WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today issued a Supervisory Highlights report, which shines a light on legal violations identified by the CFPB’s examinations in the first half of 2021. The report also highlights prior CFPB supervisory findings that led to public enforcement actions in the first half of 2021.
“Today’s report reveals that irresponsible or mismanaged firms harmed Americans during the COVID-19 pandemic," said CFPB Director Rohit Chopra. "We will continue to supervise firms to halt harmful practices before they become widespread."
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB has the authority to supervise large banks, thrifts, credit unions with assets over $10 billion, and certain nonbanks for compliance with Federal consumer financial law. Bureau-supervised nonbanks include mortgage companies, private student lenders, and payday lenders, as well as nonbanks the Bureau defines through rulemaking as “larger participants” of other consumer financial markets.
CFPB examiners often find problems during supervisory examinations that are resolved without an enforcement action. The violations described in this report have occurred in areas such as auto loan servicing, consumer reporting, debt collection, deposits, fair lending, mortgage origination and servicing, private student loan origination, payday lending, and student loan servicing.
Mortgage servicers charged improper fees to borrowers enrolled in CARES Act forbearance
This past year, the CFPB prioritized mortgage servicing supervision due to the increase in borrowers applying for and receiving mortgage forbearance due to the COVID-19 pandemic. While the CARES Act prohibits mortgage servicers from imposing fees on consumers receiving CARES Act forbearance, CFPB examiners found that mortgage servicers still charged borrowers late fees and default-related fees. These illegal fees exacerbated the economic hardships experienced by struggling homeowners in 2021. Examiners observed that mortgage servicers failed to refund some of the fees until almost a year later.
In August 2021, the CFPB published a report detailing 16 large mortgage servicers’ response to the COVID-19 pandemic. The supervisory data showed that some servicers struggled to assist distressed homeowners. The CFPB is actively working to support an inclusive and equitable economic recovery, which means ensuring all mortgage servicers meet their homeowner protection obligations under applicable consumer protection laws. Recently, the CFPB issued a joint statement with the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators to clearly define their respective supervisory and enforcement authorities to protect homeowners and address any compliance failures.
Examiners found fair lending violations
CFPB examiners identified several violations of the Equal Credit Opportunity Act (ECOA) by mortgage lenders. The examination team found that mortgage lenders discriminated against African American and female borrowers in the granting of pricing exceptions, compared to non-Hispanic white and male borrowers.
Specifically, examiners found lenders lacked oversight and control over how mortgage loan officers granted pricing exceptions to customers. Examiners identified lenders with statistically significant disparities for incidences of pricing exceptions for African American and female applications compared to similar non-Hispanic white and male borrowers.
CFPB examiners also found that lenders improperly considered small business applicants’ religion in their credit decisions. For religious institutions applying for small business loans, some lenders improperly utilized a questionnaire that contained explicit inquiries about an applicant’s religion.
In addition to pricing and religious discrimination, the CFPB is committed to rooting out all forms of lending discrimination, including redlining. The Bureau’s recent complaint against Trustmark National Bank, along with Director Chopra’s remarks about the complaint, demonstrate the CFPB will pursue and address both high- and low-tech forms of fair lending violations.
Payday lenders improperly debited consumer bank accounts
CFPB examiners found that lenders improperly debited or attempted to debit consumers’ bank accounts. In some instances where consumers called to authorize a loan payment by debit card, lenders’ systems erroneously indicated the transactions did not process, resulting in the improper debiting of additional, identical amounts or unauthorized attempts. Consumers had no reason to anticipate debits or attempted debits and could not prevent them from occurring. These practices significantly harmed consumers by depriving them of access to their funds and creating the risk of nonsufficient fund fees or overdraft fees levied by their banks.
These violations demonstrate the ongoing risk that irresponsible payday lending practices pose to American consumers. The CFPB will continue to exercise and enforce its authority in the payday lending market to protect vulnerable consumers and their economic dignity.
Remittance providers failed to investigate notice of errors in timely fashion
CFPB examiners found consumers were deprived of their rights by remittance providers who received notices of errors alleging that remitted funds had not been made available to designated recipients by disclosed dates of availability. Providers then failed to investigate whether deductions imposed by some foreign banks constituted a fee that the institutions were required to refund to the sender as part of the error resolution process.
Today’s report aims to share information that all industry participants can use to ensure their operations remain in compliance with federal consumer financial law. In all cases where CFPB examiners find problems, they alert the company to their concerns, and, in many instances, outline recommended remedial measures. When appropriate, the Bureau opens investigations for potential enforcement actions.
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit consumerfinance.gov.