Bureau Supervision Requires Some Companies to Change Practices to Prevent Future Violations
Washington, D.C. –(ENEWSPF)—September 12, 2017. The Consumer Financial Protection Bureau (CFPB) today announced that recent supervisory actions resulted in $14 million in relief to more than 104,000 harmed consumers from January through June 2017. Findings in today’s Supervisory Highlights report include that some banks misled consumers about checking account fees or overdraft coverage, and some credit card companies deceived consumers about pay-by-phone fees. The report also found some auto lenders had wrongly repossessed consumers’ vehicles, and some debt collectors improperly communicated with consumers about debts. CFPB’s examiners also found some companies did not follow the Know Before You Owe mortgage rules and some servicers failed to follow steps required by the Bureau’s mortgage servicing rule to work with borrowers trying to avoid foreclosure.
“The Bureau’s recent supervision work has returned $14 million to more than 100,000 consumers, and found companies deceiving consumers and violating the law,” said CFPB Director Richard Cordray. “Through supervision, the CFPB is putting an end to practices that harm consumers and taking proactive steps to prevent future violations.”
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to supervise banks and credit unions with more than $10 billion in assets, as well as certain nonbanks. These include mortgage companies, private student lenders, payday lenders and others defined as “larger participants.” Today’s report, the 16th edition of Supervisory Highlights, covers CFPB supervision activities from January through June 2017, and shares observations in the areas of auto loan servicing, credit card account management, debt collection, deposits, mortgage origination, mortgage servicing, remittances, service providers, short-term small-dollar lending, and fair lending. Among the findings:
- Banks deceived consumers about checking account fees and overdraft coverage: One or more institutions deceived consumers by inaccurately describing when checking account service fees would be waived. One institution told consumers it would waive the fee if the customer met certain qualifications, including making 10 or more payments from the checking account during a statement cycle. In fact, only debit card purchases and debit card payments qualified toward the fee waiver. One or more institutions also misrepresented opt-in deposit overdraft services as extending to consumer payments by check, electronic funds transfers through the Automated Clearing House payment network, or recurring payments, when those transactions were not actually covered.
- Credit card companies deceived consumers about the cost and availability of pay-by-phone options: The Bureau’s examiners found that customer service representatives of at least one credit card company disclosed only costly pay-by-phone fees while omitting mention of much cheaper payment options. Failing to disclose less costly options can result in consumers being charged for services they don’t need.
- Auto lenders wrongly repossessed borrowers’ vehicles: Many auto loan servicers give borrowers options to avoid repossession of their vehicle if a loan is delinquent or in default. But the CFPB’s examiners found that one or more companies were repossessing vehicles after the repossession was supposed to be cancelled. Some lenders wrongfully listed the account as delinquent. In other instances, customer service representatives did not cancel the repossession order when feasible after borrowers made sufficient payments. Also, some repossession agents did not check the documentation beforehand to see if the repossession had been cancelled.
- Debt collectors improperly communicated about debt: Generally, debt collectors must get consent of the person owing the debt before discussing it with other parties. The Bureau’s examiners found that one or more third-party collectors did not confirm they had contacted the right person before starting collections, or wrongly attempted to collect from consumers who were not responsible for the debt. Also, one or more payday lenders, in collecting a debt, repeatedly called third parties, including personal and work references listed on the borrowers’ loan application. In some instances, even after being told to stop, these collectors called borrowers at work or asked third parties to relay messages to them. Such calls can lead to negative job consequences for the borrower, and risk improperly disclosing the default or delinquency to third parties.
- Mortgage companies failed to follow Know Before You Owe mortgage disclosure rules: CFPB examiners found that one or more companies overcharged closing fees to consumers and one or more companies wrongly charged application fees before consumers had agreed to the mortgage transaction. Examiners did find that in general, both banks and nonbanks were able to effectively implement and comply with the Know Before You Owe mortgage disclosure rule changes.
- Mortgage servicers failed to follow the Bureau’s servicing rules: Servicers are responsible for reviewing borrowers’ initial loss mitigation applications to determine what documents are missing. They must then tell borrowers what documents are missing, so that consumers can get a full evaluation of options they have available. One or more mortgage servicers offered a forbearance option to consumers to help them prevent foreclosure, but did not let the borrower know of their right to complete an application to be considered for other options. In addition, they did not exercise reasonable diligence in collecting information needed to complete the borrower’s application. Additionally, one or more servicers, through a vendor, also provided borrowers mortgage statements that failed to specifically list fees charged.
Today’s report shares information that companies can use to comply with federal consumer financial law. When CFPB examiners find problems, they alert the company and outline necessary remedies. These steps may include paying refunds or restitution, or taking actions to stop illegal practices and assure future compliance such as implementing new policies, or improving training or monitoring. When appropriate, the CFPB opens investigations for potential enforcement actions.
Today’s edition of Supervisory Highlights is available at: http://files.consumerfinance.gov/f/documents/201709_cfpb_Supervisory-Highlights_Issue-16.pdf
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.
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