Compliance Blog

It is the most wonderful time of the year! With the holidays around the corner and wintery weather soon to follow, what better way to stay warm then to cozy up to a fire with the Consumer Financial Protection Bureau’s (CFPB) Supervisory Highlights: Issue 28, Fall 2022 (Supervisory Highlights). The CFPB recently released its biannual Supervisory Highlights that provides an overview of certain financial regulatory trends. The CFPB issues the Supervisory Highlights to provide insight on various compliance pitfalls and examination trends. These highlights include auto servicing, consumer reporting, credit card account management, debt collection, deposits, mortgage origination, mortgage servicing, and payday lending. This consumer compliance blog will discuss the first set of topics, including auto servicing, consumer reporting, credit card account management, and debt collection.

Auto Servicing

The CFPB found several issues relating to auto servicing. In one instance, the CFPB found consumers were harmed when they were not refunded unearned fees related to add-on products. Moreover, the CFPB discovered consumers, who had delinquent loans and requested payment assistance, were required by auto loan servicers “to make a payment equal to the standard monthly payment before the servicers would finalize the modifications” requested. Examiners also found consumers were “double billed” for the purchase of insurance. The CFPB additionally found devices used by servicers to prevent a vehicle from starting were activated even when the consumer’s payment was not past due.

Another examination issue the CFPB found is related to auto servicers making “deceptive representations” during collection calls. According to the Supervisory Highlights, consumers were told on these collection calls that “their driver’s licenses and tags would be or may be suspended if they did not make a prompt payment to the servicer…[and] their accounts had, or would be, transferred to the legal department.” Servicers remediated these issues.

Consumer Reporting            

CFPB examinations found issues with how consumer reporting companies (CRCs) responded to consumer complaints. Generally, the Fair Credit Reporting Act (FCRA) obligates these companies to review the complaints, provide reports to the CFPB about the investigations' outcomes, and maintain records related the complaints. The CFPB discovered during examinations that these companies did not follow its reporting and reviewing obligations under the FCRA.

Furnishers were not off the hook either. The CFPB discovered during examinations that furnishers were “inaccurately reporting information despite actual knowledge of errors.” This follows as examiners found issues with furnishers failing their duty to correct and update furnished information “after determining such information [was] not complete or accurate.” This oversight materialized when furnishers did not notify CRCs of updated or corrected information even though previously reported information was neither. Furnishers also failed the duty to notify CRCs of the “date of first delinquency” on accounts and conduct investigations into direct disputes. The CFPB also discovered furnishers did not have adequate policies and procedures related to dispute resolution, document retention, and internal controls to ensure “the accuracy and integrity of furnished information.”

Credit Card Account Management

Examiners discovered issues relating to billing error resolution provisions in Regulation Z. Examiners found entities failed on several accounts to follow Regulation Z’s billing error provisions. For example, entities failed to provide “written acknowledgement” within the 30 day window after receiving a billing error notice, failed to resolve disputes within two billing cycles, failed to conduct a “reasonable investigation,” and failed to provide explanations to consumers after establishing no error occurred or a different error occurred.

The Supervisory Highlights also discuss issues related to the reevaluation of an account’s annual percentage rate (APR) after increasing the APR. Examiners discovered several violations where creditors failed to weigh “appropriate factors” when reevaluating the APR and to evaluate “the full rate increase for certain accounts converted from fixed to variable rate.” The requirement to reevaluate at least once every six months was another violation examiners found. In addition, examinations found creditors were moving accounts from the APR reevaluation process prematurely.

In addition to violations of the billing error resolution process and the reevaluation of APRs, examiners also found certain marketing and sales practices relating to credit card add-on products unfair and deceptive. For example, the CFPB found service providers in sales scripts were touting opportunities that were not reflected in marketing materials. The Supervisory Highlights also discuss practices that included the omission of required consumer disclosures and the failure to cancel products at the request of the consumer and refunding those consumers after the cancellation. The CFPB also found issues with misrepresentations made related to fixed payment options for automatic withdrawal of the minimum payment.  

Debt Collection

Examiners found several issues relating to debt collection. The CFPB considered communication between debt collectors and consumers troubling. Examiners “found that debt collectors engaged in conduct the natural consequence of which was to harass, oppress, or abuse the person with whom they were communicating.” The CFPB found debt collectors were also communicating with outside parties, other than the consumer obligated to the pay the debt, about the consumer’s debt.

The NAFCU Regulatory Compliance Team will complete the review of the Supervisory Highlights in another blog. In the meantime, please do not hesitate to contact us at compliance@nafcu.org if there are any questions.

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