Consumer Finance Insights
March 5, 2020

CFPB Publishes its Winter 2020 Supervisory Highlights

On February 14, 2020, the Consumer Financial Protection Bureau (CFPB) released its Winter 2020 Supervisory Highlights (Report).  It summarizes the CFPB’s findings on violations in the areas of debt collection, mortgage servicing, payday lending, and student loan servicing completed between April 2019 and August 2019.  The CFPB notes that it published its Report in order to aid CFPB-supervised entities “in their efforts to comply with Federal consumer financial law.”  The report shares information regarding “general supervisory and examination findings,” identifies “operational changes to the [entities’] program[s],” and provides “a convenient and easily accessible resource for information on the Bureau’s guidance documents.”  A summary of notable Report findings follows.

In the area of debt collection, the Report identified one or more violations of the Fair Debt Collection Practices Act (FDCPA) during examination of “larger participant debt collectors.” Notably, the CFPB found that (1) “one or more debt collectors failed to disclose in their subsequent communications that those communications were from a debt collector;” and (2) that debt collectors “failed to send the prescribed validation notice within five days of the initial communication with the consumer regarding collection of the debt, where required.”  In response to these findings the debt collectors agreed to revise their “policies and procedures, monitoring and/or audit programs, and training.”

In the area of mortgage servicing, the Report noted that CFPB examinations have “continue[d] to focus on the loss mitigation process.”  The Report identified that “one or more servicers violated Regulation X, by failing to provide certain required loss mitigation notices, providing incomplete notices, or not providing notices within the time required by the regulation.”  Although the CFPB noted that these violations were caused “in part, by servicers’ efforts to handle an unexpected surge in applications due to natural disasters,” it also noted that it had “issued a statement regarding supervisory practices during natural disasters” where “flexibility in Regulation X” was described, but which “did not lift any requirements.”  Further, the Report placed emphasis on loss mitigation notice violations. One of more servicers had violated Regulation X by (1) “failing to notify borrowers in writing that an application was either complete or incomplete within 5 days of receiving the application;” (2) “not provid[ing] a written notice stating the servicers’ determination of available loss mitigation options within 30 days of receiving the complete loss mitigation application;” and (3) “not providing a written notice with the required consumer information when it offered borrowers the short-term payment forbearance program based upon evaluation of an incomplete loss mitigation application.”  Notably, the CFPB found that “borrower’s conversations [over the phone] with the servicers constituted loss mitigation applications,” which required servicers to provide these borrowers with the required consumer information.  Because these violations occurred during a surge of natural disasters, the servicers had to “develop[] plans to enhance staffing capacity in response to any future disaster-related increases in loss mitigation applications.”

In the area of payday lending, the Report identified one or more violations of Regulation Z, Regulation B and unfair acts or practices by lenders.  Notable findings included lenders (1) “failing to apply borrowers’ payments to their loans;” (2) “inaccurate[ly] disclos[ing] [the] annual percentage rate;” (3) failing to “include a fee in [the] calculation of [a] finance charge and annual percentage rate;” (4) failing to “retain evidence of compliance with Regulation Z;” (5) providing consumers with “adverse action notices that failed to disclose the principal reason(s) for the adverse action;” and (6) “assess[ing] consumers a particular fee as a condition of paying or settling a delinquent loan,” when that fee was not authorized by the loan contract and where the loan contract “stated that the expense [] would be paid by the lender.”  In response to these violations, the lenders either engaged in corrective action (such as fee refunds or sending the appropriate notices), changed policies and procedures, or improved training.

In reviewing the Report, it should be noted that the CFPB reminded the entities it regulates that it “does not impose any new or different legal requirements,” and that the violations described “are based on the particular facts and circumstances reviewed by the [CFPB] as part of its examinations.”  A conclusion that a legal violation existed in the Report “may not lead to such a finding under different facts and circumstances.”