On March 8, the Consumer Financial Protection Bureau (CFPB) released a special edition of its Supervisory Highlights report, focusing once again on fees assessed in relation to bank account deposits, auto loan servicing, mortgage loan servicing, payday lending, and student loan servicing. As the Supervisory Highlights reveal, the CFPB continues to scrutinize and challenge fees across the consumer financial services industry, consistent with much of the industry’s experience in 2022 and the subject of the CFPB’s prior November report, discussed here. The CFPB’s most recent report focuses on findings made by CFPB Examiners during examinations conducted between July 1, 2022, and February 1, 2023.
- Examiners determined that some institutions assessed overdraft fees by authorizing a debit that was made with a positive balance, but later charging an overdraft fee because of intervening transactions that were processed before the debit settled (known as authorize positive, settle negative (APSN) practices).
- Examiners identified instances in which institutions assessed APSN overdraft fees using the consumer’s available balance or ledger balance for fee decisioning. According to the CFPB, consumers could not reasonably avoid the substantial injury, irrespective of account-opening disclosures. As a result, the institutions were directed to cease charging APSN overdraft fees and to conduct lookbacks and issue remediation.
- The CFPB has previously issued guidance about APSN practices discussed here.
- Examiners identified instances in which some institutions charged customers multiple non-sufficient funds (NSF) fees for a single transaction against an insufficient balance in the consumer’s account, potentially as soon as the next day.
- The CFPB acknowledged that the institutions are making appropriate restitution to consumers. CFPB examiners have reviewed NSF fee assessment at numerous institutions, and found that many institutions have decided to forego NSF fees altogether.
- The CFPB’s guidance on NSF fees is similar to prior FDIC guidance.
Auto Loan Servicing:
- Examiners asserted that some servicers charged late fees that exceeded the permissible amounts stated in borrowers’ contracts or charged late fees to consumers after vehicle repossessions and loan acceleration, even though a monthly payment was no longer due.
- Examiners also asserted that some servicers charged inflated estimated repossession fees.
- According to examiners, this resulted in some consumers potentially being dissuaded from recovering their vehicles because the servicers estimated the repossession fee would be $1,000 when it was actually much less.
- Examiners identified payment processing fees being charged in amounts that exceeded servicers’ costs for processing payments.
- According to examiners, approximately 90% of payments made by consumers incurred a pay-to-pay fee. The servicers received over half the amount of these fees from third-party payment processors as incentive payments, totaling millions of dollars for the servicers from the CFPB’s perspective.
Mortgage Loan Servicing:
- Examiners identified instances of mortgage servicers charging the highest late fee amount allowed by relevant state laws, even when homeowners’ mortgage contracts capped late fee amounts below state maximums.
- Examiners identified accounts where consumers were charged $10 to $50 fees for property inspection visits to addresses that were known to be incorrect and continued to pay inspectors to go to the known incorrect addresses.
- According to examiners, some servicers included monthly private mortgage insurance (PMI) premiums that homeowners did not owe. These consumers did not have borrower-paid PMI on their accounts because the loans were originated with lender-paid PMI.
- Relatedly, examiners claimed that servicers failed to terminate PMI when the principal balance of the mortgage reached 78% loan-to-value on a mortgage loan that was current.
- Examiners asserted that some servicers charged homeowners late charges, fees, and penalties that should have been waived during forbearance periods or under certain loss mitigation options.
Payday and Title Lending:
- Examiners identified accounts where borrowers were charged repossession fees that were not authorized by the underlying loan agreements.
- Examiners identified instances where lenders repossessed vehicles despite having entered into new payment agreements with those borrowers.
Student Loan Servicing:
- Examiners asserted that some servicers charged late fees and interest after payments were made on time.
- For example, some servicers’ policies do not allow borrowers to pay by credit card. However, sometimes their customer representatives erroneously accepted credit card payments. The servicers then cancelled the payments, acted as if no payment had been made, and charged the borrowers late fees and additional interest.
In its report, the CFPB seems to be indicating that it is not just taking aim at what it considers excessive or surprise fees, but is instead taking on all fees in all instances. As is always the case with Supervisory Highlights, the underlying facts and circumstances remain largely unknown. As a result, it is difficult to assess if the findings are the result of violations of existing law or reflect more aggressive regulatory interpretations.