Article written by:
Karen Janota, AAP, BSACS, CUCE
The Consumer Financial Protection Bureau (CFPB) recently issued its Supervisory Highlights document. If you are not reading this document each season when it’s released, you definitely should be! There are valuable nuggets of information that can clue financial institutions into the issues that are currently hot on the Bureau’s radar, as well as enforcement trends to be mindful of as you prepare for exams.
In this particular issue, we see lots of discussion around UDAAP. As auto loan servicing continues to be examined, the Bureau reports several instances of UDAAP related to deceptive practices regarding rebates for ancillary products. Rebates for certain ancillary products like extended warranties that were financed through the loan depend on the number of miles driven, and there were instances where servicers used the wrong mileage amounts to calculate the rebate for extended-warranty cancellations. The Bureau also found instances where servicers did not request rebates for eligible ancillary products on behalf of the borrower after a repo or total loss, and the average unclaimed rebate was $1,700.
The Bureau reported unfair practices in the deposit operations of entities, where consumers were given the opportunity to select their bill-pay debit date for certain payments made through an institution’s online bill-pay service. The institution then failed to notify consumers that their bill-pay payments could be debited on a date sooner than the date selected if they made the payment with a paper check. This caused some consumers to pay overdraft fees without prior notice.
In mortgage servicing, the Bureau identified servicers charging unfair late fees greater than the amount permitted in the note or by state law. For example, certain FHA mortgages only allow late fees up to 4% of the overdue principal and interest, and servicers were collecting 4% on the overdue principal, interest, taxes and insurance. The report also mentions UDAAP related to PMI cancellation as certain borrowers who reached 80% LTV ahead of the amortization schedule due to making extra payments were denied PMI cancellation request, thus the servicer was misrepresenting the conditions for PMI removal.
Additionally, the Public Enforcement Actions highlighted in the document show a trend of going after payday and small dollar lenders. An FCRA violation against a bank for furnishing inaccurate information to the Credit Reporting Agencies is noted in the report. Also noted is a consent order against a payday lender called Cash Express; this is similar to certain parts of the Navy FCU consent order from a few years back as the lender got in trouble for threatening in collection letters that they would sue the consumers and then not actually following through with filing the lawsuits.
While this is just a summary, the entire report is a good read for financial institutions to get a feel for the hot topics in regulation and enforcement currently going on at the Bureau.