On November 16, 2022, the Consumer Financial Protection Bureau (Bureau) released its Fall 2022 Oversight Highlights. The 32-page report discusses the bureau’s key investigative findings in the areas of auto maintenance, consumer reporting, credit card services, collections, deposit accounts, mortgage origination and servicing, and Payday loans between January 1st and June 30th, 2022. A summary of the notable report findings is below.
Repeat offenders upon notification. The Governing Board has set up a special unit within the Inspectorate to investigate repeat offenders, particularly those organizations and individuals who violate administrative or court orders. The repeat offender 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 close review of the company’s compliance with court or regulatory orders. Targeting repeat offenders has been and will be a top priority for Director Chopra.
car service. As before, the Bureau focused on whether consumers who prepay their car loans can receive partial refunds for ancillary products such as B. Guaranteed asset protection purchased at the time of financing. Although these products are typically purchased from auto dealers — in which case only the dealer or a third-party product custodian holds the money that should be refunded — the Bureau claimed that some auto service companies violated the federal ban on “unfair” acts or practices by ” failed[ing] to ensure consumers receive refunds,” regardless of state legal requirements. This is the second year in a row that the Governing Board has focused on this practice in Oversight Highlights. Car service providers should at least take reasonable steps at the time of a payout to ensure consumers are aware of their rights in relation to a refund, in addition to complying with state laws that may require additional measures.
The Bureau also found that service providers engaged in unfair and deceptive acts or practices by misleading consumers about approving credit modifications, duplicating consumers billing for collateral protection insurance, and activating a consumer’s starter circuit breaker, rendering the car immobilized when the Service provider mistakenly believed the consumer was overdue on a loan payment. Finally, an investigation by the Bureau found that certain service providers gave misleading information to collection calls, telling consumers that their driver’s licenses or license plates would be suspended if they didn’t pay promptly. While not specifically identified by the Bureau, such actions could also affect the Fair Debt Collection Practices Act (FDCPA) and state collections laws in cases where service providers collect their debts under a false name.
Consumer Reporting. The report found violations of the Fair Credit Reporting Act (FCRA) and Regulation V by both Consumer Reporting Companies (CRCs) – the Bureau’s term for “Consumer Reporting Agencies” under the FCRA – and by consumer reporting providers. The CFPB found that CRCs failed to process consumer complaints contesting the accuracy of their credit reports and to report those findings to the Bureau as required by the FCRA. For providers of consumer credit information, the Bureau found FCRA and Regulation V violations where, among other things, such providers inaccurately reported information to CRCs despite knowing that that information was inaccurate and failed to establish adequate written policies and procedures regarding accuracy and and integrity of information submitted to a CRC and failed to conduct appropriate investigations of direct disputes.
credit cards. The Bureau found instances where businesses failed to follow the Regulation Z billing error resolution provisions, such as: B. The requirement to resolve disputes within two full billing cycles or no later than 90 days and the requirement to conduct an appropriate investigation upon receipt of notifications of billing errors. In addition, the report cited violations where credit card issuers failed to regularly assess whether it was appropriate to lower a consumer’s APR after raising it. Regulation Z requires card issuers to revalue an account no later than six months after the rate increase.
Finally, the report identified fraudulent acts or practices by companies in the marketing, sale and maintenance of credit card ancillary products and inaccurate representations related to automated card payment services. Regarding the latter violation, the Bureau found that consumers were likely misled into thinking that registering for the card’s autopay service automatically paid their account’s minimum monthly balance, while instead paying the same fixed amount each month became. Accordingly, when the required minimum monthly payment increased, customers using the Autopay service did not pay the full amount, resulting in late fees and financing and other late fees.
Collection of debts. Collection agencies have been charged with violating the FDCPA by continuing to contact consumers after consumers stated that the communication made them feel annoyed, harassed, or abused. The investigators also found instances where collection agencies violated the FDCPA by communicating with someone other than the consumer, even though the third party’s name was similar to the consumer’s. The Bureau cited similar violations in last summer’s “Supervisory Highlights.”
deposit accounts. The manner in which institutions deal with pandemic assistance remains a top priority for the Bureau. In 2021, the Bureau conducted prioritized assessments to assess how financial institutions have handled pandemic relief funds deposited into consumer accounts. In a review, auditors identified unfairness risks at several depositories. For example, the report cites cases of entities using protected unemployment insurance or economic impact payments to settle a negative balance on an account, garnishing protected unemployment insurance or economic impact payments in violation of federal and state laws, and processing garnishments from out-of-state orders that violate applicable state law.
In particular, the Bureau emphasized the importance of state law in protecting consumer funds held in deposit accounts, stating that failure to comply with applicable state law could result in an unfair act or practice that violates the Consumer Financial Protection Act, as it did Case in a recent Bureau enforcement action.
mortgage initiation. Mortgage originating activity by regulated companies has been cited for breaching Regulation Z, where companies unlawfully cut lender fees to cover increases in settlement costs.
Separately, Regulation Z also prohibits loan agreements from containing waivers that prevent consumers from making federal claims related to their mortgage. The Bureau cited a breach where a company had a provision in its loan security agreement that waived a consumer’s right to commence or participate in a class action lawsuit. The company was required to remove the waiver and send a notice to affected consumers revoking and voiding the waiver, although federal claims may be resolved in arbitration.
Mortgage Administration. The CFPB continues its campaign against so-called ‘junk fees’. In its report, the Bureau cited mortgage servicers involved in an abusive act or practice of charging high rates for telephone payments without disclosing their existence or costs. Additionally, earlier this year, the Governing Board stated in an advisory opinion that the federal Consumer Finance Act prohibits debt collectors from charging “pay-to-pay” or convenience fees under the FDCPA.
The Bureau also found that service providers engaged in unfair acts and practices to violate the CARES Act by charging illegal fees during CARES Act forbearance (when the law prohibited them) and failing to timely requests for forbearance have complied.
Finally, the report discussed fraudulent acts or practices by mortgage servicers who misrepresented the payment amount required for a consumer to accept offers of forbearance at the end of their forbearance periods and breaches of Regulation X by not screening consumers for all loss mitigation options and because no precise information was given.
payday loan. The report found violations of a lender’s consent order when the company failed to maintain records of call recordings, as required by that order, to demonstrate full compliance with codes of conduct prohibiting false disclosures.