumers took action that should have prevented the repossession, (ii) misled consumers about their final loan payment amount after a deferral, and (iii) failed to request refunds from the third-party administrators for certain unearned fees and failed to apply the applicable refunds to the accounts after repossession and cancellation of the contracts. 

• Remittances.  Regarding remittance transfer providers, examiners identified instances where providers: (i) engaged in deceptive acts or practices by making false and misleading representations of “instant” and “30 second” transfers, (ii) utilized remittance transfer service agreements with consumers that violated the EFTA, (iii) failed to comply with disclosure and timing requirements set forth in the Remittance Rule, (iv) failed to develop and maintain written policies and procedures designed to ensure compliance with the Remittance Transfer Rule’s error resolution requirements, and (v) failed to comply with their obligation to provide notice of the results of error investigations, including the notice of available remedies.

• Debt Collection.  The Bureau also noted that certain debt collectors violated the FDCPA by misrepresenting or implying to consumers that they were responsible for paying charges on their accounts that were incurred as the result of fraudulent activity.  Examiners specifically found violations where the debt collector continued to attempt to collect a debt and offered settlement even after the consumer informed the debt collection of the fraud.  Moreover, certain debt collectors failed to timely refund overpayments and credit balances to consumers.

• Deposits.  In connection with deposits, CFPB examiners found that institutions: (i) engaged in unfair acts or practices by erroneously placing multiple holds on certain mobile check deposits that were deemed suspicious rather than placing the single holds that were intended, resulting in the charging of overdraft fees, (ii) violated Regulation E’s stop payment requirements by failing to honor stop payment requests for preauthorized transfers tied to debit cards, (iii) failed to comply with Regulation E’s error resolution procedures, and (iv) failed to provide adequate notices of revocation of provisional credit to consumers in connection with error investigations regarding check deposits at ATMs, as required under Regulation E.

• Credit Card Account Management. With respect to the credit card account management operations of certain supervised entities, examiners noted such entities violated Regulation Z’s billing error resolution requirements.  Examiners also found that credit card issuers failed to comply with their obligation under Regulation Z to periodically assess whether it is appropriate to reduce an account’s APR after the APR is increased.  Moreover, the CFPB stated that certain entities engaged in deceptive acts or practices by advertising the interest-free financing feature of their credit card without adequately disclosing the preconditions for obtaining the financing.

• Prepaid Accounts.  In connection with prepaid accounts and prepaid account service providers, examiners found institutions violated Regulation E by failing to: (i) submit prepaid account agreements to the CFPB within 30 days of the effective date after they amend certain prepaid account agreements, (ii) honor oral stop payment requests with respect to payments originating through certain bill pay systems, including both those initiated with the merchant, as well as within the bill pay system housed at the prepaid account program manager, and (iii) include a statement noting the consumer’s right to request the documents that the institution relied on in making its determination after determining no error or a different error occurred as part of the report of the results.

• Student Loan Servicing.  Finally, examiners identified instances where servicers engaged in unfair acts or practices related to private student loan servicing by failing to: (i) make incentive payments that they offered in advertisements and agreed to make in the relevant contracts with consumers, and (ii) issue timely refund payments in accordance with the payment schedules in loan modifications.

Similar to past Supervisory Highlights, the Spring 2022 report includes information about recent public enforcement actions that were a result, at least in part, of CFPB’s supervisory work.  The report also includes certain supervisory program developments, including the CFPB’s recent announcement that it will begin expanding its supervisory examinations to additional nonbank financial companies, which WBK covered here.