Agency examiners identify improper practices across consumer financial products and services
Today, the Consumer Financial Protection Bureau (CFPB) released its Supervisory Highlights report on legal violations identified during the CFPB’s supervisory examinations in the second half of 2021. The report details key findings across consumer financial products and services.
“While most entities act in good faith to follow the law, CFPB examiners are identifying law violations that lead to real harm,” said CFPB Director Rohit Chopra. “We will continue to examine firms to proactively identify and mitigate harmful practices before they become widespread.”
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB has the authority to supervise large banks, thrifts, and credit unions with assets over $10 billion and their affiliates, as well as certain nonbanks, including mortgage companies, private student lenders, and payday lenders. The CFPB’s supervisory authority also covers large entities in certain markets, including consumer reporting, student loan servicing, debt collection, auto finance, international money transfer, and other nonbank entities that pose risks to consumers.
Supervisory examinations review whether companies are complying with federal consumer financial law. When CFPB examiners uncover problems, they share their findings with companies to help them remediate the violations. Typically, companies take actions to fix problems identified in examinations. For more serious violations or when companies fail to correct violations, the CFPB opens investigations for potential enforcement actions.
Today’s report highlights findings from examinations of practices in the auto servicing, consumer reporting, credit cards, debt collection, deposits, mortgage origination, prepaid accounts, and remittances markets.
Wrongful auto repossessions by servicers
As described in a recent compliance bulletin, examinations have revealed that some servicers were engaging in unfair acts or practices by repossessing vehicles, even after consumers took intentional actions to prevent repossessions.
The timing of auto repossessions is commonly a surprise to consumers. They often lose personal property when the vehicle is repossessed or are unable to hold on to their job due to the lack of transportation. They also incur other significant costs, including the expense of finding alternative transportation, fees related to repossession, and negative marks on their credit reports.
In certain examinations, examiners found that auto servicers engaged in unfairly failing to obtain refunds for borrowers for add-on products that no longer provided a benefit. In other instances, they found that auto servicers misled consumers about the amount of their final loan payments after their normal payments were deferred due to financial difficulties – largely as a result of the COVID-19 pandemic.
Failure by credit reporting companies to conduct reasonable investigations into disputed debts
Credit reporting companies that assemble and evaluate information on consumers – as well as entities, such as banks and servicers, that furnish credit information – play a vital role in people’s ability to access credit. Credit reporting companies are required to comply with several regulations to help ensure their reporting is fair and accurate.
Under the Fair Credit Reporting Act, when a person disputes a debt on their credit report, the credit reporting companies must conduct a reasonable investigation into the accuracy of the information. Examiners, however, have found that the credit reporting companies commonly fail to conduct these investigations in a timely manner, and they also fail to review and consider all the relevant evidence submitted by consumers.
The CFPB released a report in March that highlighted how the credit reporting system is used to coerce families and individuals to pay medical bills that may not be accurate, are being disputed, or may not even be owed. Federal law requires credit reporting companies to ensure that medical bills reported on consumers’ credit reports are accurate. If furnishers of medical bills are contaminating the credit reporting system with inaccurate information, the CFPB expects credit reporting companies to limit their access to the system.
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