CFPB Supervisory Highlights notes redlining, RESPA violations, more

Findings last year of four types of legal violations that the federal consumer financial protection agency found “particularly concerning” were highlighted in a release Tuesday based on the agency’s summer 2021 Supervisory Highlights report.

The Supervisory Highlights report by the Consumer Financial Protection Bureau (CFPB) notes these particular violations are generally from 2020 and reflect findings that arose in connection with examinations of supervised entities (and resolved without specific enforcement action).

The bureau described the four concerning findings as follows:

  • Information furnishing: Examiners found that consumer reporting companies are accepting information from companies that furnish consumer data despite “ample signs” that these furnishers were unreliable. Examiners found that this violates the Fair Credit Reporting Act.
  • Redlining: Examiners observed discouragement of people in minority neighborhoods from applying for credit by, among other things, locating offices in almost exclusively majority-white neighborhoods, only using pictures of white people in direct mail marketing campaigns, and publishing loan officer headshots of almost exclusively white people. Examiners noted these practices lowered the number of applications from minority neighborhoods relative to other comparable lenders. (The bureau noted its lawsuit filed last July alleging redlining by Townstone Financial, Inc., specifically through violations of the Equal Credit Opportunity Act and Regulation B, which implements the act, and the Consumer Financial Protection Act.)
  • RESPA violations related to foreclosures: Examiners found several violations of the mortgage servicing rules in Regulation X, including: instances of some servicers making the first notice or filing for foreclosure when it was prohibited (for example, filing before they had evaluated borrowers’ appeals; in some cases failing to notify their foreclosure counsel to stop all legal filings at the time that the servicer received a completed loss mitigation application). Examiners also found that some servicers engaged in a deceptive act or practice when they told borrowers foreclosure would not occur until a specific date but initiated foreclosures prior to that date.
  • Student loan servicing/forgiveness program: Servicers misled consumers about Public Service Loan Forgiveness (PSLF), a program intended to forgive the balance of certain federal student loans after 10 years of payments on a qualifying repayment plan if the consumer works in certain public service jobs. There are additional requirements consumers need to satisfy to access the program, andborrowers frequently request information from their servicers about their eligibility. The CFPB examiners found a number of ways that student loan servicers gave incorrect information to borrowers, resulting in missteps that could cost consumers thousands of dollars.

These violations are among the numerous “supervisory observations” noted in the report, which also summarized findings related to auto loan servicing, debt collection, deposits, fair lending, mortgage origination, payday lending, and private education loan origination.

Summer 2021 Supervisory Highlights

Release: CFPB Report Highlights Supervisory Findings of Wide-Ranging Violations of Law in 2020