July 2, 2024

CFPB: Exams Find Loan Servicing Failures, Illegal Debt Collection Practices, and Issues with Medical Payment Products

Supervisory Highlights report also reviews practices related to deposit and prepaid account freezes and information access

The Consumer Financial Protection Bureau (CFPB) today published an edition of Supervisory Highlights sharing key findings from recent examinations of auto and student loan servicing companies, debt collectors, and other financial services providers. The report also highlights consumer complaints about medical payment products and identifies concerns with providers preventing access to deposit and prepaid account funds.

“Loan servicers and debt collectors harm borrowers when they fail to provide required information, create barriers to customer assistance, or harass people about their debts,” said CFPB Director Rohit Chopra. “The CFPB is working to ensure servicers, debt collectors, and other financial service providers follow the law to protect consumers.”

Failures in student and auto loan servicing

CFPB examiners found multiple instances of unfair, deceptive, or abusive acts or practices at companies servicing auto loan and student loans, including:

Deception and harassment by debt collectors

The CFPB’s recent examinations of debt collectors identified violations of the Fair Debt Collection Practices Act and other violations of consumer protection law, including:

Financial institutions’ oversight of medical providers offering payment products

In examining supervised entities, CFPB examiners also reviewed medical payment products, including medical credit cards. These products are typically marketed to consumers at healthcare facilities, including doctors’ offices or hospitals, as a means to pay for medical services or products. Healthcare providers commonly use sales and marketing materials provided by the financial institutions issuing these payment products.

Examiners identified a significant number of consumer complaints regarding how dentists and other healthcare providers promoted, offered, and sold medical credit cards to consumers. Patients complained about health care providers misrepresenting the specifics of “deferred interest” promotions and that they felt pressured by providers to open a credit card while receiving treatment. CFPB examiners will continue to assess financial services companies’ oversight of medical providers and will be monitoring marketing materials and incentives offered to enroll patients.

Practices preventing access to funds or account information for deposit and prepaid accounts

Financial institutions regularly review deposit and prepaid account activity to identify fraud or other suspicious activity, sometimes freezing funds as a preventive measure. However, CFPB examiners found unfair practices in how some institutions communicated with consumers about these account freezes. For example, some institutions failed to affirmatively notify consumers when their accounts were frozen. In other instances, institutions failed to provide clear guidance to affected consumers, and customer service representatives were often inaccessible to those with frozen accounts.

The CFPB also assessed industry compliance with Section 1034(c) of the Consumer Financial Protection Act. This law prohibits large banks and credit unions from creating unreasonable barriers, such as excessive fees, for customers seeking basic account information. The CFPB issued information requests to select entities regarding their deposit and credit card-related services, and the responses identified some changes in industry practices. Some institutions have eliminated fees for obtaining account information, including charges for printed check images and statements. Others now offer free balance inquiries at third party ATMs. The CFPB will continue to gather information about compliance across various financial product types.

Read this edition of Supervisory Highlights.

Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

This post was originally published here.