March 22, 2019

Winter 2019 Supervisory Highlights

3 min

The CFPB published its second issue of the agency's Supervisory Highlights (winter 2019) on March 12, 2019. The Winter 2019 Supervisory Highlights mark the first published under Director Kathy Kraninger, and the second issuance since the departure of former Director Cordray. The current issue appears to be in keeping with the sentiment first expressed by former Acting Director Mick Mulvaney, that the Bureau would enforce the laws as written, but not push the envelope. Like the previous Summer 2018 Supervisory Highlights published under former Acting Director Mulvaney, the current issue contains the notice that "[t]his document does not impose any new or different legal requirements." The current issue also continues the trend of not including a summary of the dollar amounts of restitution payments resulting from supervisory resolutions.

Specific financial services industries discussed in the Supervisory Highlights include automobile loan servicing, deposits, mortgage servicing, and remittances.

Automobile loan servicing: CFPB examiners found that after the loss or repossession of a vehicle, auto financing services allegedly miscalculated, misapplied, or did not fully apply rebates of ancillary products (such as extended warranties), resulting in increased deficiencies. Furthermore, services misrepresented to consumers that the final deficiency balance included all credits and rebates. CFPB examiners identified such practices as deceptive under the Bureau's unfair, deceptive, or abusive acts or practices (UDAAP) principles.

Deposits/Online Bill-Pay: Another UDAAP issue, CFPB examiners found that certain online bill-pay services misrepresented when a payment would be debited from a consumer's account; specifically, paper checks were sent several days before the consumer's chosen payment date, without notice to the consumer.

Mortgage servicing: Examiners identified a variety of issues related to UDAAPs in mortgage servicing, including unfair acts or practices for charging consumers unauthorized amounts, deceptive acts or practices for misrepresenting aspects of private mortgage insurance (PMI) cancellation, violation(s) of the Real Estate Settlement Procedures Act (RESPA)/Regulation X loss mitigation requirements, and potentially misleading statements to successors-in-interest on reverse mortgages.

  • Overcharged Late Fees: Servicers based late fees on the full periodic payment of principal, interest, taxes, and insurance, despite the consumer agreeing in the note to late fees based solely on principal and interest.
  • PMI Cancellation: Servicers misrepresented that consumers did not qualify for PMI cancellation when the relevant amortization schedules had not yet reach 80% loan-to-value (LTV), but the borrowers had in fact reached 80% LTV by making additional principal payments.
  • Loss Mitigation: Servicers offered short-term forbearance programs to consumers without notifying consumers that they might qualify for more assistance upon completion of a full loss mitigation application.
  • Successor-in-Interest Notices: Servicers utilized inadequate notices that did not fully alert successors-in-interest to their rights and obligations – specifically, to qualify for an extension of time to delay or avoid foreclosure.

Remittances: CFPB examiners found that companies failed to refund fees and applicable taxes to consumers when remitted funds were not available to recipients on time, in violation of the Remittance Rule. The Supervisory Highlights note that the Remittance Rule was violated even though the error was on the part of a non-agent foreign payer institution – regardless of the entity responsible for the error, the remittance transfer provider must refund fees and taxes to the consumer when required under the Remittance Rule.

Like the Summer 2018 Supervisory Highlights, the current issue focuses on clear legal violations and application of the Bureau's UDAAP principles. The CFPB remains focused on several key areas, including auto finance servicing and mortgage servicing.