On April 21, 2015, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) filed a complaint and consent order against Green Tree Servicing, LLC, a mortgage servicing company. The joint CFPB and FTC complaint against Green Tree represents the first time the agencies have filed a joint enforcement action. The complaint also reflects the agencies' ongoing interest in all aspects of mortgage servicing.
Green Tree, as described in the complaint, engages with borrowers, processes payments, and administers short sale and foreclosure relief or "loss mitigation" programs provided by the owner of the loans it services. The agencies allege that Green Tree violated consumer protection laws governing mortgage servicing and debt collection practices.
The CFPB and the FTC have operated under a Memorandum of Understanding (MOU) since January 23, 2012. On March 6, 2015, the agencies re-signed the MOU as part of a continued effort to coordinate and avoid the duplication of enforcement activity. The agencies have engaged in coordinated action, such as announcing a sweep against deceptive marketing related to disclosure relief in 2014.
The agencies' joint complaint likely reflects an increase in coordination between the CFPB and the FTC. The agencies also pool strategic information about companies they are planning to investigate, communicate about upcoming rulemakings and industry guidance, analyze consumer complaints filed in the agencies' respective databases, and share nonpublic information about companies.
In the complaint, the CFPB and FTC allege that Green Tree engaged in unfair or deceptive practices in violation of the Federal Trade Commission Act (FTC Act) and the Consumer Financial Protection Act (CFPA). The agencies also allege that Green Tree violated the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA), and the Real Estate Settlement Procedures Act (RESPA) and its implementing regulation, Regulation X.
The agencies allege that Green Tree "delayed or deprived" close-to-foreclosure borrowers of the benefits of loss mitigation programs by demanding payments before providing loss mitigation options; failed to honor in-process mitigations; delayed short sales; harassed overdue borrowers; and charged deceptive convenience fees. The complaint also enumerates alleged violations of the debt collection rules under the FDCPA, including calling consumers between seven and twenty times per day; speaking with customers multiple times in a day; immediately calling a customer back after a call is terminated; leaving multiple voicemail messages for consumers in the same day; calling customer at inconvenient times or while the customer is at work; and using threatening or abusive language during calls.
The complaint sets out the alleged violations under the authority of the FTC Act and CFPA:
Deceptive acts and practices regarding:
- Account terms and status;
- Requirements for loan modification consideration;
- Reviewing and responding to short sale requests;
- Payment collection threats; and
- Available payment methods.
Unfair acts and practices regarding:
- Unauthorized withdrawals;
- In-Process loan modifications; and
- Contacting consumers' place of employment.
Under the agencies' stipulated consent order, Green Tree will pay $48 million in restitution—$18,000,000 for alleged misrepresentations relating to payment methods that entail a convenience fee and $30,000,000 for alleged violations stemming from short sales and in-process loan modifications. In addition, Green Tree will be required to pay a civil money penalty of $15,000,000 to the CFPB.
Further, in addition to standard injunctive relief, Green Tree will be required to "establish and maintain a comprehensive data integrity program" regarding its services. This program will require Green Tree to assemble data portfolios and engage in on-going testing and error correction to ensure that the information in the portfolios is accurate. The data integrity program will to be assessed by an independent third party every two years, for a full period of eight years.
The consent order also includes protective measures for consumers whose loans are sold or transferred. Under the consent order, whenever Green Tree is involved in the sale or transfer of servicing rights, it will need to meet loan-servicing requirements to ensure that the buyer or transferee will honor loss mitigation agreements and review outstanding loss mitigation requests. Green Tree will also be required to establish and implement a home preservation plan to identify and review potentially affected customers for loss mitigation options, solicit loss mitigation applications, and stop pending foreclosure sales to the extent necessary to permit the consumers to be solicited and considered for loss mitigation.
The CFPB's and FTC's joint complaint reflects a new level of cooperation between the agencies. Nonbanks in the consumer financial services sector need to manage the goals and expectations of these two government agencies when managing risk and building compliance programs.