CFPB Supervisory Report Outlines Violations

The CFPB released its latest Supervisory Highlights Report on March 8, 2016 addressing issues uncovered from supervisory examinations generally completed between September and December 2015. The report highlights compliance issues identifies compliance problems regarding Consumer reporting, debt collection, student loan servicing, mortgage origination, remittances and fair lending. The CFPB’s report identifies the following examination findings:

Consumer Reporting.  Examiners found compliance violations related to furnisher obligations under FCRA which included:

• Failure to have reasonable policies and procedures regarding information furnished to NSCRAs;
• Failure to promptly update outdated information;
• NSCRAs ensuring data quality; and
• NSCRA oversight of furnishers.

Debt Collection.  Violations of the FDCPA included:

• Use of exception reports by furnishers to reduce errors in furnished information (FCRA violations);
• Cease-communication requests; and
• False, deceptive or misleading representations regarding garnishment.

Mortgage Origination.

• Failure to maintain written policies and procedures required by the loan originator rule; and
• Deficiencies in compliance management systems.

Remittances.  The CFPB’s amendments to Regulation E governing international money transfers (for remittances) became effective October 28, 2013.  Examiners found the following issues regarding remittances:

• Violations of the remittance rule;
• Gaps or systems issues related to compliance management systems;
• Deceptive representations; and
• Zero-money-received transactions.

Student Loan Servicing.  CFPB examinations have identified the following concerns:

• Auto-default as a result of bankruptcy or death meaning that the loan is accelerated and becomes immediately due;
• Failure to disclose impact of forbearance on consigner release eligibility;
• Servicing conversion errors costing borrowers money;
• Inadequate policies and procedures that do not reference one another, making it difficult to determine which policy or procedure applies;
• Record retention, internal controls, audits, testing, third-party oversight and insufficient detail regarding employee training.

Fair Lending:  The federal government settled the largest auto loan discrimination case in history which included $80 million in settlement payments for consumers who were overcharged and $38.9 million to consumers who were both eligible and overcharged on auto loans issued subsequent to the settlement.  Approximately 235,000 loans and approximately 301,000 borrowers and co-borrowers were represented.  In another case, the CFPB and DOJ ordered an institution to provide $169 million in relief to about 108,000 borrowers excluded from debt relief offers because of their national origin.  During the course of administering the settlement, the institution identified additional customers who had mailing addresses in Puerto Rico or who indicated a preference to communicate in Spanish were excluded from offers of debt relief and provided approximately $201 million in redress to approximately 133,463 eligible consumers.

The CFPB’s Supervisory Highlights, Issue 10, Winter 2016 is available at: http://files.consumerfinance.gov/f/201603_cfpb_supervisory-highlights.pdf.