CFPB Report Highlights Nonbank Supervisory Findings


On May 22, the CFPB published its Spring 2014 Supervisory Highlights report, its fourth such report to date. In addition to reviewing recent guidance, rulemakings, and public enforcement actions, the report states that the CFPB’s nonpublic supervisory actions related to deposit products, consumer reporting, credit cards, and mortgage origination and servicing have yielded more than $70 million in remediation to over 775,000 consumers. The report also reiterates CFPB supervisory guidance with regard to oversight of third-party service providers and implementation of compliance management systems (CMS) to mitigate risk.

The report specifically highlights fair lending aspects of CMS, based on CFPB examiners’ observations that “financial institutions lack adequate policies and procedures for managing the fair lending risk that may arise when a lender makes exceptions to its established credit standards.” The CFPB acknowledges that credit exceptions are appropriate when based on a legitimate justification. In addition to reviewing fair lending aspects of CMS, the CFPB states lenders should also maintain adequate documentation and oversight to avoid increasing fair lending risk.

Nonbank Supervisory Findings

The majority of the report summarizes supervisory findings at nonbanks, particularly with regard to consumer reporting, debt collection, and short-term, small-dollar lending:

Consumer Reporting

Following its adoption of its larger participant rule for consumer reporting agencies (CRAs) in July 2012, CFPB examiners reviewed CRAs’ dispute handling processes and CMS, and found among other things that (i) some CRAs lacked a formal or adequate CMS, and/or their boards and senior managers exercised insufficient oversight of the CMS; (ii) some CRAs failed to establish sufficient FCRA compliance policies, including with regard to dispute-handling procedures, and (iii) some failed to adequately supervise vendors, including call center and ancillary product vendors. CFPB examiners also found that (i) at least one CRA did not monitor or track consumer complaints; (ii) at least one CRA failed to forward all relevant consumer dispute materials to the furnisher, as required by FCRA; and (iii) at least one refused to accept disputes from certain consumer submitted online or by phone.

Debt Collection

The CFPB finalized its debt collector larger participant rule in October 2012 and since that time its examiners have observed debt collectors engaged in the following allegedly illegal or unfair and deceptive practices: (i) intentionally misleading consumers about litigation; (ii) making excessive calls to consumers; and (iii) failing to investigate consumer credit report disputes.

Short-term, Small-dollar Lending

The Dodd-Frank Act grants the CFPB supervisory authority over payday lenders without having first to adopt a larger participant rule. The CFPB launched its payday lender supervision program in January 2012 and reports that its examiners have found, among other things, that in seeking to collect payday loan debt some lenders engaged in the following allegedly unfair or deceptive practices: (i) threatening to take legal actions they did not actually intend to pursue; (ii) threatening to impose additional fees or to debit borrowers’ accounts, regardless of contract terms; (iii) falsely claiming they were running non-existent promotions to induce borrowers to call back about their debt; and (iv) calling borrowers multiple times per day or visiting borrowers’ workplaces.


Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© BuckleySandler LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.