On June 30, the CFPB released its twelfth edition of Supervisory Highlights providing supervisory observations from its examiners in the areas of auto origination, debt collection, mortgage origination, small-dollar lending, and fair lending. In the area of auto origination, examiners determined that one or more institutions engaged in deceptive advertising practices related to the benefits of gap coverage products and the effects of payment deferrals, and failed to implement adequate compliance management systems. In the area of debt collection, examiners found that debt sellers sold thousands of debts that were unsuitable for sale because: (i) the accounts were in bankruptcy; (ii) the debts were the product of fraud; or (iii) the accounts had been paid in full. CFPB examiners further observed violations of the Fair Debt Collection Practices Act (FDCPA), determining that at least one collector falsely represented to consumers that a down payment was necessary in order to establish a repayment arrangement, when no such down payment was required by the collectors’ policies and procedures. For mortgage origination, CFPB examiners focused on compliance with provisions of CFPB’s Title XIV rules, the Truth in Lending Act (TILA), as implemented by Regulation Z, and the Real Estate Settlement Procedures Act (RESPA), as implemented by Regulation X, disclosure provisions, and other applicable consumer financial laws. According to the report, CFPB examiners found that one or more institutions violated TILA by miscalculating loan financing amounts, which resulted in a negative finance charge and an amount financed that was greater than the stated loan amount. The report also highlights (i) violations of RESPA’s prohibition against improper referral arrangements; (ii) failure to implement policies and procedures and to provide sufficient training related to the Fair Credit Reporting Act’s requirement to provide consumers with notice of any adverse action, such as denial of credit; (iii) failure to properly disclose interest on interest-only loans in violation of TILA; and (iv) weak oversight of compliance management systems. In the area of small dollar lending, CFPB examiners assessed compliance with the Electronic Fund Transfer Act (Regulation E), and found that the installment loan agreements of one or more entities failed to set out an acceptable range of amounts to be debited because they contained ambiguous or undefined terms in their descriptions of the upper and lower limits of the range. Finally, regarding fair lending, the report covers violations relating to the Home Mortgage Disclosure Act (Regulation C) and the Equal Credit Opportunity Act (Regulation B).
According to the report, the CFPB’s supervisory resolutions from January 2016 through April 2016 resulted in more than 257,000 consumers receiving approximately $24.5 million in restitution.