TILA/Reg Z violations led shortcomings in bank consumer protection compliance in 2018, report details

Failures by banks to properly calculate or disclose finance charges, or annual percentage rate for mortgage loans, and other violations under the Truth in Lending Act (TILA, Regulation Z) were the top violations reported last year by federally insured bank examiners in a report released Thursday.

The Federal Deposit Insurance Corp. (FDIC) said in its 2018 Consumer Compliance Supervisory Highlights that the TILA violations made up 324 violations reported by examiners, or 25% of major violations reported by examiners. The violations reported were level 3/High Severity (“violations that have resulted in significant harm to consumers or members of a community”) or level 2/medium severity (“violations reflecting systemic, recurring, or repetitive errors that represent a failure of the bank to meet a key purpose of an underlying regulation or statute” and that “may have had a small, but negative impact on consumers or have the potential to have a negative impact if uncorrected”).

Only two level 3 TILA violations were reported, the FDIC said; those violations typically result in a request or a requirement that the institution provide restitution in excess of $10,000 (in aggregate. Level 2 violations, the agency said, typically result in potential restitution that is in an amount below the Level 3 threshold).

Despite the specific TILA/Reg Z violations, FDIC also noted that 98% of all FDIC-supervised institutions as of year-end 2018 were rated satisfactory or better for consumer compliance (“1” or “2”). “The high percentage of institutions rated satisfactory or better for consumer compliance indicates that the vast majority of supervised institutions maintain effective programs to manage their consumer compliance responsibilities, even during a period of significant regulatory change,” the agency said.

The 2% of banks and thrifts, the FDIC said, rated as less than satisfactory for consumer compliance (rated a “3” or more adverse) “typically demonstrated weaknesses in the institution’s overall compliance management system (CMS) that led to violations of law with material impact on consumers.”

Other “most commonly cited” violations outlined in the report include:

  • Truth in Savings (Reg DD): 140 (five “level 3”), accounting for 11% of the “most commonly cited” violations;
  • Electronic Funds Transfer (Reg E): 126 (three “level 3”), 9.9%;
  • Flood Disaster Protection Act (FDPA): 112 (all “level 2”), 8.8%;
  • Equal Credit Opportunity Act (Reg B): 85 (two “level 3”), 6.7%.

FDIC 2018 Consumer Compliance Supervisory Highlights

 

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