The CFPB published its Winter Supervisory Highlights last week, highlighting examinations across various financial products that were conducted between September 2015 and December 2015. The Report highlights key findings made by the CFPB and provides insight into the current focus of examiners. The Report makes clear that the CFPB remains concerned with credit reporting issues involving depository accounts and that supervision of the student loan servicing market remains a priority. The Report also makes clear that where there is no specific regulatory authority, the CFPB will fall back on its UDAAP (unfair and deceptive practices) umbrella to regulate as it deems necessary. Good news for debt collectors and mortgage servicers, the primary focuses of the Report are credit reporting and student loan servicing. The CFPB noted the following issues worthy of mention:
CREDIT REPORTING DEPOSITORY ACCOUNTS
- Banks and Credit Unions continue to struggle with accurately furnishing information to nationwide specialty consumer reporting agencies and specifically, with regard to depository accounts. As we indicated in a prior blog post, the CFPB continues to be concerned with the furnishing and reporting of information related to deposit accounts. The Report again emphasizes the need for banks and credit unions to implement reasonable written policies and procedures regarding the accuracy and integrity of the information they are furnishing as to deposit accounts and promptly update information they determine is incomplete or inaccurate.
- The Report also indicates that examiners are concerned that specialty consumer reporting agencies are not adequately overseeing furnishers.
- Debt collectors may want to review their data migration systems and employee training regarding cease and desist requests. The Report notes that examinations found at least one debt collector who contacted consumers after receiving written cease and desist requests. The report attributed the failure to data migration errors and from mistakes during manual data entry.
- The Report also noted that specific to student loan collection, their examiners found in at least one examination, debt collectors falsely threatening garnishment.
STUDENT LOAN SERVICING
- As to student loan servicers, the Report makes clear that student loan servicing is going to be an emphasis for the CFPB in coming months. According to the CFPB news release, “[t]he CFPB has made it a priority to police this market so that borrowers ae not treated unfairly or illegally dead-ended into default.” Significant to the Report:
- The CFPB examiners found unfair practices in violation of Dodd Frank where one or more servicers auto defaulted both the borrower and the co-borrower if the other filed bankruptcy. The CFPB concluded that the “auto-defaults were unfair where the whole loan due clause was ambiguous on this point because reasonable consumers would not likely interpret the promissory notes to allow their own default based on a co-debtor’s bankruptcy.” Supervisory Highlights, p. 16 (10th Ed. Winter 2016).
- The CFPB identified issues with loan conversions, suggesting that interest rates were migrated inaccurately by some loan servicers.
- The CFPB identified weaknesses with loan servicers’ policies and procedures for credit reporting. Particularly, the CFPB examinations noted insufficient policies and procedures regarding record retention, internal controls, audits and testing, and technology to furnish information accurately to consumer reporting agencies.
Banks and credit unions should pay close attention to the volume of comments being provided by the CFPB concerning credit reporting and depository accounts. This is the second consecutive Supervisory Highlight edition to note the issue and the CFPB has additionally issued a Compliance Bulletin this year on the subject.