The CFPB released yesterday its Supervisory Highlights for Fall 2016.  The Supervisory Highlights state that, taking into account non-public enforcement actions, “recent supervisory activities […] resulted in approximately $11.3 million in restitution to more than 225,000 consumers” during the May-August 2016 review period.

The Highlights reflect continued focus by the CFPB on many of the same issues and products it has targeted throughout the past several quarters, including automobile loan origination and servicing, debt collection, and mortgage origination, as discussed more fully below.

At the same time, the Supervisory Highlights flag a renewed focus on student loan servicing, including in connection with (i) denials of applications for income-driven repayment plans; (ii) failures to provide borrowers with “effective” choices on how to allocate their payments among various loans; and (iii) providing misleading billing statements about the allocation of payments to principal and interest when funds are “paid ahead” for future months.

Contemporaneous with the release of the Supervisory Highlights for Fall 2016, the CFPB also formally released:

In addition, the Supervisory Highlights contain a lengthy discussion of supervisory observations relating to fair lending, with a particular focus on the assessment of redlining risk and the provision of language services to non-English-proficient customers.

In addition to the student loan servicing issues described above, specific issues noted in the Fall 2016 Supervisory Highlights include:

  • For automobile servicing, the CFPB identified as an unfair practice one or more auto loan servicers that refused to return personal property found in a repossessed vehicle until the borrower paid a storage fee, depending upon state law and contract terms.
  • For mortgage origination, the CFPB reported that one or more mortgage originators relied on alternative income documentation, but failed to verify properly a consumer’s total monthly income in determining ability to repay. The CFPB also found certain compliance management system weaknesses at one or more mortgage originators.
  • For debt collection:
    • The CFPB observed favorably that the use of guides and scripts by debt collectors, supplemented by monitoring and discipline, resulted in improved adherence to compliance policies.
    • On the other hand, the CFPB noted that one or more debt collectors engaged in a number of Fair Debt Collection Practices Act violations including: charging consumers unlawful convenience fees; making false representations to consumers about consumers’ creditworthiness and credit scores, the need for immediate payment to prevent damage to consumers’ credit, and the pending revocation or expiration of the ability to settle the collection account; and unlawfully disclosing to a third party the debt owed by the consumer.
    • The CFPB also noted that one or more debt collectors engaged in a number of Fair Credit Reporting Act violations, including inadequate dispute handling and failing to provide guidance or training to employees regarding the difference between FCRA disputes and general consumer inquiries or complaints. The CFPB also noted instances where one or more debt collectors failed to provide consumers with a copy of the terms of authorization for preauthorized electronic fund transfers as required by Regulation E.
Photo of David Stein David Stein

David Stein advises clients on credit reporting, financial privacy, financial technology, payments, retail financial services, and fair lending issues. He assists a broad range of financial services firms, consumer reporting agencies, financial technology companies, and their vendors with regulatory, compliance, supervision, enforcement, and…

David Stein advises clients on credit reporting, financial privacy, financial technology, payments, retail financial services, and fair lending issues. He assists a broad range of financial services firms, consumer reporting agencies, financial technology companies, and their vendors with regulatory, compliance, supervision, enforcement, and transactional matters.

Mr. Stein has significant experience advising clients on compliance with the FCRA, GLBA, ECOA, EFTA, E-Sign Act, TILA, TISA, FDCPA, Dodd-Frank Wall Street Reform and Consumer Protection Act, and FTC Act, as well as state financial privacy laws. Mr. Stein is a member of the firm’s fintech and artificial intelligence initiatives and works with clients on issues related to cutting edge technologies, such as blockchain, virtual currencies, big data and data analytics, artificial intelligence, online lending, and payments technology.

Mr. Stein previously served in senior regulatory, policy-making, and management positions at the Consumer Financial Protection Bureau (CFPB) and the Federal Reserve Board (FRB). He played a significant role in developing regulations and policy on credit reporting, financial privacy, retail payments systems, consumer credit, fair lending, overdraft services, debit interchange, unfair or deceptive acts or practices, and mortgage origination and servicing. Mr. Stein draws upon his government experience in representing clients before the CFPB, the FRB, and other regulatory agencies and leverages his insights into the regulatory process to provide clients with practical, actionable advice.

Photo of Nikhil Gore Nikhil Gore

A member of the international arbitration and financial institutions practices, Nikhil V. Gore represents sovereign states and U.S. and global firms in international treaty-based and commercial disputes. He also regularly represents U.S. financial institutions, and the U.S. branches and affiliates of foreign financial…

A member of the international arbitration and financial institutions practices, Nikhil V. Gore represents sovereign states and U.S. and global firms in international treaty-based and commercial disputes. He also regularly represents U.S. financial institutions, and the U.S. branches and affiliates of foreign financial institutions, in investigations and inquiries involving the Federal Reserve, OCC, FDIC, CFPB, and state banking regulators.

Mr. Gore has served as counsel in investment and commercial arbitrations spanning several industries and a variety of regions, including Asia, Eastern Europe, North America, and Southern Africa. Additionally, he has expertise in the law of the sea, and was part of the Covington team that secured an order from the International Tribunal for the Law of the Sea, which required Russia to release three Ukrainian naval vessels and twenty-four servicemen detained in the Black Sea in 2018.

In his financial institutions practice, Mr. Gore has experience with enforcement actions and investigations relating to the Bank Secrecy Act, the federal criminal money laundering statutes, the full range of safety and soundness issues (including, in particular, supervisory reviews of bank control functions), and fair lending and consumer compliance. Mr. Gore is a regular contributor to the firm’s financial services blog.