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From Banking and Finance Law Daily, September 6, 2018

CFPB reports on examination findings, remedial actions, and supervision program developments

By J. Preston Carter, J.D., LL.M.

The Consumer Financial Protection Bureau has published its latest Supervisory Highlights detailing key findings from its supervisory work to help industry limit risks to consumers and comply with federal consumer financial law. The current report (Issue 17) covers examinations in the areas of automobile loan servicing, credit cards, debt collection, mortgage servicing, payday lending, and small business lending. The report also highlights recent remedial actions and supervision program developments.

Automobile loan servicing. According to the report, recent auto loan servicing examinations have identified deceptive and unfair acts or practices related to billing statements and wrongful repossessions. One or more examinations observed instances in which billing statement notes required that insurance proceeds from a total vehicle loss be applied as a one-time payment to the loan with any remaining balance to be collected according to the consumer’s regular billing schedule. However, in some instances after consumers experienced a total vehicle loss, the servicers sent billing statements showing that the insurance proceeds had been applied to the loan payments so that the loan was paid ahead and that the next payment on the remaining balance was due many months or years in the future. Servicers then treated consumers who failed to pay by the next month as "late" and, in some cases, also reported the negative information to consumer reporting agencies.

The report also notes that auto servicers may offer formal extension agreements that allow consumers to forbear payments for a certain period of time or may cancel a repossession order once a consumer makes a payment. However, examiners found instances in which auto servicers repossessed vehicles after the repossession was supposed to be cancelled.

Credit cards. Credit card issuers must periodically re-evaluate interest rate increases. However, examiners found that some issuers: (a) failed to reevaluate all eligible accounts, (b) failed to consider the appropriate factors when re-evaluating eligible accounts, or (c) failed to appropriately reduce the rates of accounts eligible for rate reduction.

Debt collection. Examinations of larger consumer debt collectors identified violations of the Fair Debt Collection Practices Act, such as failing to obtain and mail debt verification before engaging in further collection activities.

Mortgage servicing. Recent mortgage servicing examinations observed unfair acts or practices relating to conversion of trial modifications to permanent status and initiation of foreclosures after consumers accepted loss mitigation offers. Examiners also identified unfair acts or practices when institutions charged consumers amounts not authorized by modification agreements or by mortgage notes.

Payday lending. Examiners observed entities engaging in deceptive acts or practices in their payday loan collection letters. Some entities represented in their letters that they will, or may have no choice but to, repossess consumers’ vehicles if the consumers fail to make payments or contact the entities. This was despite the fact that these entities did not have business relationships with any party to repossess vehicles and, as a general matter, did not repossess vehicles. Others debited consumers’ accounts without valid authorization by using account information previously provided for other purposes.

Small business lending. Examinations observed that some institutions collect and maintain (in useable form) only limited data on small business lending decisions. The report states that limited availability of data could impede an institution’s ability to monitor and test for the risks of Equal Credit Opportunity Act violations through statistical analyses.

Remedial actions. The report notes the Bureau’s enforcement action against Citibank, N.A., for violations of the Truth in Lending Act and Reg. Z. by failing to properly and periodically re-evaluate and reduce the Annual Percentage Rates applicable to credit card accounts that had been subject to certain rate increases between 2011 and 2017 and by failing to have in place reasonable written policies and procedures to do so. Also, the Bureau entered into a consent order with payday lender Triton Management Group, Inc., for violating the Consumer Financial Protection Act and the disclosure requirements of TILA by failing to properly disclose finance charges associated with their auto title loans in Mississippi.

Supervision program developments. The Bureau issued a final rule to help mortgage servicers communicate with certain borrowers facing bankruptcy. The rule gives mortgage servicers a clearer and more straightforward standard for providing periodic statements to consumers entering or exiting bankruptcy by amending the Bureau’s 2016 mortgage servicing rule. In fair lending developments, the report notes Bureau action regarding Home Mortgage Disclosure Act implementation and a new data submission platform. Also, the Federal Financial Institutions Examination Council (FFIEC) members, including the Bureau, announced new FFIEC Home Mortgage Disclosure Act (HMDA) Examiner Transaction Testing Guidelines for all financial institutions that report HMDA data.

In its press release announcing the report, the Bureau said it expects that publication of Supervisory Highlights will continue to aid Bureau-supervised entities in their efforts to comply with federal consumer financial law.

Companies: Citibank, N.A.; Triton Management Group

MainStory: TopStory CFPB CommunityDevelopment ConsumerCredit CreditDebitGiftCards DebtCollection EnforcementActions EqualCreditOpportunity Loans Mortgages TruthInLending UDAAP

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