On June 23, 2015, the Consumer Financial Protection Bureau (CFPB) released its Supervisory Highlights report detailing the Bureau’s supervision efforts for the first four months of 2015. The report summarizes the most common “illegal practices” uncovered by the Bureau and identifies the areas where the Bureau has focused on in its enforcement efforts. The report identified compliance issues at debt collection companies, mortgage servicers, mortgage originators, and consumer reporting agencies.
The CFPB identified a number of problems at certain debt collection companies. These companies allegedly failed to properly record or respond to consumer complaints. The CFPB directed these companies to reform their policies for addressing consumer complaints to ensure all complaints were timely addressed and fully resolved. The CFPB also faulted some companies for failing to maintain proper logs of consumer complaints, which deprives the CFPB of the ability to assess compliance with consumer debt collection law. Finally, the CFPB directed some debt collectors to remove statements from their websites that the CFPB deemed deceptive. For example, at least one debt collection company stated on its website that it investigated all consumer disputes, but the CFPB found that in practice the company rarely did so.
The CFPB also identified a number of issues at mortgage servicing companies related to loss mitigation applications. Distressed borrowers can apply for assistance to avoid foreclosure by sending a loss mitigation application to their mortgage servicer. Regulation X, which implements the Real Estate Settlement Procedures Act, requires that mortgage servicers send acknowledgment receipts to borrowers who submit loss mitigation applications. If the application is deficient, the servicer must request that the borrower send the additional documentation in the acknowledgment receipt. According to the CFPB, some mortgage servicers failed to send the acknowledgement receipt altogether. Others requested documentation that was not required or that had already been provided by the borrower. The CFPB required some of these servicers to pay restitution to borrowers that did not obtain timely loan modification as a result of these practices.
The CFPB also identified issues at mortgage servicing companies related to foreclosure notices. Some servicers sent foreclosure notices to borrowers who had already been approved for loan modification. The CFPB deemed this practice deceptive because the borrower foreclosure notice suggested the servicer had abandoned the loan modification process. The CFPB also alleged that at least one servicer sent foreclosure notices to borrowers who were current on their loan payments. The CFPB directed these servicers to reform their policies and procedures regarding foreclosure notices.
The CFPB cited some mortgage originators for failing to comply with the Equal Credit Opportunity Act, which prohibits lenders from discriminating against borrowers based on their participation in public assistance programs. The CFPB alleged that some mortgage originators refused to consider Section 8 Homeownership vouchers as a source of income when evaluating mortgage applications or improperly restricted use of these vouchers to certain mortgage loan categories. The CFPB required some of these mortgage originators to provide financial remuneration to affected borrowers.
The CFPB alleged that certain consumer reporting agencies lacked sufficient internal controls to prevent errors in credit reports. These agencies allegedly failed to monitor credit furnishers for compliance with policies designed to ensure furnishers appropriately vetted credit information before providing it to the reporting agency. The CFPB also alleged that some credit reporting agencies failed to test completed consumer reports for accuracy. The CFPB required that these agencies reform their policies and procedures to ensure accuracy on consumer reports.
Finally, the CFPB announced the upcoming implementation of the TILA-RESPA Integrated Disclosure Rule, which becomes effective on August 1, 2015. Under this Rule, mortgage originators must provide consumers with a Loan Estimate, which replaces the Good Faith Estimate and the initial Truth in Lending Disclosure. Mortgage originators also must provide a Closing Disclosure, which replaces the HUD-1 and the final Truth in Lending Disclosure. The CFPB has published new mortgage origination examination procedures that it will use to monitor compliance with the new regulation. The new examination procedures are available here.