Two Supervisory Highlights for Spring 2024

The Consumer Financial Protection Bureau (CFPB) has released two Supervisory Highlights for Spring 2024, covering Fair Credit Reporting Act (FCRA) Compliance, Supervision, Credit Reports, Scores and Identity Theft and Mortgage Servicing, Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs), Deceptive Practices, and Mortgages. These Supervisory Highlights identify various issues and offer guidance to organizations on ensuring compliance with federal regulations concerning credit reporting and mortgage loan operations.  If your focus is on mortgage servicing or credit reporting, these two CFPB Supervisory Highlights are for you.  This blog provides a short synopsis of each. The full reports can be downloaded from this link: https://www.consumerfinance.gov/compliance/supervisory-highlights/ 

Spring Supervisory Highlights – Issue 32 

Supervisory Highlights: Consumer Reporting Companies and Furnishers

Topic:  The Fair Credit Reporting Act, Supervision, Credit Reports and Scores, and Identity Theft – There is a consistent theme regarding how Consumer Reporting Companies (CRC)  and Furnishers execute when it comes to consumer identity theft.  This Supervisory Highlight details the challenges of working through identify theft issues and areas that both CRSs and Furnishers need to focus on to be able to deliver expected regulatory requirements. 

Consumer Reporting Companies: 

  • Identity Theft Concerns 
  • Recent examinations of CRCs revealed failures to promptly implement blocks of information upon receiving necessary documentation related to alleged identity theft, without making reasonable determinations for declining to block. 
  • Additionally, CRCs were found to have failed in providing required notice within five business days of declining to block information, attributed to system issues or human error. 
  • Examiners discovered CRCs’ failure to furnish consumers with a complete summary of rights as mandated by the CFPB’s model summary, either by omitting required information or neglecting to provide the summary altogether. 
  • Human Trafficking: 
  • Recent examinations found CRCs failing to promptly block identified adverse information within the required four business days. 
  • CRCs’ accuracy procedures were insufficient in assuring the reliability of information provided by furnishers. 

Furnishers: 

  • FCRA and Regulation V 
  • Examiners noted ongoing violations by furnishers of the FCRA duty to promptly correct and update furnished information, particularly concerning issues such as the date of first delinquency, bankruptcy filing dates, lease returns, and failure to report fraud. 
  • Furnishers were found to continue providing disputed information to CRCs without notifying them of the dispute, and failing to conduct reasonable investigations of direct disputes as required by Regulation V. 
  • Further violations included failure to investigate direct disputes, deleting trade lines without completing investigations, and neglecting to notify CRCs of first delinquency dates on relevant accounts. 
  • Furnishers were also found to provide inaccurate identity theft information to CRCs after consumers submitted identity theft reports. 

Spring Supervisory Highlights – Issue 33 

Supervisory Highlights, Mortgage Servicing Edition

Topic – Mortgage Servicing, Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs), Deceptive Practices, and Mortgages – The last few years have brought significant regulatory change to the mortgage processing arena.  This Supervisory Highlight provides insight into regulatory requirements that are currently challenging mortgage processors.   

Mortgage Servicing: 

  • Examiners discovered instances where servicers engaged in unfair practices by imposing property inspection fees on Fannie Mae loans, despite Fannie Mae guidelines prohibiting such inspections. 
  • Servicers were found to assess unauthorized late fees, including fees exceeding the loan agreement limits and fees charged on accounts with active loss litigation agreements. 
  • Violations of Regulation X were noted as servicers failed to waive existing fees after borrowers accepted streamlined COVID-19 loan modifications. 
  • Despite attempts to make timely escrow disbursements, payments did not reach payees, with servicers delaying attempts to resend the payments for months. 
  • Deceptive practices were identified when servicers prematurely notified consumers of approval for streamlined loss mitigation options before confirming eligibility. 
  • Misleading notices were sent to consumers prompting loss mitigation applications, despite many not requiring payments due to current status, participation in a trial modification plan, or having an inactive loan. 
  • Regulation X violations were found in acknowledgment notices sent to borrowers, lacking specification on the completeness of their loss mitigation applications. 
  • Servicers failed to establish timely live contact with delinquent borrowers as required by Regulation X, neglecting efforts with hundreds of delinquent borrowers. 
  • Thousands of delinquent borrowers did not receive written early intervention notices within the stipulated time frames, breaching Regulation X provisions. 
  • Servicers neglected to retain records documenting actions taken with borrowers’ mortgage loan accounts, violating Regulation X requirements. 

Summary

In conclusion, the CFPB’s Supervisory Highlights for Spring 2024 shed light on significant compliance issues within the realms of Fair Credit Reporting Act (FCRA) and Mortgage Servicing practices. These reports serve as a valuable resource for organizations operating in these sectors, offering insights into areas of improvement and guidance on adhering to federal regulations. By addressing the identified deficiencies and implementing the recommended measures, companies can enhance their practices, mitigate risks, and ensure better protection for consumers in credit reporting and mortgage servicing transactions. Compliance with regulatory standards not only fosters trust and transparency but also reinforces the integrity of the financial system as a whole. As the regulatory landscape evolves, staying informed and proactive in compliance efforts remains essential for maintaining sound business practices and upholding consumer rights. 

Author: Ken Evancic

Ken.Evancic@ResourceManagement.com

As a consultant for Resource Management Services, Ken provides consulting, training and mentoring in all phases of collection and recovery, in addition to auditing third party vendors.

Ken Evancic is a Vice President at Resource Management Services, Inc.  Ken Evancic is a collections veteran with over 25 years experience. He has managed all phases of collection, including all levels of delinquency, automated dialer units, early out agency management, recovery, and skip tracing. In addition to collections operations management, he has lead initiatives in the areas of performance management, collections strategy development, collector and manager training, collector desktop design, collections reporting systems, and risk and compliance.

As a consultant for Resource Management Services, Inc., Ken has specialized in developing and completing third party compliance and performance audits for collections agencies and collection attorney firms for many top credit grantors and debt buyers. He has leveraged his 25 years of experience to develop multiple collector and collection management training classes designed to maximize collector performance. In addition to collection training, Ken helped develop and facilitates the RMS Third Party Vendor Auditing training. 

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