Recently, the Consumer Financial Protection Bureau released its Supervisory Highlights, No. 21 (Winter 2020) (“the Report”). The Report discusses findings related to many of the CFPB’s examinations regarding debt collection, mortgage servicing, payday lending, and student loan servicing that were completed between April and August 2019.
Key takeaways from the Report are as follows:
The CFPB found that “one or more debt collectors failed to disclose in their subsequent communications that those communications were from a debt collector.” It further found that debt collectors “failed to send the prescribed validation notice within five days of the initial communication with the consumer regarding collection of the debt, where required.” As a result, “the collectors revised their [FDCPA] policies and procedures, monitoring and/or audit programs, and training.”
The Report stated “that one or more servicers violated Regulation X, by failing to provide certain required loss mitigation notices, providing incomplete notices, or not providing notices within the time required by the regulation.” Such violations included “failing to notify borrowers in writing that an application was either complete or incomplete within 5 days of receiving the application;” “not provid[ing] a written notice stating the servicers’ determination of available loss mitigation options within 30 days of receiving the complete loss mitigation application;” and, also, “not providing a written notice with the required consumer information when it offered borrowers the short-term payment forbearance program based upon evaluation of an incomplete loss mitigation application.”
The violations regarding a failure to provide the required information after offering short-term loss mitigation took place after automatically granting short-term payment forbearances, based on phone conversations with borrowers in a disaster area who had experienced home damage or incurred a loss of income from the disaster. The CFPB stated that “[t]he borrowers’ conversations with the servicers constituted loss mitigation applications under Regulation X.” However, because the servicers were attempting “to handle an unexpected surge in applications due to natural disasters and occurred during a time period where the servicers were making specific efforts to address borrower needs arising from the natural disasters,” the CFPB did not issue any matters requiring attention. Further, the servicers “developed plans to enhance staffing capacity in response to any future disaster-related increases in loss mitigation applications.”
The Report also focused on the CFPB finding numerous violations of “Regulation Z, Regulation B, and unfair acts or practices” by payday lenders. These violations included the lenders failing to apply borrowers’ payments to their loans, continuing to assess interest as if the consumers had not made payments, and incorrectly treating the borrowers as delinquent. The violations also included inaccurately disclosing consumers’ APRs and charging borrowers a fee that was not authorized by their loan contracts, and which the contracts stated would be paid by the lenders, as a condition of paying, or settling, delinquent loans. Such a fee was either incorrectly described as a court cost (which the contracts would have required the borrowers to pay) or not disclosed at all. This led to a number of borrowers, ultimately, paying more than they owed.
Student Loan Servicing
The CFPB found that one or more servicers violated Dodd-Frank “by stating monthly amounts due in periodic statements that exceeded those authorized by consumers’ loan notes, where either the servicers automatically debited incorrect amounts or, for borrowers not enrolled in auto debit, the borrowers submitted an inflated payment or were assessed a late fee for failing to submit the inflated payment by the due date.” As a result, the student loan servicers “conducted reviews to identify and remediate affected consumers,” as well as instituted processes to mitigate any future errors.