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CFPB Issues Supervisory Highlights (Fall 2015), Including Discussion of Fair Lending Compliance

Picture1The federal Consumer Financial Protection Bureau (CFPB) recently released its Supervisory Highlights (Issue 9, Fall 2015), a copy of which is available here.

The CFPB reported that, among other things, its “supervisory activities have either led to or supported six recent public enforcement actions, resulting in $764.9 million being returned to consumers and $50.7 million in civil money penalties,” plus supervisory resolutions resulting in “restitution of approximately $107 million to more than 238,000 consumers.”

In addition, the CFPB provided a summary discussion of its fair lending and ECOA compliance examination methodologies, as well as a number of steps lenders may take to limit the risk of ECOA violations due to disparate outcomes in underwriting (at pp. 27-32).

The issues the CFPB reported in this Supervisory Highlights bulletin include:

Mortgage Servicing:

  • Failures to maintain adequate policies and procedures to identify and communicate with successors in interest of deceased borrowers
  • Failures to identify with specificity all loss mitigation options available, including soliciting loan mod applications when servicer’s records showed borrower did not qualify
  • Failures to evaluate loan mod applications for all options available based on loan owner’s requirements
  • Failures to share and update information with all relevant servicer personnel, and with foreclosure counsel
  • Failures to maintain schedules of fees and servicing data in manner that facilitates compilations within five days
  • Proving 30 days for borrowers to submit missing loan mod application documents but then denying the application within the 30 days
  • Loan mod application denial letters that failed to state the particular borrower had a right to appeal, rather than merely providing a generic disclosure
  • Loan modifications that required borrowers to sign waivers, releases, or statements as to defenses, set-offs, or counterclaims
  • Failures to automatically terminate PMI for borrowers that are current on their loans on the termination date, in alleged violation of the Homeowners Protection Act (HPA)
  • Incorrectly telling borrowers seeking to cancel PMI that they had to wait until the mortgage balance reached 75 percent of the property’s current value, and until 24 months after origination to cancel PMI, in alleged violation of the HPA
  • Holding unearned PMI premiums, or keeping unearned PMI premiums in borrower escrow accounts indefinitely, rather than returning them directly to borrowers within 45 days, in alleged violation of the HPA
  • Charging pay-by-phone fees when such charges not allowed under mortgage loan instruments or by state law
  • Listing debt amounts in debt validation letters that servicer could not verify as accurate, instead of only accurate and verifiable debt amounts
  • Failures to provide timely debt validation notices

Mortgage Origination:

  • Settlement charges exceeding amounts stated in GFE, by allowed tolerances or when not allowed at all
  • Failures to properly document changes in circumstances to support increases in settlement charges beyond allowable tolerances
  • Inadequate or inaccurate descriptions of purpose and amount of fees in settlement statements
  • Failures to timely provide disclosures as to homeownership counseling organizations, or at all
  • Failures to provide accurate information about the loan originator’s intent to retain, assign, sell or transfer servicing
  • Failures to reimburse borrowers for understated APRs and finance charges
  • Multiple and inconsistent privacy notices used company-wide or as to same loan
  • Privacy notices that did not identify affiliates or that information was shared with the affiliates
  • Employees performing loan originator activities without being registered with the NMLSR

Consumer Reporting:

  • Failures to “establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information furnished” to consumer reporting agencies (CRAs), including as to both loans and deposit accounts
  • Failures to include in adverse actions notices “the name, address, and telephone number of the CRA that provided the information relied upon when the adverse action was taken.”
  • Weaknesses in “processes, policies, and procedures for ensuring proper handling of disputes in compliance with their obligations under the FCRA,” including failures to distinguish FCRA disputes from other types of disputes, and failures to monitor and track direct and indirect FCRA disputes
  • Policies and procedures that required deleting disputed trade lines, rather than conducting an investigation as to the dispute

Debt Collection:

  • Failures to “always state during subsequent phone calls that the calls were from debt collectors”
  • Failures to maintain adequate systems to prevent direct contact with consumers represented by counsel, and to prevent calls at the consumer’s place of work when not allowed by the employer
  • Failures to remove or block unwanted calls in dialer systems
  • Notes being placed in only one of several places in account systems
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Ralph Wutscher's practice focuses primarily on representing consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. He represents the lending and financial services industry as a litigator, and as regulatory compliance counsel. For more information, see