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MoFo Reenforcement The Enforcement Blog

Winter 2015 Supervisory Haiku-lights

Posted in CFPB, Fair Lending, Mortgage, Student Lending, Supervisory Highlights

Spring has sprung, technically speaking, but Old Man Winter is dragging his feet on the way out here on the East Coast. Maybe he was hanging around waiting for the Winter 2015 edition of Supervisory Highlights, which came out right before the turn of the seasons. Spring is, of course, prime time for haikus, so we are gearing up for Sakura Matsuri by delivering some key takeaways from the CFPB’s supervisory observations in our favorite poetic form.

tweeting about loans
in 140 characters?

Most of the CFPB’s Title XIV mortgage origination rules took effect in January 2014, and supervision of compliance with the rules began four months later. This issue of Supervisory Highlights covers a number of examination findings and observations on compliance with the rules in the latter half of 2014. The observations run the gamut, from providing untimely Good Faith Estimates, to failing to offer compliance training to an institution’s board members.

One of the more interesting observations was that institutions were not subjecting social media advertising to monitoring or compliance audit. According to Supervision, loan originators advertised the length of payment, amount and number of payments, and finance charges on social media without providing disclosures required under Regulation Z. You can fit all those disclosures into 140 characters or less, right? #goodluck #unfollow

public assistance
money is as green as any
under ECOA

After extensive loan origination reviews, Supervision observed that “many lenders operate in compliance with” the ECOA and Regulation B. Violations were found at some institutions, however, related to “the failure to consider public assistance income or other sources of income protected by Regulation B.” The ECOA prohibits discriminating against an applicant on the basis that all or part of his or her income derives from public assistance. Regulation B provides that creditors must consider public assistance and other non-employment income, and must not discourage, in written materials like advertisements, prospective applicants with these sources of income from applying.

Supervision observed that, in fact, in some cases, applicants were automatically declined if they relied on non-employment income, such as social security or retirement benefits, and that some marketing materials contained written statements regarding this prohibition that may have discouraged applicants receiving public assistance from applying. While narrow exceptions to the ECOA’s prohibitions exist, they must be considered on a case-by-case basis; the Bureau cautioned that a blanket practice of denying applicants who rely on public assistance income without an assessment of the applicants’ particular situations violates the ECOA and Regulation B. Supervision noted that the creditors found in violation were directed to provide remediation to affected applicants and prospective applicants, including reimbursement of fees and interest; the opportunity to reapply; and additional remuneration for consumers who lost their homes subsequent to an improper denial.

used every syllable
in haiku’s first line

Really?? Okay, okay . . .

in debt collection
don’t threaten legal action
unless you mean it

In line with recent enforcement activity, Supervision made several observations involving debt collectors performing collection services of defaulted student loans in a manner the Bureau found violated the FDCPA. Among the observations, collectors were found to have overstated the benefits of loan rehabilitation programs, exaggerating the impact of the program on the borrower’s credit report and credit score and the extent to which collection fees would be waived upon completion of the program. Supervision also found to have threatened to take action against certain consumers, creating the impression that they would be sued for nonpayment when in fact none of the collection agents knew whether legal action would be taken or intended to take legal action.