CFPB Report Highlights Errors In Mortgage And Student Loan Servicing

CFPB FDCPA FCRA UDAAP Student Lending HMDA

On October 28, the CFPB released the fifth edition of its Supervisory Highlights report. The report highlighted the CFPB’s recent supervisory findings of regulatory violations and UDAAP violations relating to consumer reporting, debt collection, deposits, mortgage servicing and student loan servicing. The report also provided updated supervisory guidance regarding HMDA reporting relating to HMDA data resubmission standards.  With respect to consumer reporting, the report identified a variety of violations of FCRA Section 611 regarding dispute resolution.  The report noted findings of several FDCPA and UDAAP violations in connection with debt collection, including: (i) unlawful imposition of convenience fees; (ii) false threats of litigation; (iii) improper disclosures to third parties; and (iv) unfair practices with respect to debt sales.  For deposits, the report identified several Regulation E violations found, including: (i) error resolution violations; (ii) liability for unauthorized transfers; and (iii) notice deficiencies.   The report outlines four main compliance issues identified in the mortgage servicing industry: (i) new mortgage servicing rules regarding oversight of service providers; (ii) delays in finalizing permanent loan modifications;  (iii)  misleading borrowers about the status of permanent loan modifications; and (iv) inaccurate communications regarding short sales. Finally, the report outlines six practices at student loan servicers that could constitute UDAAP violations: (i) allocating the payments borrowers make to each loan, which results in minimum late fees on all loans and inevitable delinquent statuses; (ii) inflating the minimum payment due on periodic and online account statements; (iii) charging late fees when payments were received during the grace period; (iv) failing to give borrowers accurate information needed to deduct loan interest payments on tax filings; (v) providing false information regarding the “dischargeable” status of a loan in bankruptcy; and (vi) making  debt collection calls to borrowers outside appropriate hours.