On May 2, the Consumer Financial Protection Bureau (CFPB or Bureau) released its Supervisory Highlights report on legal violations discovered during examinations in the second half of 2021.

The Supervisory Highlights detail issues identified by CFPB examination teams across a wide number of segments of the consumer financial services industry. Summarized below are those issues identified in the areas of auto servicing, consumer reporting, credit card account management, debt collection, deposits, mortgage origination, prepaid accounts, remittances, and student loan servicing.

Auto Servicing

1. The CFPB sees wrongful repossessions everywhere. Per the report, recent examinations found that servicers engaged in unfair acts or practices when they repossessed vehicles after consumers took action that should have prevented the repossession. The CFPB required servicers to enhance their procedures, including enhancing timely communications with repossession agents, and remediating consumers. This is yet another emphasis point on this issue, about which the CFPB released a bulletin earlier this year.

2. Final payment amounts after deferral. The Bureau returned to this issue again, which first appeared in the “Prioritized Assessment” special edition of Supervisory Highlights in early 2021. Specifically, the Bureau asserted that auto finance companies used “imprecise conditional statements,” such as stating that a final payment “may be larger” (emphasis added). The CFPB required servicers to update disclosure language and practices, such as affirmative outreach as the final payment date approaches, including estimated final payment amounts in written correspondence confirming a deferral, or developing online calculators to calculate final payment amounts.

3. Failing to trigger refunds of GAP protection after a repossession. The Bureau continued its emphasis on ancillary product refunds by stating that auto finance companies failed to request refunds from GAP providers for unearned portions of the cost of GAP coverage when a vehicle was repossessed, and then failing to apply the refund to the deficiency balance.

Consumer Reporting

1. The CFPB sees reasonable investigations — or the lack thereof — as a continuing problem. The CFPB specifically highlights the practice of some consumer reporting agencies (CRA) to simply delete disputed tradelines, rather than investigate them (reasonably). Another practice highlighted in the report: failing to review and consider all relevant information submitted by the consumer when conducting reasonable dispute investigations.

2. The CFPB asserts that CRAs are slow to provide prompt notice of a dispute to the furnisher. CRAs are required to send a notification of a dispute to furnishers within five business days of receiving the dispute — but the CFPB says it uncovered failures to do so in several examinations.

3. In addition, the CFPB found issues with CRAs providing notices to consumers. Not just in providing notice to furnishers, the CFPB also found that CRAs weren’t notifying consumers promptly of the results of a dispute reinvestigation.

4. And when CRAs did provide notice to consumers, the CFPB found that those notices weren’t clear. Per the report, examiners found that CRAs’ statements of results omitted material information necessary to understand the results of the investigation. Examiners also found that in some cases the statement of results was incorrect — stating, for example, that disputed information had been corrected when, in fact, the disputed information was verified as accurate by the furnisher and not materially changed by the CRA.

5. The CFPB found that some furnishers do not have reasonable policies and procedures in place concerning accuracy and integrity of furnished information. The policies and procedures must be appropriate to the nature, size, complexity, and scope of each furnisher’s activities. The CFPB required furnishers to consider and incorporate, as appropriate, the guidelines of Appendix E to Regulation V when developing their policies and procedures

Credit Card Account Management

1. The CFPB believes it found Truth in Lending (Regulation Z) violations related to Fair Credit Billing Act disputes. Specifically, the CFPB stated that it found errors in every aspect of handling such disputes:

  • Failing to mail or deliver written acknowledgments to consumers within 30 days of receiving a billing error notice.
  • Failing to resolve disputes within two complete billing cycles after receiving a billing error notice.
  • Failing to reimburse consumers after billing errors were determined to have occurred as consumers asserted.
  • Failing to mail or deliver correction notices to consumers resolving billing errors in their favor.
  • Failing to conduct reasonable investigations after receiving billing error notices due to human errors and system weaknesses.
  • Providing inaccurate explanations to consumers as to why the creditor denied the consumers’ billing error claims in whole or part.
  • Failing to provide consumers with the evidence the creditor relied upon to determine no billing error occurred.The CFPB required issuers to make system improvements, perform enhanced monitoring, create additional controls for consumer complaints, and revise applicable policies and procedures.

2. Failure to re-evaluate annual percentage rates (APRs) on credit cards under the CARD Act. The CFPB reports that this seems to happen most often with creditors’ acquisitions of pre-existing credit card accounts from other creditors. The CFPB wants to see creditors removing the inappropriate factors when determining the applicable APR following the re-evaluation of a rate increase and revise their relevant policies and procedures.

3. The CFPB sees deceptive advertising of interest-free financing. Specifically, when creditors advertise the interest-free financing feature of their credit card without adequately disclosing the preconditions for obtaining the financing.

Debt Collection

1. The CFPB believes that debt collectors misrepresent consumers’ responsibilities in cases of identity theft. The CFPB reports that examiners found instances in which debt collectors violated this section by misrepresenting or implying to consumers that they were responsible for paying charges on their accounts that were incurred as the result of fraudulent activity. The CFPB might also see this as a sustained deviation from debt collectors’ policies and procedures.

2. The CFPB alleges debt collectors fail to refund overpayments in a timely manner. Per the report, these practices caused or were likely to cause substantial injury to affected borrowers as consumers lost the ability to use funds for an extended period of time. Covered collection agencies where this practice was discovered will have to report on remedial measures, including issuing full refunds to consumers, revising their policies and procedures, and strengthening their monitoring to ensure credit balances are timely refunded.

Deposits

1. Too many holds on mobile check deposits. One area the CFPB identified as a consumer harm is when financial institutions charge a consumer overdraft fees because the institutions failed to lift the initial automatic holds on the amounts of mobile check deposits after an additional suspicious deposit hold was placed on the account. The CFPB wants to see revised policies and procedures governing holds controls to monitor for and detect instances of duplicate holds.

2. The CFPB alleges some financial institutions do not perform robust enough investigations of errors. In many cases, financial institutions did not perform an investigation because the consumer failed to submit an affidavit; however, the reports asserts that financial institutions cannot require a consumer to file a police report or other documentation as a condition of initiating or completing an error investigation.

3. Some financial institutions did not provide consumers with notice of revocation of provisional credit. In cases where consumers filed error claims stating that checks deposited at ATMs in specific amounts were not properly credited to their accounts, the CFPB alleges that financial institutions violated Regulation E by failing to state that they would be debiting the excess amounts originally provisionally credited from the consumers’ accounts.

Mortgage Origination

1. Some mortgage originators may not have asked for sufficient documentation for changed circumstances. The lenders claimed that the rush appraisals, which led to the appraisal rush fees, were requested by consumers. However, in each instance, the lender failed to maintain sufficient documentation evidencing the consumer’s request of the rush appraisals. In certain instances, the lenders’ documentation included only a checked box indicating the consumer requested the rush appraisal, but there was no other evidence retained reflecting this occurred.

2. The CFPB believes that some disclosures failed to reflect the terms of legal obligations. The CFPB reported this specifically on closing disclosures that did not reflect the legal obligation between the parties. The problem might be a software one; some software used a rounding method that is different from the method used in the corresponding promissory notes. The software automatically rounded up to the nearest 1/8%; the promissory note’s instructions, however, were to round to the nearest 1/8% — up or down. This practice resulted in closing disclosures that do not reflect the terms of the legal obligation between the parties.

Prepaid Accounts

1. Financial institutions might not be submitting prepaid account agreements to the CFPB. This is a requirement set forth in Regulation E, which says that these prepaid account agreements must be submitted to the CFPB on a rolling basis, no later than 30 days after an issuer “offers, amends, or ceases to offer any prepaid account agreement.”

2. The CFPB alleges some financial institutions failed to honor valid stop-payment requests. Specifically oral stop-payment requests. Regulation E states that a consumer may stop payment of a preauthorized electronic fund transfer from the consumer’s account by notifying the financial institution orally or in writing at least three business days before the scheduled date of the transfer. The CFPB asserts that some financial institutions do not follow the statute. The CFPB wants to see corrected processes to allow for stop-payment requests received orally or in writing, regardless of where the payment originated.

3. Financial institutions may not always communicate error resolutions to consumers. Several examined entities failed to include a statement noting the consumer’s right to request the documents that the institution relied on in making its determination after determining no error or a different error occurred as part of the report of the results.

Remittances

1. Reported transfer speeds may have been deceptive. Some companies used words like “instant” and “30 second” in describing transfer speeds, even when those transfers may not be completed either instantly or within 30 seconds. In some cases, the CFPB found that transfers could take as much as an additional 48 hours.

2. The CFPB alleges several instances of transfer account agreement waiver violations. What the CFPB reports in its Spring Highlights is multiple instances where remittance transfer service agreements with consumers violated the Electronic Funds Transfer Act’s (EFTA) prohibition on waivers of rights conferred or causes of action created by EFTA. Per the EFTA, “[n]o writing or other agreement between a consumer and any other person may contain any provision which constitutes a waiver of any right conferred or cause of action created by this subchapter.”

3. The CFPB asserts disclosure and timing issues on receipts for remittance transfers. According to the report, examined institutions violated the Remittance Rule by failing to disclose on the remittance transfer receipts the date the funds are available to the designated recipient. The institutions disclosed when the funds were delivered to the designated recipient’s bank, but not the date on which the funds would be available to the recipient. Further, the CFPB believes institutions violated the rule in instances where they failed to issue receipts until after the funds were successfully delivered to the intended recipients.

4. No written policies or procedures. In what can be seen as a common refrain throughout the report, in most cases where examined institutions failed to meet the CFPB’s expectations, it was in cases where policies and procedures either weren’t robust enough or nonexistent.

5. Institutions failed to provide notice of the results of error investigations. Examiners also found that institutions failed to provide refunds in the amounts needed to resolve the errors within one business day, or as soon as reasonably practicable, after receiving the sender’s instructions regarding the appropriate remedy, as is required.

Student Loan Servicing

1. The CFPB alleges deceptive advertising. Examiners found that servicers engaged in unfair acts or practices by failing to make incentive payments that they offered in advertisements and agreed to make in the relevant contracts with consumers.

2. Refunds to consumers weren’t timely. Examiners found that servicers engaged in unfair acts or practices by failing to issue timely refund payments in accordance with the payment schedules in loan modifications. Examiners were concerned because consumers relied on the specific terms described in the modification agreement.

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Photo of Stefanie Jackman Stefanie Jackman

Stefanie devotes her practice to assisting financial services institutions facing state and federal government investigations and examinations, counseling them on complex compliance issues, as well as defending them in individual and class action lawsuits. Stefanie represents clients across the financial services industry, including…

Stefanie devotes her practice to assisting financial services institutions facing state and federal government investigations and examinations, counseling them on complex compliance issues, as well as defending them in individual and class action lawsuits. Stefanie represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party service providers, health care and medical revenue cycle service providers, credit and prepaid card companies, auto lenders, and fintechs. She regularly advises her clients on issues arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, the FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA.

In addition to her litigation and government investigations work, Stefanie focuses a significant portion of her practice on providing compliance-related advice to her clients. She regularly counsels clients on conducting compliance assessments relating to their debt collection, credit reporting and dispute resolution processes, fair lending and underwriting, and vendor oversight, as well as the functionality of their overall compliance management system. Stefanie also brings her litigation and enforcement experience to bear in assisting clients in designing new products and processes, including product structuring, advertising, online application flows, underwriting, and servicing-related strategies.

Photo of Chris Willis Chris Willis

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending…

Chris is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He advises financial services institutions facing state and federal government investigations and examinations, counseling them on compliance issues including UDAP/UDAAP, credit reporting, debt collection, and fair lending, and defending them in individual and class action lawsuits brought by consumers and enforcement actions brought by government agencies.

Chris also leverages insights from his litigation and enforcement experience to help clients design new products and processes, including machine learning marketing, fraud prevention and underwriting models, product structure, advertising, online application flows, underwriting, and collection and loss mitigation strategies.

Chris brings a highly practical focus to his legal advice, informed by balancing a deep understanding of the business of consumer finance and the practical priorities of federal and state regulatory agencies.

Chris speaks frequently at conferences across the country on consumer financial services law and has been featured in numerous articles in publications such as the Wall Street Journal, the New York Times, the Washington PostAmerican BankerNational Law JournalBNA Bloomberg, and Bank Safety and Soundness Advisor.

Photo of Keith J. Barnett Keith J. Barnett

Keith Barnett is a litigation, investigations (internal and regulatory), and enforcement attorney with more than 15 years of experience representing clients in the financial services and professional liability industries.

Photo of Mark Furletti Mark Furletti

Mark is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He focuses on federal and state consumer and small business lending and payments laws, including those that apply to payment cards, buy-now-pay-later transactions, vehicle-secured loans, lines of credit, unsecured…

Mark is the co-leader of the Consumer Financial Services Regulatory practice at the firm. He focuses on federal and state consumer and small business lending and payments laws, including those that apply to payment cards, buy-now-pay-later transactions, vehicle-secured loans, lines of credit, unsecured loans, and deposit products. He counsels providers of consumer and small business financial services, including banks, on regulatory compliance, and defends them in class action litigation and government supervisory and enforcement matters. He also counsels purchasers of merchant receivables, companies that specialize in online small business lending, and companies that interact with their customers electronically or that set up recurring billing arrangements with their customers.

Mark regularly provides guidance on electronic payments and payment network rules, electronic contracting and mobile commerce, online banking, retail installment sales, preparing for examinations by the Consumer Financial Protection Bureau (CFPB), responding to CFPB supervisory requests (including so-called PARR letters), Article 9 of the Uniform Commercial Code, lease-purchase transactions and consumer protection laws, such as the Telephone Consumer Protection Act (TCPA), Truth in Lending Act (TILA), Fair Credit Reporting Act (FCRA), Equal Credit Opportunity Act (ECOA), Electronic Funds Transfer Act (EFTA), Electronic Signatures in Global and National Commerce Act (E-SIGN), and statutes prohibiting unfair, deceptive, and abusive acts and practices.

He is the co-chair of the American Bar Association’s (ABA’s) National Institute on Consumer Financial Services Basics. He previously served as co-chair of the Electronic Financial Services Subcommittee of the ABA’s Consumer Financial Services Committee.

Previously, Mark worked for the Federal Reserve Bank of Philadelphia for several years, during which he wrote more than 15 articles on consumer credit and payments topics and advised those crafting regulations on consumer credit and consumer payments issues. One article, “The Debate Over the National Bank Act and the Preemption of State Efforts to Regulate Credit Cards,” 77 Temple L. Rev. 425 (2004), was named best student article by the American College of Consumer Financial Services Lawyers. Other published articles include “Credit Card Pricing Developments and Their Disclosure,” 13 J. of Fin. Transformation 5 (2005).

Mark also worked as a business consultant, assisting the nation’s largest retail banks and credit card lenders with customer strategy issues, and as a manager at one of the largest credit card issuers in the United States.