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CFPB Recovers $107M in Relief for 238,000 Consumers
Wednesday, November 4, 2015 6:50 AM

Examiners Uncover Illegal Practices in Student Loan Servicing, Mortgage Origination and Servicing, Consumer Reporting, and Debt Collection Markets

On Tuesday, the Consumer Financial Protection Bureau released its latest supervision report outlining the illegal practices uncovered by the Bureau’s examiners from May 2015 to August 2015. The Bureau found violations in the student loan servicing, mortgage origination and servicing, consumer reporting, and debt collection markets. The report shows that CFPB supervisory actions resulted in $107 million in relief to more than 238,000 consumers.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the CFPB has authority to supervise banks and credit unions with more than $10 billion in assets and certain nonbanks. Those nonbanks include mortgage companies, private student lenders, payday lenders, as well as nonbanks the Bureau defines through rulemaking as “larger participants.” To date, the Bureau has issued rules to supervise the larger participants in the markets of consumer reporting, debt collection, student loan servicing, international money transfers, and auto finance.

The CFPB often finds problems during supervisory examinations that are resolved without an enforcement action. Among the findings in this supervision report:

  • Student loan servicers allocated payments to maximize fees and failed to give consumers choices about how to apply payments.
  • Student loan servicers’ unfair practices increased fees and interest for borrowers.
  • Student loan servicers deceive borrowers about student loan late fees.
  • Mortgage servicers failed to automatically terminate mortgage insurance and reimburse consumers.
  • Furnishers lacked adequate policies for accurately reporting information to consumer reporting agencies and failed to respond to disputes.
  • Debt collectors used illegal tactics to contact consumers.

Bureau examiners did observe some positive steps taken by various institutions to improve compliance. For example, certain mortgage servicers have made significant improvements to their compliance audits, which led to prompt correction of problems in many instances. Other mortgage servicers conducted information technology reviews and identified inadequacies, leading them to replace outdated systems.

Additionally, certain student loan servicers took positive steps in cases where borrowers try to pay off their entire loan or account with a large lump sum but fall short of the total amount. In these instances, examiners observed that some servicers alert borrowers about unpaid balances, which can prevent them from accruing interest, having problems with their credit reports, or facing potential delinquency or default.

In this edition of Supervisory Highlights, the CFPB also announced that it has revised its exam appeals process. Where examiners find violations of law or other significant problems or weaknesses, they alert the institutions to their concerns and outline necessary remedial measures. When appropriate, the CFPB opens investigations for potential enforcement actions. The CFPB expects all entities under its supervision to respond to customer complaints and identify major issues and trends that may pose broader risks to their customers.

Review this edition of Supervisory Highlights