BCFP Supervisory Highlights

The BCFP recently released its latest Supervisory Highlights, Issue 17, Summer 2018 addressing issues uncovered from supervisory examinations generally completed between December 2017 and May 2018. The report shares recent supervisory observations in the areas of:  automobile loan servicing; credit cards; debt collection; mortgage servicing; payday lending; and small business lending.  As in past editions, this report includes information about recent public enforcement actions that were a result, at least in part, of BCFP’s supervisory work. The report also includes information on recently-released examination procedures and BCFP guidance.

The BCFP’s report identifies the following examination findings:

• Automobile loan servicing: In some recent auto servicing examinations, examiners identified unfair and deceptive acts or practices relating to wrongful repossessions and billing statements.  More specifically, some auto loan servicers repossessed vehicles after the repossession was supposed to be cancelled.  Additionally, examinations found that servicers used a deceptive practice when they sent billing statements to consumers who did not need to make a payment until a future date when the consumer was required to make a monthly payment.  Due dates on billing statements were inconsistent with the servicer’s insurance payment application and the note.
• Credit card account management: While examinations found compliance with federal consumer finance laws, there were some exceptions where card issuers did not consider applicable factors when re-evaluating eligible accounts, did not reduce the rates of accounts eligible for rate reduction and did not re-evaluate all accounts that were eligible.
• Debt collection: Examiners identified several violations of the Fair Debt Collection Practices Act (FDCPA), not mailing debt verifications prior to further collection activities.
• Mortgage servicing: Examiners found that some servicers delayed permanent modification for over 30 days after consumers successfully completed their trial modification. Additionally, some servicers charged more than the amounts contained in the loan modification agreements.  Finally, some servicers represented to consumers that there would be no initiation of foreclosure if a loss mitigation offer was accepted by a specified date, but foreclosures were initiated even when borrowers had called or written to accept loss mitigation offers by the required date.
• Payday Lending: Some companies were found to represent in their collection letters that they will, or may have no choice but to repossess vehicles if there was a failure to make payments or contact the company.  The problem was that the companies did not have relationships with any party to repossess vehicles and generally did not repossess vehicles.  Another unfair practice involved debiting a borrower’s account without authorization and by accessing account information provided for other purposes.
• Small Business Lending: Examiners generally found that there was effective management of the risks of an ECOA violation. There were instances where businesses collected and maintained only limited data on lending decisions which could impede their ability to test and monitor ECOA risk using statistical analyses.

Fair Lending:  This Supervisory Letter reiterates the statements regarding HMDA implementation on January 1, 2018, and their July 5, 2018 statement related to recent HMDA amendments.  Small business lending review procedures are outlined and a brief comment about the FFIEC HMDA examiner transaction testing guidelines effective date of March 1, 2019 was made.  Lastly, there is a discussion of No-Action Letters, and that the Office of Innovation (established July 18, 2018) is revising No-Action Letters and trial disclosure policies.