Bureau notes violations in loan servicing, credit cards; adds small-business lending to report

Supervisory and examination findings regarding compliance, and noncompliance, with federal consumer financial protection laws are cited in a six-month report that also, for the first time, looks at small-business lending.

In its latest Supervisory Highlights released Thursday, the Bureau of Consumer Financial Protection (BCFP, formerly known as CFPB), provides an overview of activities from December 2017 and May 2018.

The bureau publishes the information “to help institutions better understand how the Bureau examines institutions for compliance,” the report says. “The Bureau expects that the publication of Supervisory Highlights will continue to aid Bureau-supervised entities in their efforts to comply with federal consumer financial law.”

Key highlights include the following:

  • Automobile loan servicing: The report says recent auto loan servicing examinations identified deceptive and unfair acts or practices related to billing statements and wrongful repossessions.
  • Credit cards: “With some notable exceptions, the examinations found that supervised entities generally are complying with applicable Federal consumer financial laws,” the report said. In some cases, it found violations related to Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) requirements for periodic interest-rate reevaluations, failure to reevaluate appropriate factors or failure to implement rate reductions for eligible accounts, among other things.
  • Debt collection: The report says recent examinations of larger participants identified one or more violations of the Fair Debt Collection Practices Act (FDCPA). For example, examiners found that one or more debt collectors routinely failed to mail debt verifications (required) before engaging in further collections activities.
  • Mortgage servicing: Some examinations found that servicers failed to convert consumers who successfully completed trial modifications to permanent modifications in time to prevent consumers from accruing additional interest charges and fees. The report says one or more examinations identified an unfair act or practice, noting that consumers experienced substantial injury that could not be reasonably avoided. Among other findings were charges to consumers of unauthorized amounts and deceptive acts or practices involving representations regarding initiation of foreclosure.
  • Payday lending: The bureau report says examinations of payday lenders identified unfair and deceptive acts or practices as well as violations of Regulation E (Electronic Fund Transfer Act). There were findings of misleading collection letters and debits to consumers’ accounts without valid authorization, it said.
  • Small-business lending: The bureau notes that it began conducting supervision work in 2016 and 2016 to assess Equal Credit Opportunity Act (ECOA) compliance in institutions’ small-business lending product lines. “In the course of conducting ECOA small business lending reviews, Bureau examination teams have observed instances in which one or more financial institutions effectively managed the risks of an ECOA violation in their small business lending programs,” the report says.

BCFP Supervisory Highlights (Issue 17, Summer 2018)