On July 26, 2023, the Consumer Financial Protection Bureau (CFPB) released its Summer 2023 Supervisory Highway Review describing key findings and violations identified in inspections conducted from July 2022 through March 2023. announced the light.
Findings cover a wide range of areas, including debt collection, deposits, fair lending, information technology, payday and microfinance, remittances, auto origination and servicing, and mortgage origination and servicing. The report also describes the CFPB’s efforts to assess how technology used by supervised agencies affects consumers and impacts compliance with federal law. Although specific practices may be attributed to the provision of specific financial products or services, many of the themes in each section are generally applicable and may be criticized as unfair, deceptive, or abusive. It is useful for internal evaluation of certain practices and deserves consideration. .
Auto loan and car maintenance
With respect to auto loans, the examiner found deceptive auto loan origination practices in which lenders used advertisements with loan offers depicting larger, newer, and more expensive vehicles that were not actually covered by the offers. . On the maintenance side, the unfair and fraudulent act of a vehicle mechanic to collect and retain interest on additional options built into the loan amount, even though the vehicle on which the loan was secured did not include the additional options. The action was approved by the judge. Investigators also found that servicers stopped making regular payments without giving proper warning, or required consumers to repay other debts before they could cross-secure their loans and pay off their seized vehicles. We have also identified unjust situations to do so.
Providing credit report information
Investigators uncovered numerous technical violations related to providing consumer reported information to credit bureaus. This includes failure to:
- We regularly review and update our policies and procedures to promote the accuracy and completeness of the information provided.
- We will conduct a reasonable investigation into direct disputes.
- Inform consumers that the dispute is frivolous or irrelevant.
- We will provide appropriate address-related disclosures for inaccurate notices.
The CFPB directed these agencies to revise their policies and procedures, update their equipment systems, and train their dispute resolution staff.
Examiners noted fair lending concerns regarding mortgage lenders’ management of pricing exceptions, consideration of criminal records and public assistance income in underwriting criteria. In the field of mortgage origination, examiners believe that mortgage lenders may allow pricing exceptions for competitive purposes to protected class consumers, including race, national origin, gender, age, etc. identified as low. Lenders have been criticized for enforcing pricing exception policies and procedures, failing to take corrective action to address observed disparities, failing to maintain sufficient documentation to justify exceptions; Inadequate training on pricing exceptions was criticized.
With regard to underwriting practices, the CFPB notes that the consideration of prior contact with the criminal justice system increases the risk of a range of impacts, and it is against incorporating this element into mortgage originations, auto financing, credit card offerings, and small businesses. identified concerns. lending. With respect to consideration of welfare income, examiners found instances in which a lender improperly excluded certain types of welfare income from consideration or imposed stricter standards for income earned from welfare programs. identified. The CFPB also maintains that it does not consider income for the Section 8 Housing Choice Coupon homeownership program, does not offer mortgage credit benefits, and maintains extended income continuity requirements for public assistance income. He stressed his concerns about what he was doing.
Investigators found that debt collectors continued to collect work-related medical debts even though they received information that the debts were no longer collectible under the state’s workers’ compensation law. found a violation of the Fair Debt Collection Practices Act (FDCPA). This follows the CFPB’s continued focus on issues related to health care debt collection, and its recent announcement that it is partnering with other agencies to address the impact health care debt has on consumers. is consistent with Investigators also identified situations in which debt collectors told consumers that if they paid their debts by a specified date, they would cancel the accrued interest, but did not actually waive that interest.
Examiners found the practice of assessing both non-financial funds (NSF) and credit transfer fee lines for the same transaction to be unfair. The CFPB believed that supervised bodies had controls in place to avoid charging two fees for the same transaction, but noted that system programming limitations failed to prevent this practice.
Examiners may draft language in loan agreements prohibiting lenders from revoking their consent to call, text, or email consumers about collections, or prohibit lenders from charging consumers wages. It found that it was an unjust, deceptive and abusive act, such as threatening a false collection in order to seize it. when the borrower did not have the authority to do so; Examiners also identified risks associated with a lender’s inability to determine whether a consumer is protected under the Military Lending Act before entering into a transaction.
Examiners found that each financial institution had not developed and maintained appropriate error resolution policies and procedures for money transfers. As an example, some institutions have utilized anti-money laundering policies and procedures in lieu of remittance rules policies that do not meet all remittance rule requirements.
Information technology and privacy
Investigators found that certain organizations acted unfairly by failing to implement appropriate IT security controls that could have prevented or mitigated cyberattacks. Due to the lack of controls, bad actors gained unauthorized access to consumers’ bank accounts and withdrew large sums of money, causing damage. The CFPB has directed these agencies to implement multi-factor authentication and strengthen password management practices.
The Examiner maintains that financial institutions maintain a policy of varying remuneration based on whether a product is brokered rather than self-originated, even if the brokerage product is not originated by the lender. Determined that remuneration for personnel was improperly based on the terms of the deal. The examiner also identified a technical violation of Regulation Z that the financial institution’s loan origination system was not programmed to properly round promissory note interest rates and reflect the terms of its legal obligations.
Examiners identified a number of technical infringements relating to:
- Timings and representations about timings for handling loss mitigation applications.
- Ensure that customer service representatives are fully available to the borrower and have timely access to information about the borrower’s account.
- Failed credit payment after service transfer.
- Unable to identify missing information after service transfer.
The examiner also found that the servicer’s notice of approval in Spanish lacked regulatoryly required information, even though the English notice contained the required information.
Non-bank supervisory authority
The supervisory highlights also touched on other nonbank supervisory developments, including those related to large market participants and organizations identified based on the CFPB’s risk-based analysis. The CFPB has already issued “several times” reasoned notices to initiate risk-based supervision, in some cases allowing entities to be supervised voluntarily after consultation with supervisors. said he agreed with