CFPB Releases Winter Supervisory Highlights Report
By Alexander M. Smith
Earlier this month, the Consumer Financial Protection Bureau (CFPB) released the latest iteration of its Supervisory Highlights report, which summarizes some of the CFPB’s recent supervisory examinations and provides guidance to industry about practices to avoid. The CFPB’s Supervisory Highlights report notes that the CFPB has recently examined the following practices:
Automobile Loan Servicing. The CFPB has recently conducted examinations of captive automotive finance companies for unfair and deceptive acts and practices (UDAAPs) involving rebates for extended automobile warranties. Typically, when a lessee purchases an extended warranty for a leased car and the car is a total loss, the lessee is entitled to a pro-rated rebate of the premium amount for the un-used portion of the warranty; the rebate is applied first to any deficiency balance on the lease, and the balance is returned to the lessee. The CFPB found that some automotive finance companies had engaged in UDAAPs by (1) failing to apply the rebate to the deficiency balance or artificially deflating the value of the rebate (for instance, by overstating the number of miles on the car) and then (2) attempting to collect on the inflated deficiency balance.
Bank Debiting Practices. The CFPB found that some banks had inaccurately represented that debits made through an online bill-pay service would occur on a given date, even though they might occur earlier than the stated date (for instance, if a payee only accepted a paper check). In some instances, this caused consumers to suffer overdraft fees because there was insufficient money to cover the debit on the earlier date.
Mortgage Servicing. The CFPB found that some mortgage servicers had unlawfully charged consumers fees that were not authorized by their mortgage loans, failed to cancel private mortgage insurance when the loan-to-value ratio dipped below 80%, failing to exercise “reasonable diligence” in processing loss mitigation applications, and failed to provide necessary documentation to the successors-in-interest to borrowers who obtained a home equity conversion mortgage (a type of HUD-insured reverse mortgage).
The CFPB also noted that it had brought five public enforcement actions against payday lenders and other financial institutions relating to a variety of unlawful practices, including debiting consumers’ bank accounts without authorization, furnishing inaccurate information to credit reporting agencies, failing to make required disclosures to consumers, and improperly threatening to initiate debt collection actions.