CFPB Fall 2022 Supervision Highlights—Key Findings and Takeaways | Manatt, Phelps & Phillips, LLP
On November 16, 2022, the Consumer Financial Protection Bureau (Bureau) released its Fall 2022 Monitoring Highlights. The 32-page report discusses key findings from the Bureau’s review in the areas of auto care, consumer reporting, credit card services, debt collection, deposit accounts, licensing and servicing mortgages and payday loans between January 1 and June 30, 2022. A summary of the report’s notable findings is below.
Repeat offenders under notice. The Bureau has created a special unit within the Oversight Bureau to prosecute repeat offenders, particularly entities and individuals who violate agency or court orders. The Repeat Offenders Unit will focus on ways to improve the detection of repeat offenders and develop a rapid response process to address the root cause of the violation and recommend corrective action, including a thorough review of corporate compliance court or agency orders. Targeting repeat offenders has been and will continue to be a priority for director Chopra.
Automatic maintenance. As it has done before, the Bureau focused on whether consumers who prepay their auto loans receive partial refunds for complementary products, such as secured asset protection, that they have purchased at the time of financing. Although these products are typically purchased from auto dealerships – in which case only the dealership, or a third-party administrator of the products, holds the money that should be reimbursed – the Bureau said some auto repairers violated the federal ban on ” unjust” acts or practices by “failure[ing] to ensure consumers receive refunds,” regardless of state law requirements. It’s the second Over time, the Office has focused on this practice in Supervision Highlights. Automotive repairers must at least take reasonable steps at the time of a payment to ensure consumers are aware of their refund rights, in addition to complying with state laws that may require additional steps. .
The Bureau also found that servicers engaged in unfair and deceptive acts or practices by misleading consumers about loan modification approvals, charging consumers twice for warranty protection insurance, and incurring the device interrupting a consumer’s starter, rendering the car inoperable, when the repairer mistakenly believed the consumer was in default on a loan payment. Finally, the Bureau found during a review that some repairers made misleading claims during collection calls by telling consumers that their driver’s license or sticker would be suspended if they didn’t pay promptly. Although not specifically identified by the Bureau, such actions could also involve the Fair Debt Collection Practices Act (FDCPA) and state debt collection laws in cases where debt collectors collect their debts under an assumed name.
Consumer reports. The report noted violations of the Fair Credit Reporting Act (FCRA) and Regulation V by the two consumer reporting companies (CRCs) – the Bureau’s term for “consumer reporting agencies” as defined in the FCRA – as well as by consumer reporting providers. The CFPB found that CRCs failed to address complaints from consumers who challenged the accuracy of their credit reports and report those results to the Bureau, as required by the FCRA. For providers of consumer credit information, the Bureau found violations of the FCRA and Regulation V when such providers, among others, provided inaccurate information to CRCs when they knew that information was inaccurate. , failed to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information provided to a CRC, and failed to conduct reasonable investigations of direct disputes.
Credit card. The Bureau found instances where companies failed to comply with the billing error resolution provisions of Regulation Z, such as the requirement to resolve disputes within two full billing cycles or no later than 90 days, and the obligation to conduct reasonable investigation after receiving notices of billing errors. . Additionally, the report cited violations where credit card issuers failed to periodically assess whether it was appropriate to reduce a consumer’s APR after increasing it. Under Regulation Z, card issuers must reassess an account no later than six months after the rate increase.
Finally, the report identified deceptive acts or practices by entities for the marketing, sale and service of credit card add-on products, as well as misrepresentations regarding automatic card payment services. With respect to this latter violation, the Bureau found that consumers were likely misled into believing that signing up for the card’s automatic payment service automatically paid their minimum monthly account balance when, instead, they paid the same fixed amount each month. As a result, when the required minimum monthly payment increased, customers using the autopay service did not pay the full amount, resulting in late fees, finance charges, and other default charges.
Debt recovery. Collection agents were cited for violating the FDCPA by continuing to engage with consumers after consumers said the communication annoyed, harassed or abused them. The reviewers also found instances where debt collectors violated the FDCPA by communicating with someone other than the consumer when the third party had a similar name to the consumer. The Office cited similar violations in Highlights from last summer’s watch.
Deposit Accounts. How institutions have managed pandemic relief benefits continues to be a top priority for the Office. In 2021, the Bureau conducted prioritized assessments to assess how financial institutions handled pandemic relief benefits deposited into consumer accounts. In a follow-up review, reviewers identified risks of inequity at several deposit-taking institutions. For example, the report cites instances of institutions using protected unemployment insurance or economic impact payments to offset a negative account balance, seizing protected unemployment insurance or economic impact payments in violation of federal law and state, and dealing with out-of-state garnishments. orders in violation of applicable state law.
In particular, the Bureau emphasized the importance of state laws in protecting consumer funds held in deposit accounts and said failure to comply with applicable state law could result in an act or an unfair practice in violation of consumer financial protection law, as is the case in a recent Office enforcement actions.
Origin of the mortgage. Supervised entities’ mortgage origination transactions have been cited for violations of Regulation Z where entities improperly reduced loan originator compensation to cover increases in settlement costs.
Separately, Regulation Z also prohibits loan agreements from containing disclaimers prohibiting consumers from bringing federal claims related to their mortgage. The Bureau cited a violation where an entity had a provision in its loan guarantee agreement that waived a consumer’s right to initiate or participate in a class action. The entity was required to remove the waiver provision and send notice to affected consumers rescinding and revoking the waiver, despite the fact that federal claims can be decided by arbitration.
Mortgage service. The CFPB continues its campaign against what it calls “junk fees”. In its report, the Bureau cited mortgage servicers engaging in abusive acts or practices by charging large telephone payment fees without disclosing their existence or cost. In addition, earlier this year, the Office stated in a advisory opinion that the Federal Consumer Finances Act prohibits debt collectors from charging payment or convenience fees under the FDCPA.
The Bureau also found that repairers engaged in unfair acts and practices for violating the CARES Act by charging illegal fees during CARES Act forbearance (when prohibited by law) and failing to honor requests for service. forbearance in a timely manner.
Finally, the report discussed the deceptive acts or practices of mortgage agents for misrepresenting the amount of payments needed for a consumer to accept deferral offers at the end of their forbearance periods, and violations of Regulation X for not failing to assess consumers for all loss mitigation options and failing to provide accurate information.
Payday loan. The report found violations of a lender’s consent order when the entity failed to retain records of call recordings as required by that order to demonstrate full compliance with conduct provisions that prohibit false statements.