By: Melanie Brody, Ernest Simons

On June 23, the Consumer Financial Protection Bureau (CFPB or Bureau) released its latest Supervisory Highlights, outlining key findings from supervisory work completed between January and April 2015. Recent supervisory resolutions across all industries have resulted in remediation of approximately $11.6 million to more than 80,000 consumers. The report highlights recent supervisory observations in the following areas:

Consumer Reporting: The Bureau found weaknesses with the methods and processes for assuring the maximum possible accuracy in consumer reports. Examiners were concerned by the policies and procedures at one or more consumer reporting agencies (CRAs) for vetting and overseeing new furnishers of consumer information. Further, examiners found that one or more CRAs maintained no quality control policies and procedures to test consumer reports for accuracy.

Debt Collection
: The report identified weaknesses in compliance management systems, citing various areas that created a risk of consumer harm. In some cases, institutions lacked formal follow-up or escalation procedures for third-party debt collection personnel. Examiners identified instances where complaints and inquiries forwarded from third-party debt collectors were not recorded, categorized, or processed by the financial institution receiving them. The report further identified instances where furnishers failed to conduct reasonable investigations with respect to disputed information.

Student Loan Servicing: The Bureau’s recent examination identified deceptive practices and a possible Fair Credit Reporting Act (FCRA) violation. Examiners determined that one or more student loan servicers included deceptive language on periodic statements that falsely suggested that a borrower must pay a minimum amount of interest before taking a tax deduction. The possible FCRA violation involved the failure of some student loan servicers to provide sufficient adverse action notices in connection with the denial of a request to release a cosigner to private student loans.

Mortgage Origination: Supervision completed its first round of targeted reviews for mortgage examinations for compliance with Title XIV rules, including requirements related to ability-to-repay, loan originator compensation, high-cost mortgages, and home ownership counseling. Supervision found instances of noncompliance with certain Title XIV rules, and violations of disclosure requirements associated with the Good Faith Estimate and the Settlement Statement (HUD-1).

Mortgage Servicing: The CFPB also found weaknesses regarding foreclosures and loss mitigation procedures. Particularly, CFPB examiners found at least one servicer that sent notices of intent to foreclose to borrowers already approved for trial modifications. The Bureau believes this dual-tracking could mislead consumers into believing that the servicer has abandoned the trial modification. Regarding loss mitigation, examiners found at least one servicer in violation of rules designed to protect consumers from runarounds by either failing to send required notices in response to loss mitigation applications or requesting consumer documents that were either inapplicable to their loss mitigation application or already provided.

Fair Lending: The report noted that one or more lenders denied or discouraged mortgage applications from consumers who received public assistance income. According to the Bureau, a blanket practice of excluding or refusing to consider public assistance as a source of income violates the Equal Credit Opportunity Act. The CFPB directed these lenders to identify borrowers who, due to their reliance on public assistance income, were either denied loans or discouraged from applying; these consumers were provided with financial remuneration and an opportunity to reapply.

Stay tuned to Consumer Financial Services Watch in the coming months as developments in these areas unfold.

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