During these trying and unprecedented times, many financial institutions are struggling with limited staff and resources while trying to provide the services promised to their customers. Unfortunately, even as we are trying to make accommodations to those customers, there are no breaks being handed out by the examiners. Regulatory examinations are still being scheduled and completed remotely. And as many are aware, this often increases the man hours required to provide documentation in this manner. As always, there is intense scrutiny on current practices and a list of “hot topics” of criticism for the examination period.
On September 4, the CFPB released its September Issue 22 Summer 2020 Supervisory Highlights, which detailed its supervisory and enforcement actions. Like the February Issue 20 Winter 2020 reporting, Issue 22 Summer highlights still included issues with Payday Lending, Debt Collection and Mortgage Servicing. Additional Summer findings and criticisms included Consumer Reporting, Deposits, and Fair Lending.
The reports discussed violations of the CFPA for payday lenders. These violations were comprised of misleading representations for advertisements included on websites and mailed advertisements regarding the ability to apply online, false representation regarding no credit check requirements, deceptive acts for sending collection letters with false threats of lien placements, late payments fees, and violations in advertisements including missing required disclosures when triggering terms are used.
The report states that examiners found one or more debt collectors that made false threats regarding litigation, false representation of credit reporting, and falsely represented that they operated or were employed by a credit reporting agency.
The Bureau cited violations of Regulation Z and Regulation X that included failure to provide periodic statements to consumers in bankruptcy. In addition, flood insurance management was a target for criticism for failure to have a reasonable basis to charge borrowers for force-placed insurance and failure to timely refund charges for overlapping insurance. Other servicing violations included repayment options in annual escrow statements, violations for servicing transfers, and failing to provide appropriate disclosures for loan ownership transfers.
The Bureau cited violations of the FCRA’s requirement that lenders establish a permissible purpose before they obtain a consumer credit report. Additionally, the report noted instances where furnishers failed to conduct a reasonable investigation of account information for direct and indirect disputes. Examiners also found that furnishers failed to establish and follow reasonable procedures to obtain and report the correct date of first delinquency from their clients.
The Bureau’s report included violations related to Regulation E and Regulation DD. These violations included where institutions, through deposit account agreements, required waivers of consumers error resolution and stop payment rights. There were violations noted regarding reliance on incorrect dates to assess the timeliness for resolving disputes and providing required notices. There was also one or more financial institutions that advertised bonuses for consumers who failed to provide the promised bonuses in instances where consumers met the requirements.
The report noted instances where examiners cited violations of ECOA, including intentionally redlining majority-minority neighborhoods and failing to consider public assistance income when determining a borrower’s eligibility for mortgage modification programs.
In addition to the notice violations and exam criticisms, the report also included highlights of the Bureau’s recently issued rules and guidance, including the various responses to the CARES Act and the Covid-19 pandemic.
Unfortunately, while most examinations are being completed remotely, there is no relief for lack of controls, monitoring, training, and review of compliance functions. It also appears that the current examination process is geared towards current consumer needs and practices, taking into consideration the special needs given today’s pandemic environment. Therefore, as you implement new processes and procedures to accommodate consumers in their time of need, do complete appropriate risk assessments for any newly implemented platforms, conduct proper training, and ensure there is appropriate monitoring to mitigate the risk of potential violations.