CFPB Releases Latest Supervisory Highlights Report
9/13/2017 7:05:00 PM
The summer 2017 report includes updated information on FDCPA compliance for debt collectors and entities in the small-dollar lending industry.
The Consumer Financial Protection Bureau has released the 16th edition of its Supervisory Highlights Report with updates on examinations of businesses in debt collection, auto lending, mortgages, short-term small-dollar lending and credit card account management.
The CFPB’s supervisory activities from January through June 2017 led to or supported public enforcement actions that resulted in about $1.15 million in consumer remediation and an additional $1.75 million in civil penalties, according to the report.
The report’s findings represent alleged problems at individual companies and are not necessarily indicative of the practices of the entire collection industry or other financial services industries. The report provides guidance to industry participants on how their operations can remain in compliance with the consumer financial laws and includes examples of common opportunities for improvement.
The CFPB’s examination of businesses in debt collection identified violations of the Fair Debt Collection Practices Act including unauthorized communications with third parties, false representations regarding credit reports, and communications with consumers at inconvenient times, according to the report.
At one or more entities reviewed by the CFPB, examiners found that debt collectors followed client instructions that led to violations of the FDCPA and recommended they mitigate the risk by determining if the client’s instructions would violate the FDCPA before moving forward.
In other cases, CFPB examiners found that one or more entities did not confirm that the correct party had been contacted prior to beginning collection activities, according to the report.
Under section 805(b) of the FDCPA, a debt collector generally may not communicate with a person other than the consumer in connection with the collection of a debt without permission from the consumer.
As a result of not confirming the correct party had been contacted, one or more entities communicated with an unauthorized third party in connection with debt collection.
The entities, in response to the CFPB’s findings, enhanced consumer verification processes before disclosing the debt or the nature of the call to the consumer, according to the report. The enhanced process includes verification of first and last names and confirmation of date of birth or last four digits of Social Security numbers.
The CFPB examiners also found cases of entities communicating with consumers at a time known to be inconvenient, including outside of the hours of 8 a.m. to 9 p.m.
Under section 805(a)(1) of the FDCPA, a debt collector may not communicate with a consumer in connection with the collection of any debt at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer.
In response to the violations, CFPB supervision directed one or more entities to enhance compliance monitoring for dialer systems to ensure that call paramenters consider the consumer’s last known address in addition to the consumer’s area code, according to the report.
Overall, the CFPB’s examinations gauge the adequacy of the entities’ compliance management systems and communications with consumers, it states.
Short-Term, Small Dollar Lending
The CFPB’s supervision program also covers entities that offer or provide payday loans, including other short-term, small dollar products.
The CFPB proposed a rule containing requirements related to small-dollar lending in June 2016 and reportedly could scale back the rule to concentrate on short-term loans, ACA International previously reported.
The CFPB started its payday lending supervisory program in 2012 and has conducted multiple examinations for compliance with Federal consumer laws such as Regulation E, which implements the Electronic Fund Transfer Act.
Overall, during review of entities that offer small dollar products to consumers, examiners found compliance management system weaknesses and violations of federal consumer financial law, including the Dodd-Frank Act’s prohibition of Unfair, Deceptive or Abusive Acts or Practices (UDAAPs), according to the report.
Specific to practices by small-dollar lenders collecting their own debt, for example, examiners found that one or more entity contacted consumers at their workplace; made repeated calls to third parties; and made statements to consumers that they must immediately contact the lender to avoid additional collection activity, including being visited at home or work, according to the report.
Other Financial Services Industries
The CFPB also found compliance issues in the areas of auto loan servicing and credit card account management.
CFPB examiners found that credit card entities are generally in compliance with federal consumer financial laws, according to the report, however some companies did not disclose all pay-by-phone options for consumers.
During one or more examinations, credit card companies provided consumers with the opportunity to pay their credit card bills by mail, online, or in person free of charge or by using one of two pay-by-phone services. Examiners found in some cases representatives did not follow scripts for payment options and often only dictated the script for fee-based expedited payments, resulting in consumers incurring fees that could have been avoided, according to the report.
The CFPB recently released a compliance bulletin on fees for phone payments, ACA International previously reported. The bulletin is also outlined in the Supervisory Highlights report.
In one or more recent exams of auto loan servicers, CFPB examiners found that entities were repossessing vehicles after the repossession was supposed to be cancelled. Servicers at these companies wrongfully identified the consumers’ account as remaining delinquent, meaning orders for repossession were not cancelled on a timely basis, according to the CFPB’s report.
In response to the findings, the entities reported the consumers received a refund for the repossession fees and implemented a system that requires repossession agents to verify that the repossession order is still active immediately prior to repossessing the vehicle, according to the report.
Under the Dodd-Frank Act, the CFPB has supervisory authority over larger participants of certain markets for consumer financial products or services as the bureau defines by rulemaking.
For more information, members should review the Summer 2017 Supervisory Highlights Report, especially the sections relating to debt collection and small-dollar lending.
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