Catch up on the bureau’s recent actions related to the accounts receivable management industry.
08/29/2023 3:35 P.M.
3.5 minute read
The Consumer Financial Protection Bureau continues to issue enforcement actions, research reports and bulletins on a regular basis.
Here are a few of the bureau’s updates you should know about this week:
CFPB Seeks Comments on Proposal for Student Borrower Survey
The CFPB is seeking comments on a request for approval by the Office of Management and Budget (OMB) to conduct a survey of student loan borrowers.
The goal of the survey, if approved by the OMB, would be to understand the recipients’ borrowing decisions, experience managing their loans, and their expectations for the future of their loan process, according to a notice in the Federal Register.
The request for comments includes:
- Whether the collection of information is necessary for the proper performance of the functions of the CFPB, including whether the information will have practical utility;
- The accuracy of the CFPB’s estimate of the burden of the collection of information, including the validity of the methods and the assumptions used;
- Ways to enhance the quality, utility, and clarity of the information to be collected; and
- Ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments, which are due Sept. 1, will be summarized and/or included in the request for OMB’s approval.
To submit comments go to www.reginfo.gov/public/do/PRAMain, select “Currently under Review—Open for Public Comments” or by using the search function.
CFPB Sues CURO Group’s Installment Lender for Unlawful Loan-Churning Resulting in High Fees
The CFPB filed a lawsuit against Heights Finance Holding Company, previously known as Southern Management Corporation, and its subsidiaries, including Covington Credit and Quick Credit, for allegedly engaging in illegal loan-churning practices, according to a recent press release.
The bureau claims that the lender, now part of CURO Group Holdings, targeted financially distressed borrowers, coercing them into a cycle of frequent refinancing that led to exorbitant loan costs and fees. The lender, operating primarily in several southern states, allegedly identified struggling borrowers and “aggressively” pushed them to refinance multiple times, effectively trapping them in a cycle of debt, according to the bureau’s report. Many borrowers, including those with low incomes and impaired credit, were pushed into refinancing over a dozen times, generating significant revenue for the lender.
The CFPB’s lawsuit highlights the lender’s coercive tactics and employee incentive programs that encouraged refinancing, ultimately harming consumers. The lender is accused of falsely marketing refinancing as a solution for struggling borrowers, while in reality, it prolonged their indebtedness and increased their total borrowing costs. The bureau seeks to halt these alleged unlawful practices, compensate affected consumers, and impose civil penalties on the lender.
“Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices. The [bureau] alleges that Southern’s steering practices are unfair and abusive, and is taking action to address its wrongful practices,” according to the release.
CFPB Takes Action Against Freedom Mortgage and Realty Connect for Illegal Kickbacks
The bureau recently imposed penalties on Freedom Mortgage Corporation and Realty Connect USA Long Island for engaging in illegal kickback schemes, according to a press release.
Freedom Mortgage offered incentives, such as cash payments, subscription services and parties, to real estate brokers and agents in exchange for referring homebuyers to them for mortgage loans. This violation of the Real Estate Settlement Procedures Act was met with a cease-and-desist order and a $1.75 million penalty for Freedom Mortgage. Realty Connect, which accepted these kickbacks, will pay a $200,000 penalty and must cease its unlawful practices.
CFPB Director Rohit Chopra emphasized the importance of preventing anti-competitive actions.
“Freedom provided kickbacks to real estate brokers and agents—including those at Realty Connect—in return for mortgage referrals, a clear violation of federal law,” Chopra said in the press release. “The CFPB will be vigilant in rooting out anti-competitive behavior that interferes with consumers’ ability to choose financial products and services.”
The violations stemmed from Freedom Mortgage entering into marketing services agreements that were essentially fronts for mortgage referrals, along with providing valuable industry subscription services for free, contingent on being paired with a Freedom loan officer. Additionally, hosting events and offering gifts were part of the prohibited practices. Both companies are mandated to halt these activities and pay the stipulated penalties.