Compliance Blog

Written by Benjamin M. Litchfield, Regulatory Compliance Counsel

Greetings compliance fans! On March 8, 2016, the CFPB issued its latest supervisory report sharing observations from recent examinations and other supervisory activities. The report covers issues observed by the Bureau in the areas of consumer reporting, debt collection, mortgage origination, remittances, student loan servicing, and fair lending.

Consumer Reporting. CFPB examiners found that one or more furnishers of information to consumer reporting agencies failed to have policies and procedures addressing the furnishing of information related to deposit accounts. For example, these furnishers would update their own systems when customers paid charged-off accounts in full but would not provide updated information to the consumer reporting agencies. The CFPB recently issued Compliance Bulletin 2016-01 (Feb. 3, 2016), reminding furnishers of their responsibilities under the Fair Credit Reporting Act (FCRA) and Regulation V regarding specialty consumer reporting agencies such as ChexSystems.

Debt Collection. CFPB examiners also determined that some debt collectors failed to honor written requests to cease communications. While credit unions collecting on their own debts are not considered debt collectors under the Fair Debt Collection Practices Act (FDCPA), the CFPB and NCUA have separately signaled that credit unions should still strive to comply with the requirements of the FDCPA to avoid any liability for committing unfair or deceptive acts or practices (UDAAPs). See, CFPB Compliance Bulletin 2013-07 (July 10, 2013) and NCUA Consumer Compliance Handbook, p. 98. Some debt collectors also made false, deceptive or misleading representations regarding garnishment when attempting to collect on student loan debt.

Mortgage Origination. In general, the Bureau noted overall compliance with its Title XIV rules (loan originator compensation, ability-to-repay, appraisals and valuations, high-cost mortgages and escrows for higher-priced mortgage loans). Some exceptions included the absence of written policies and procedures for loan originator activities under the loan originator rule and some deficiencies in compliance management systems. The loan originator rule makes it an independent regulatory requirement that credit unions establish policies and procedures reasonably designed to ensure and monitor the compliance with the prohibited payment, anti-steering, qualification and identification requirements of the rule. See, 12 C.F.R. 1026.32(j). The CFPB maintains a landing page with resources that credit unions can use to comply with these rules, including compliance guides and quick reference charts, here.

Remittances. As the CFPB noted in its press release touting the Supervisory Highlights report, this is the first report on exams of financial institutions in the remittance market since the CFPB issued its remittance transfer rule. While the Bureau noted overall compliance with the remittance transfer rule, a few trouble spots identified by examiners included providing incomplete or inaccurate disclosures, failing to adhere to regulatory timeframes for refunding cancelled transactions, failure to communicate the results of error investigations, or failure to promptly credit consumer accounts. Like the Title XIV rules, the CFPB maintains a landing page with resources credit unions can use to help comply with the remittance transfer rule here.

Student Loan Servicing. In the report, the CFPB noted that supervising the student loan servicing market has been a priority for its Supervision program. CFPB examiners cited private student lenders for taking advantage of auto-default clauses in student loans where either the borrower or a cosigner declared bankruptcy. The effect of the auto-default clause was to place both the borrower and the cosigner immediately into default and make the loan payable in full immediately. The Bureau found this practice to be a UDAAP. In addition, CFPB examiners determined that servicers committed unfair practices by failing to disclose a significant adverse consequence of forbearance. Namely, the inability of some borrowers to take advantage of cosigner release clauses in student loan contracts following the borrower's use of forbearance.

Fair Lending. The report also provided updates on the Bureau's administration of its fair lending enforcement settlement agreements with Ally Financial, Inc. and Ally Bank, and with Synchrony Bank, formerly known as GE Capital Retail Bank.

As this report shows, the Bureau has been very aggressive in several key areas particularly consumer reporting, loan servicing, mortgage origination, and debt collection. The Bureau has repeatedly emphasized these areas as focal points for its supervision and enforcement activities for the next two years.. One thing to keep in mind is that the Bureau repeatedly emphasized the requirement to furnish accurate information to consumer reporting agencies under the FCRA and Regulation V throughout the report and not just as part of the consumer reporting section. This signals that the Bureau is likely to remain laser-focused on the accurate reporting of consumer information likely as part of a larger effort to examine ways to bring financial services to unbanked and underbanked populations.

The full report is available here.

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Know the Changes: HMDA Reporting Procedures

Live Webcast: Wednesday, March 16 | 2:00 p.m. - 3:30 p.m. EST

Part of the HMDA Webcast Series

Major CFPB rule changes brought new HMDA reporting procedures your credit union must comply with. Join this webcast for a comprehensive overview of the final rule, revision of Regulation C, and data collection requirements. You'll discover the new data credit unions are required to collect and report, when these requirements will be active, and more.