Compliance Blog

Written by Shari R. Pogach, Regulatory Paralegal

The Consumer Financial Protection Bureau (CFPB) released the tenth edition of its Supervisory Highlights report. This report provides a rundown of the bureau's key examination findings generally completed between September 2015 and December 2015. Although much of the report discusses consumer reporting issues under the Fair Credit Reporting Act (FCRA) and its implementing regulation, Regulation V, issues with mortgage origination and remittances were also noted.

Mortgage Origination

With some exceptions, the bureau generally found prevailing compliance with the Dodd-Frank Title XIV rules. The exceptions included a lack of the required written policies and procedures under the loan originator rule, and weak compliance management systems.

Lack of Policies and Procedures

Regulation Z requires depository institutions to establish and maintain written policies and procedures for loan originator activities. These specific activities cover prohibited payments, steering, qualification requirements and identification requirements. Yet, in one or more examinations, depository institutions had not maintained such written policies and procedures, already a violation in itself. In most cases, the violations consisted of one or more related substantive provisions of the rule, such as a failure to comply with the requirement to include the loan originator's name and Nationwide Multistate Licensing System and Registry identification on loan documents.

Weak Compliance Management Systems

CFPB examiners determined that a weak compliance management system allowed for violations of Regulations X and Z. A failure to allocate sufficient resources to ensure compliance with federal consumer financial law resulted in an inability to: institute timely corrective-action measures, maintain adequate systems and implement adequate preventive controls to ensure compliance and implementation of established policies and procedures.

Remittances

The bureau reported that on the whole, remittance transfer providers it examined have implemented changes to compliance management systems (CMS) in order to comply with the remittance rule under Regulation E. Still the report noted in some instances such systems were still in the early stages of development. With both bank and nonbank providers, some resources have been dedicated to compliance with the rule with updated policies and procedures, complaint management and training programs but the bureau also noted some of the changes were not implemented until sometime after the rule's effective date. Examiners noted implementation gaps or systems issues with a lack of prior testing or post-implementation monitoring and audit. Such weaknesses led to consumers either getting inaccurate disclosures or, in some cases, none at all.

Violations

The CFPB reported that examiners found the following violations of the remittance rule at one or more providers:

• Providing incomplete, and in some instances, inaccurate disclosures;
• Failing to adhere to the regulatory timeframes (typically three business days) for refunding cancelled transactions;
• Failing to communicate the results of error investigations at all or within the required timeframes, or communicating the results to an unauthorized party instead of the sender; and
• Failing to promptly credit consumers accounts (for amounts transferred and fees) when errors occurred.

Remittance providers have been cited by the CFPB for not giving oral disclosures and/or the written results of investigations to satisfy the rule's foreign language requirements. And, some entities were directed to review marketing materials to stop deceptive statements regarding any conditions for designated recipients to be able to access transmitted funds

Zero-Money-Received

Examiners also found instances where providers told consumers that the recipients would receive zero dollars after fees were deducted. Some consumers went ahead and completed these transactions. After being informed of such transactions, some providers went ahead and took steps to alter systems to either provide consumers with an added warning or to simply not allow the transactions to be completed. The bureau stated that while zero-money-received transactions were not a violation of the rule, it is continuing to compile information on such transactions.