The Consumer Financial Protection Bureau (CFPB) recently released its ninth supervisory highlights report, which includes new findings from its supervisory program from May – August 2015. Overall, the report focuses on examination of the student loan servicing, mortgage origination and servicing, consumer reporting, and debt collection markets. In addition, the report highlights the CFPB’s recent revisions to the appeal process for examinations.
In the report, the CFPB highlighted the following findings:
- While furnishers of information under the Fair Credit Reporting Act (FCRA) generally have adequate policies and procedures for the accurate reporting of credit accounts, the policies were lacking in the area of deposit accounts.
- With regard to consumer disputes and investigations under the FCRA, the CFPB noted that furnishers did not always provide notice of the results of investigations of direct disputes to the consumers, did not monitor or track direct and indirect disputes they received, and failed to distinguish disputes from other communications (e.g., complaints) they received.
- The CFPB directed these entities to update and implement dispute-handling policies and procedures and to create a coordinated monitoring system in order to ensure all direct and indirect disputes of deposit information are tracked, investigated and resolved completely within the timeframes required.
- In connection with its supervision and enforcement over debt collectors under the Fair Debt Collection Practices Act (FDCPA), the CFPB noted that it had observed that collectors did not always state during subsequent phone calls that the calls were from debt collectors. The CFPB directed the debt collectors to improve training with regard to the FDCPA’s requirement to provide these disclosures.
- When consumers made verbal requests to debt collectors regarding phone calls, such as a request not to be called at work, the debt collectors’ agents would note the request in one of several places in the account notes, but did not remove or block the affected telephone numbers in their dialer systems. The CFPB directed the collectors to improve their training so agents would annotate accounts and check for dialing restrictions in a consistent manner.
- The CFPB directed debt collectors to establish and implement reasonable written policies and procedures as required by Regulation V.
- Certain mortgage servicers were found to be violating the FDCPA when they charged fees for taking mortgage payments over the phone to borrowers whose mortgage instruments did not expressly authorize collecting such fees and/or resided in states that do not expressly permit collecting such fees.
- Certain mortgage servicers were found to be violating the FDCPA when they sent debt validation letters listing debt amounts that the servicers could not verify as accurate. The servicers had listed estimates of the debt amounts rather than the actual amounts the borrowers owed. The CFPB advised that servicers should list only accurate and verifiable debt amounts in their debt validation letters.
- Certain mortgage servicers were found to be violating the FDCPA when they failed to send debt validation letters to borrowers within five days after the initial communications about the debts, where the borrowers’ loans were in default when servicing rights were obtained.
Student Loan Servicing
- The CFPB criticized student loan servicers that allocate partial payments proportionally to multiple student loans, finding that this policy may result in separate fees for each loan and, in some cases, the total amount of fees charged was higher than if the servicer allocated the payment in another manner. The CFPB recommended that servicers allocate partial payments among current loans to the loan with the highest interest rate first, and then the loan with the next-highest interest rate. In addition, the CFPB emphasized that the servicers should clearly inform borrowers of their ability to direct payments to individual loans.
- The CFPB found servicers were unfairly processing automatic debits early, which could trigger unexpected overdraft charges because a borrower may not have had sufficient funds in time for the early withdrawal.
- Similarly, when automatic payments fell on a weekend or bank holiday, payments typically were processed on the next business day, causing additional interest to accrue. The CFPB found that servicers should be crediting payments back to the due date when this delay occurred - a practice that would reverse the additional interest accrual.
- Some student loan servicers for Department of Education loan notes were representing to consumers that late fees may be charged even though the Department of Education’s current policy is to not allow the charging of any late fees. The CFPB felt that such representations were misleading to the borrowers.
- The CFPB also noted that confusion remained for borrowers who attempted unsuccessfully to pay off loans with lump-sum payments. The CFPB encouraged servicers to continue to communicate with borrowers during paid-ahead periods so borrowers are aware when a remaining balance exists, which can help borrowers seeking to fully pay off their loans understand that they still owe money.
Revised Appeal Process
The CFPB also released a revised appeals process for any report or exam on or after Sept. 21, 2015. Changes to the process, according to the report, include the following:
- Expressly allowing members of the Supervision, Enforcement, and Fair Lending (SEFL) Associate Director’s staff to participate on the appeal committee, replacing the existing requirement that an Assistant Director serve on the committee
- Permitting an odd number of appeal committee members in order to facilitate resolution of appeals
- Limiting oral presentations to issues raised in the written appeal
- Providing additional information on how appeals will be decided, including the standard the committee will use to evaluate the appeal
- Preventing an institution from appealing adverse findings or an unsatisfactory rating related to a recommended or pending investigation or public enforcement action until the enforcement investigation or action has been resolved
Changing the expected time to issue a written decision on appeals from 45 to 60 days