Consumer Finance Insights
January 24, 2017

CFPB Secures $8.8 Million Consent Order Against Mortgage Servicer

On January 23, the Consumer Financial Protection Bureau (CFPB) announced that it entered into a consent order with a mortgage servicer, resolving alleged violations of the Real Estate Settlement Procedures Act (RESPA), the Fair Credit Reporting Act (FCRA), and the Consumer Financial Protection Act’s (CFPA) prohibition on deceptive acts or practices.

The CFPB alleged that the servicer violated the CFPA by providing over 200,000 borrowers with deferments (since January 2014), but simultaneously misrepresenting to borrowers the impact of receiving a deferment.  Specifically, the servicer failed to disclose that additional interest that accrued during the deferment period would become due immediately upon the next scheduled payment.  The servicer also failed to treat such deferments as a request under RESPA to be reviewed for loss mitigation options.

The consent order further alleged that the servicer violated the CFPA by failing to cancel optional credit insurance coverage in accordance with the terms of borrowers’ promissory notes.

In addition, the CFPB alleged that the servicer violated the FCRA by failing to conduct reasonable investigations of consumer reporting disputes and inaccurately reporting to credit reporting agencies accounts settled in full as “charged off.”  Finally, the consent order averred that the servicer violated RESPA by furnishing adverse information regarding borrower payments even though they were subject to a Notice of Error.

The servicer agreed to, among other things, implement certain plain language disclosures on deferment authorization forms, treat requests for deferments as a loss mitigation application, and cease furnishing certain information to credit reporting agencies.  The servicer also agreed to provide $4.4 million in restitution to affected consumers, and pay a $4.4 million penalty to the CFPB.

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