The CFPB published the Fall 2021 edition of its Supervisory Highlights. The report addresses the Bureau’s reviews in the areas of credit card account management, debt collection, deposits, equity loans, mortgage servicing, payday loans, prepaid accounts and payments that have been made. carried out between January 2021 and June 2021. Therefore, the majority of reviews discussed in the report would have taken place under the leadership of former acting director Uejio.
CFPB press release on the report bears the hyperbolic title “CFPB Report Highlights Supervisory Findings of Wide-Ranging Violations of Law in 2021”. The report does not characterize the causes of violations found by examiners, and even consumer financial protection laws recognize that violations can occur despite good faith compliance efforts. Nonetheless, the press release includes a statement from Director Chopra that the violations occurred because the companies were “irresponsible or mismanaged”.
The main findings of the CFPB examiners are described below.
Credit card management. In addition to finding that creditors violated the billing error resolution provisions of Regulation Z, card issuers were found to have engaged in deceptive acts or practices by:
- Announced to some existing customers that they would receive bonus offers if they opened a new credit card account and met certain spending requirements, but did not provide the advertised bonuses to customers who met those requirements
- Notifying other customers that they would receive bonus offers if they opened a new credit card account and met certain spending requirements, but failing to disclose or adequately disclose that consumers were required to apply in line to receive the bonus.
Debt recovery. Debt collectors have been found to have created a risk of misrepresentation or deceptive means to collect or attempt to collect a debt in violation of the FDCPA by telling consumers that improvements in consumer creditworthiness and the removal of a commercial line would occur when finalizing payment under a new payment plan. Such a payment might, in fact, not improve a consumer’s credit rating, as many factors influence an individual consumer’s credit rating, including potential business lines previously provided by owners of the same debt. .
Deposits. Financial institutions were found to have violated the error resolution provisions of Regulation E in the provision of person-to-person digital payment network services. Errors are defined by Regulation E to include “[a]n incorrect electronic transfer to or from the consumer’s account. The reviewers found that due to inaccurate or outdated information in the digital payment network’s directory, consumers’ EFTs were misrouted to unintended recipients, even though the consumer accurately provided the phone number or phone number. correct recipient email address. Called “token errors,” these errors are “incorrect” EFTs because funds are not transferred to the correct account. The examiners found that the institutions violated Regulation E by failing to determine that the token errors were ‘incorrect’ EFTs for the purposes of Regulation E and by failing to conduct reasonable investigations into the errors when they did so. received notices from consumers alleging that the funds had not been received by the intended recipients. . Reasonable investigations were not carried out because the institutions only verified whether the EFTs had been processed according to the sender’s instructions and not whether the payment had gone to an unintended recipient due to a token error.
Fair loan. The examiners found instances of price discrimination and religious discrimination in violation of the ECOA and Regulation B as follows:
- Price discrimination. Mortgage lenders were found to have unlawfully discriminated against African American borrowers and women by granting price exceptions based on competitive offers from other lenders. Lenders had policies and procedures in place for loan officers to offer pricing exceptions, but did not specifically address the circumstances in which a pricing exception might be offered in response to a competitive bid. Rather, lenders relied on managers to adopt a verbal policy that a consumer should initiate or request an exception. Reviewers identified lenders with statistically significant disparities in the incidence of price exceptions for African American and female applicants compared to white and non-Hispanic male borrowers in the same situation. Reviewers identified instances where lenders provided price exceptions for a competitive offer to white and non-Hispanic male borrowers without any proof of customer initiation. There was also a lack of documentation to support pricing exceptions. The report cites the lack of monitoring and control by lenders over the use of exceptions by mortgage officers and the failure of management to take appropriate corrective action on risks self-identified as contributing to the disparities.
- Religious discrimination. Lenders were found to have unlawfully discriminated on the basis of religion by improperly inquiring into the religion of small business applicants and taking into account an applicant’s religion in the credit decision. For applicants who were religious institutions, lenders used a questionnaire that explicitly asked for the applicant’s religion. Lenders also refused credit to applicants from religious institutions because they did not respond to the questionnaire.
Mortgage service. Duty officers were found to have engaged in unfair acts or practices by:
- Charge delinquency fees to borrowers in CARES law abstentions in violation of the CARES law prohibition
- Failure to terminate pre-authorized TEFs from closed accounts after receiving a closure notice, resulting in repeated NSF charges for failed pre-authorized TEFs
- Charge borrowers more for the cost of home inspections and brokerage reviews than the actual costs of these services
- Misrepresent payment and transaction information in borrowers’ online accounts
Repairers also have:
- Violated Regulation X by failing to assess complete loss mitigation requests within 30 days
- Breach of Policy Z by applying payments in excess of the amount owed to borrowers’ escrow accounts rather than processing them in accordance with the requirements for processing partial payments (which required departments to return the overpayment to the borrower or credit the payment at the borrower’s next regular monthly payment).
- Violation of the Homeowners Protection Act by failing to terminate private mortgage insurance on the date the principal balance of an outstanding mortgage was to reach 78% of the loan-to-value ratio
Payday loans. Lenders have been found to have engaged in deceptive acts or practices by:
- Debit or attempt to debit consumer accounts for the remaining loan balance on the original due date after consumers (1) request an extension, and (2) receive a confirmation email stating that only a extension would be billed on the due date
- Misrepresent in loan confirmation emails that consumers would only pay extension fees on their initial loan maturity dates
- Debit or attempt one or more additional, identical and unauthorized debits from consumers’ bank accounts due to a coding error or after consumers call to authorize a debit card loan payment and the systems of lenders incorrectly indicated that the payments had not been processed. (These facts also formed the basis for the conclusion that the lenders violated Regulation E by failing to maintain evidence of compliance with Regulation E for the required period.)
Prepaid accounts. Financial institutions issuing prepaid accounts have been found to have violated EFTA and Regulation E by not honoring requests for objection to payment that they received orally or in writing at least 3 working days before the date. planned transfer. Institutional service providers have improperly required consumers to contact the merchant first before processing a chargeback request. Financial institutions have also been found to have violated the error investigation provisions of Regulation E by failing to (1) begin investigations promptly upon receipt of an oral error notice, (2) complete investigations on disputed point-of-sale debit transactions within 90 days of receipt. of the initial error notice, after issuing an interim credit when required, and (3) reporting the results of the investigation in the letter of determination sent to consumers.
Transfers of funds. The providers were found to have violated the error investigation provisions of the Remittances Rule by failing to (1) determine whether a deduction imposed by a foreign recipient bank was a commission that the institutions were required to reimburse the sender, and (2) to reimburse this charge after suppliers have received error notices alleging that the funds paid had not been made available to the designated recipient as of the disclosed availability date .