On September 12, 2017, the Consumer Financial Protection Bureau (CFPB) released its summer 2017 Supervisory Highlights report. The report focuses on supervision-related work generally completed between January 2017 and June 2017 related to automobile loan servicing, credit card account management, debt collection, deposits, mortgage origination and servicing, remittances, service provider programs, short-term, small-dollar lending and fair lending. This article summarizes the CFPB’s supervisory observations related to consumer loan and mortgage lending and servicing.
Automobile Loan Servicing
In the examiners’ review of how automobile loan servicers oversee repossessions, the CFPB identified an unfair practice involving repossessing vehicles after the repossession should’ve been canceled. According to the CFPB, this unfair practice was identified at one or more automobile servicers, and occurred because of the following:
- The servicers wrongfully coded the account as remaining delinquent
- Customer service representatives didn’t cancel the repossession order on time after borrowers made sufficient payments or entered an agreement with the servicer to avoid repossession
- Repossession agents hadn’t checked the documentation before repossessing and thus didn’t learn the repossession had been canceled
Credit Card Account Management
In one or more recent examinations, the CFPB identified violations of Regulation Z, including the following deceptive practices:
- Failure of credit card issuers to provide the required tabular account-opening disclosures that included the table set forth in Appendix G-17 of Regulation Z
- Misrepresentations to consumers that occurred when communicating the costs and availability of pay-by-phone options
- Misrepresentations to consumers that occurred when communicating benefits and terms of credit card add-on products
- Failure to properly follow billing error resolution processes required by Regulation Z, and noncompliance with limits set forth in Regulation Z related to the amount of unauthorized transactions for which a cardholder can be held liable
Examiners identified the following Fair Debt Collection Practices Act violations during recent examinations of larger debt collection market participants:
- As a result of not verifying the correct party had been contacted before starting collection activities, debt collectors communicated with third parties about the debt without consumer permission
- When a credit card’s authorized user wasn’t financially responsible for a debt, the CFPB found that one or more debt collectors attempted to collect the debt from that authorized user, thereby deceptively implying the authorized user was responsible for the debt
- Debt collectors made false representations regarding the effect on a consumer’s credit report when paying a debt in full versus settling the debt in full
- Debt collectors contacted consumers outside the hours of 8 a.m.–9 p.m., or at times that the consumers had previously communicated were inconvenient
Examiners identified regulatory violations of federal consumer financial laws at one or more supervised entities.
- CFPB examiners had findings and observations related to the Know Before You Owe mortgage disclosure rule. The Supervisory Highlights report discloses the following violations related to the content and timing of Loan Estimate and Closing Disclosures:
- Amounts consumers paid at closing exceeded the amounts disclosed on the Loan Estimates beyond the applicable tolerance threshold
- The entities failed to retain evidence of compliance with the requirements associated with the Loan Estimates
- The entities failed to obtain and/or document the consumer’s intent to proceed with the transaction prior to imposing a fee in connection with the consumer’s application
- Waivers of the three-day review period didn’t contain bona fide personal financial emergencies
- The entities failed to provide consumers with a list identifying at least one available settlement service provider, if the creditor permits the consumer to shop for a settlement service
- The entities failed to disclose the amount payable into an escrow account on the Loan Estimate and Closing Disclosure when the consumer elected to escrow taxes and insurance
- Loan Estimates didn’t include the date and time at which estimated closing costs expire
- The entities failed to properly disclose fees the consumer paid prior to closing on the Closing Disclosure
- At one or more entities, a specified service deposit was collected from consumers, but the entities failed to reimburse unused portions of the deposit when customers withdrew their applications
- The CFPB identified Regulation Z violations at one or more entities related to arbitration language included in residential loan document templates
At one or more entities, the CFPB identified Regulation X violations in cases when mortgage servicers received incomplete loss mitigation applications and subsequently failed to complete reasonable diligence in obtaining the documents and information needed to complete the application. In addition, the CFPB continues to identify broad waivers of rights in loss mitigation agreements, specifically for short sales and cash-for-keys. The CFPB has determined such broad waivers violate Regulation Z.
Short-Term, Small-Dollar Lending
The CFPB identified multiple unfair, deceptive or abusive acts or practices (UDAAP) findings related to debt collection and short-term, small-dollar loans, including:
- Prohibited workplace collection calls
- Prohibited repeated collection calls to third parties
- Misrepresentations in collections
- Marketing misrepresentations about small-dollar loan products
- Misrepresentations regarding use of references provided by borrowers in applications
- Unauthorized debits and overpayments
The CFPB identified weaknesses in fair lending compliance management systems in reviews of one or more mortgage servicers.
For information regarding the supervisory observations reported, recent enforcement actions, supervision program developments, fair lending developments, examination procedure updates and recent CFPB guidance, read the summer 2017 Supervisory Highlights in its entirety.