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FDIC releases October 2024 enforcement actions
On November 29, the FDIC released a list of administrative enforcement actions taken against banks and individuals in October. Specifically, the October actions included a consent order to address alleged unsafe and unsound banking practices, two orders assessing civil money penalties for alleged violations relating to the Flood Disaster Protection Act, and one combined order of prohibition and order for restitution relating to loan application referrals. The publicly-available actions included a termination of a consent order previously issued to a Washington State-based insured state nonmember bank.
OCC releases its November CRA evaluations
On December 2, the OCC released its CRA performance evaluations that became public during the month of November. The OCC evaluated 19 entities, including national banks, federal savings associations, and insured federal branches of foreign banks. The OCC uses four ratings: Outstanding, Satisfactory, Needs to Improve, and Substantial Noncompliance. Of the 19 evaluations reported by the OCC, 16 entities were rated “Satisfactory,” three entities were rated “Outstanding.” No evaluated entities received either a “Needs to Improve” or “Substantial Noncompliance” rating.
CFPB proposed judgment seeks to bar individuals from debt-relief services, dissolve companies
On December 4, the CFPB filed a proposed stipulated judgment against a student loan debt-relief company and its owner to resolve its 2021 action against defendants for allegedly charging borrowers more than $3.5 million in unlawful advance fees. As previously covered by InfoBytes, the Bureau alleged that between 2015 and 2019, the defendants violated the Telemarketing Sales Rule and the CFPA by unlawfully marketing and enrolling borrowers in the company’s purported debt relief services.
If approved by the court, the defendants would (i) permanently be banned from offering or providing consumer financial products or services or using or selling any customer information, and (ii) pay a civil money penalty, in this case $2,000, due to the defendants’ inability to pay a higher penalty. It would also require the owner to dissolve both the business and a related business that was engaged in the allegedly unlawful activities.
District Court orders auto loan servicing company to pay $42M to CFPB
On November 26, the U.S. District Court for the Northern District of Georgia granted the CFPB’s motion for default judgment against the defendant, an auto loan servicing company, determining that the defendant’s bankruptcy filing did not stay the civil action. The court found the defendant liable for violating the CFPA, resulting in wrongful activation of starter-interruption devices (SIDs), failure to refund unearned guaranteed asset protection (GAP) fees, overbilling for insurance, misapplication of consumer payments, and wrongful repossession of vehicles. The court ordered the defendant to pay over $42 million in combined damages, restitution, interest and civil penalties, as well as enjoin permanently the defendant from future violations.
As previously covered by InfoBytes, the CFPB initially sued the auto loan servicer for allegedly engaging in unfair acts and practices in violation of the CFPA, including: wrongfully activating starter-interruption devices, which are devices that warn consumers with beeps or disable their car altogether when they make a loan payment late; failing to ensure refunds of over millions of dollars of GAP insurance premiums after consumers paid off their loan early or their car was repossessed by the auto-loan servicer; erroneously billing 34,000 consumers for collateral-protection insurance by charging consumers twice each billing cycle; wrongfully applying extra consumer payments first to late fees instead of accrued interest; and wrongfully repossessing consumers’ cars dozens of times.
The court noted its most recent decision was supported by expert testimony to quantify damages for wrongful repossessions, erroneous SID disables, and erroneous warning tones. However, the injunctive relief granted by the court was noted as largely “academic,” since the defendant has already ceased operations.
Bowman delivers speech on Fed policymaking
On November 20, Fed Governor Michelle Bowman delivered a speech discussing the Fed’s dual mandate of maximum employment and price stability, noting the inherent challenges in balancing these goals in light of recent economic conditions. Governor Bowman discussed the recent vote to lower the federal funds rate by one-half of a percentage point, and provided an analysis of current economic indicators, including the strength of the labor market, strong household spending, and persistent inflation particularly in housing services. Bowman emphasized the importance of relying on the best available data, while acknowledging the imperfections and uncertainties inherent in economic forecasting.
In discussing banking regulation and supervision, Bowman emphasized the need for a balanced approach that promotes the safe and sound operations of banks and economic growth and efficiency. She cautioned against “regulatory overreach” and stressed the importance of identifying and addressing problems without imposing unnecessary burdens on the banking system. Bowman also highlighted the need for transparency and accountability in regulatory actions.
FDIC, OCC issues CRA evaluation schedules
On November 26, the OCC released its schedule for its CRA evaluations to take place in the first and second quarters of 2025. The OCC encouraged public comments on the CRA activities of the national banks and federal savings associations that will be evaluated. Comments should be sent to the banks at the addresses listed in the schedule or to the appropriate OCC supervisory office before the evaluation month. The OCC also noted it will consider all public comments received before the end of the CRA evaluation.
Similarly, on November 29, the FDIC released the list of financial institutions scheduled for CRA examinations in the first and second quarters of 2025. The examinations are scheduled based on a bank’s asset size and CRA rating, with specific intervals for institutions with assets of $250 million or less. The schedules are subject to change based on various factors, such as additional time needed for certain examinations or new applications for deposit facilities.
CFPB updates supervision and enforcement procedures
On November 29, the CFPB published a final rule in the Federal Register to make “ministerial updates” to its supervision and enforcement procedures, effective upon publication, to reflect recent organizational changes within the CFPB. Specifically, the Division of Supervision, Enforcement, and Fair Lending will split into two separate entities: the Supervision Division and the Enforcement Division. As a result, responsibilities related to the disclosure of confidential supervisory information have been reassigned to the Supervision Director.
The CFPB’s final rule amended five specific regulations — 12 C.F.R. Part 1070, Part 1080, Part 1081, Part 1082, Part 1090 — to update nomenclature and reflect these organizational changes.
The CFPB clarified that these updates do not impose new or revised recordkeeping, reporting, or disclosure requirements, and are exempt from the notice-and-comment rulemaking requirements of the Administrative Procedure Act.
CFPB analyzes borrower challenges in the first seven months of student loan repayments
On November 26, the CFPB published a report that provided an analysis of the first seven months following the resumption of federal student loan repayments after the Covid-19 forbearance ended on September 1, 2023. The report detailed issues that borrowers experienced with servicers such as extended call waiting times, delays in processing income-driven repayment (IDR) plan applications, and inaccurate billing statements. The report also noted the Department of Education implemented a one-year “on-ramp” policy to mitigate the negative effects of missed payments on borrowers’ credit reports, which automatic placed borrowers in forbearance temporarily if they missed three consecutive monthly payments.
Using credit record data from the CFPB’s Consumer Credit Information Panel, the report examined the repayment statuses of student loan borrowers as of this past April and found that approximately 40 percent of borrowers successfully made payments, 20 percent owed nothing due to IDR plans, and 30 percent missed their April payments. The report highlighted the number of borrowers who owe no monthly payments has more than quadrupled since the start of the pandemic, likely due to the introduction of the new Saving on a Valuable Education (i.e., the SAVE plan) that provided $0 monthly payments for borrowers earning up to 225 percent of the federal poverty level.
The report also revealed that borrowers who missed payments often face broader financial distress, including higher rates of delinquency on other debts and high credit card utilization. Borrowers in low-income areas were more likely to struggle; individuals who missed payments were 27 percent more likely to live in high-poverty areas and 60 percent more likely to be delinquent on non-student loan debt. Additionally, borrowers with $0 scheduled payments were 33 percent more likely to live in high-poverty areas and 30 percent more likely to have delinquencies on other credit accounts.
The CFPB emphasized the importance of continued monitoring and support for borrowers, particularly those struggling to access IDR plans due to long servicer call waiting times and processing issues. The report concluded that expanded $0 payments under IDR plans may help some borrowers stay out of delinquency on their student loans and avoided increasing their use of other debts. The Bureau noted it will continue to monitor the return to student loan repayment activities through supervision and complaint handling.
FTC fines tax prep company $7M for misleading claims
On November 12, the FTC released a proposed settlement agreement containing a consent order against a tax preparation company and its subsidiaries regarding certain practices that allegedly violated the FTC Act.
The proposed settlement stemmed from the administrative complaint that the FTC filed against the company earlier this year. As previously covered by InfoBytes, the FTC alleged in its redacted administrative complaint that the defendant unfairly pushed consumers into paying for more expensive tax preparation products. The FTC further alleged the company made it unnecessarily difficult to downgrade the consumer’s tax preparation plan, both by requiring the consumer to first speak with a representative and by requiring the consumer to re-input the data if the consumer chooses to downgrade to the lower-priced product.
The company, while neither admitting nor denying the allegations, agreed to enter into a consent order to resolve the issue. Upon acceptance of the consent order, the company must: (i) pay $7 million in consumer redress; (ii) eliminate the requirement for consumers to contact customer service to downgrade their online tax products; (iii) eliminate the practice of deleting consumer information upon downgrading by January 15, 2026; and (iv) notify consumers who are upgrading that if they later choose to downgrade, their information will not be saved and they will have to start over until the deletion requirements are eliminated.
The agreement will be open for public comment for a period of 30 days following publication of the consent agreement package in the Federal Register, after which the FTC will decide whether to make the proposed consent order final.
FDIC updates its signs and advertising requirement Q&As
On December 2, the FDIC updated its Q&As related to its final rule “FDIC Official Signs and Advertising Requirements, False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC Name or Logo,” affecting 12 C.F.R. Part 328. The new Q&As address implementation, such as the use of digital signs and the placement of official signs in physical premises such as bank branches, as well as the use of the advertising statement on digital channels. This release built upon the first set of Q&As published this past July and a previous update in August (covered by InfoBytes here). The FDIC noted it may host seminars in 2025 to support implementing the final rule. Issued in December 2023, the final rule went into effect on April 1 with a compliance date initially set for January 1, 2025. However, the compliance date was extended to May 1, 2025, to allow institutions more time to implement processes updates (covered by InfoBytes here).