WASHINGTON—The Consumer Financial Protection Bureau has released a new Supervisory Highlights report on legal violations identified during the CFPB’s supervisory examinations in the first half of 2022.
According to the CFPB, the report details key findings across consumer financial products and services, including how consumer reporting companies and data furnishers continued to violate the Fair Credit Reporting Act (FCRA) by failing to promptly address and update incorrect information on credit reports.
The report also highlights instances where mortgage servicers charged impermissible fees when homeowners went to make their mortgage payments, the CFPB said.
The CFPB said its examiners found that one or more of the nationwide consumer reporting companies failed to report to the CFPB the outcome of their reviews of complaints about inaccuracies on consumers’ credit reports.
Changed Policies
“In response to these findings, the consumer reporting companies changed their policies, procedures, and practices to be more transparent in handling such complaints,” the Bureau said. “Additionally, CFPB examiners found violations of the accuracy obligations of the FCRA by furnishers, including finding that auto loan furnishers were reporting inaccurate information about consumer loans despite knowing that the information was inaccurate. In response to these findings, furnishers corrected the inaccurate information for affected consumers and made it easier for consumers to submit disputes directly to the furnishers, the agency said.
The CFPB further stated its examiners found mortgage servicers violated federal law by charging sizable phone payment fees – even though consumers were not made aware of these pay-by-phone penalties.
“During calls with borrowers, customer service representatives did not disclose the existence or cost of fees for paying over the phone, yet the borrowers were charged fees anyway,” the CFBP said.
Following these findings, the Bureau noted it required the servicers to reimburse all borrowers who paid phone payment fees when those fees were not properly disclosed.
Other Areas of Focus
According to the Bureau report, other areas of focus have included:
Junk Fees
The CFPB said it has been focusing on the practice of charging “pay-to-pay” junk fees, and earlier this year issued advisory opinion that affirmed federal consumer financial protection law often prohibits companies considered debt collectors under the Fair Debt Collection Practices Act from charging “convenience fees” to pay down a balance.
“CFPB examiners identified legal violations related to add-on product charges, loan modifications, double billing, electronic devices that interfere with driving, and debt collection tactics,” the Bureau said. “In a number of examinations, examiners focused on junk fees. For example, examiners reviewed servicers’ handling of add-on product charges where individuals had paid the full amount for certain add-on products as a lump sum at loan origination and made payments on these add-on products throughout the loan term.
“Examiners identified instances where borrowers paid off their loans early, but servicers engaged in an unfair practice by failing to provide refunds for unearned fees related to the add-on products,” the Bureau continued. “The borrowers were entitled to refunds of the related unearned fees because, upon early payoff, the loan and the add-on products terminated and no longer offered any possible benefit.”
Pandemic Relief Benefits
The CFPB said its examiners conducted assessments to evaluate how financial institutions handled pandemic relief benefits deposited into consumer accounts.
“They identified policies and procedures that may have resulted in people losing their pandemic relief benefits due to garnishments or setoff practices,” the Bureau said. “In response to these findings, the CFPB directed the institutions to issue refunds and make process changes to ensure they comply with applicable state and territorial protections regarding garnishments and setoff practices.”
Mortgage Servicing
The CFPB said its examinations also focused on mortgage servicers’ actions as homeowners experienced financial distress related to the COVID-19 pandemic. CFPB examiners identified violations regarding failure to timely provide homeowners with CARES Act forbearances.
“Examiners also found that servicers unfairly charged some individuals fees, while they were in CARES Act forbearances, as well as failed to maintain policies and procedures reasonably designed to properly evaluate homeowners’ loss mitigation options when CARES Act forbearances expired,” the Bureau said.