CFPB Summer 2019 Supervisory Highlights looks at GAP products, credit card practices, debt collection, furnishing to consumer reporting agencies, reverse mortgages

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The CFPB has released the Summer 2019 edition of its Supervisory Highlights.  The report discusses the Bureau’s examination findings in the areas of automobile loan originations, credit card account management, debt collection, furnishing, and mortgage originations.

Key findings include the following:

Auto loan originations.  Auto lenders were found to have engaged in an abusive practice by selling GAP insurance to consumers whose low loan-to-value ratios meant they would not benefit from the product.  The remedial and corrective action taken by the lenders in response to these findings included reimbursing consumers for the cost of the product and establishing an LTV minimum for GAP product sales.

Credit card account management.  CFPB examiners found:

  • Entities violated the Regulation Z requirement for card issuers to clearly and conspicuously make certain disclosures in advertisements if they contain certain triggering terms.  The entities used hyperlinks in online advertisements that were not labeled in a way that referred to the triggered disclosures.  Consumers would have to click on the hyperlink and then navigate through an online application before reaching the triggered disclosures or click on multiple hyperlinks with the triggered disclosures appearing only after completing an application.
  • Entities violated the Regulation Z prohibition on offsetting credit card debts with funds the consumer has on deposit with the issuer by not satisfying the requirements for obtaining a consensual security interest in such funds.  Those requirements include the consumer’s awareness that granting a security interest is a condition for the card (or more favorable terms) and the consumer’s specific intent to grant a security interest in the deposit account.  Issuers were found to have offset funds on deposit without sufficient indication of the consumer’s awareness and intent to grant a security interest by enforcing a security interest where the consumer had not signed an authorization form or the form could not be located.
  • Entities engaged in deceptive acts or practices in violation of the CFPA by sending collection letters that suggested they could repossess consumers’ automobiles or foreclose on their homes when the issuers did not repossess any vehicles or foreclose on any mortgages in connection with delinquent card accounts and it was against the issuers’ policies to do so.
  • Entities engaged in deceptive acts or practices in violation of the CFPA by orally representing to consumers that secured credit cards would automatically be upgraded to unsecured cards on a specific timeframe if the card accounts were maintained in good standing or that secured cards subject to an annual fee would be periodically reviewed for upgrade.  The issuers in fact did not upgrade secured accounts on a preset timeframe and upgrades were conditioned on additional factors and accounts subject to an annual fee were not reviewed for a year or more without additional disclosures or modification of marketing materials.

Debt collection.  One or more debt collectors were found to have violated the FDCPA prohibition on falsely representing the character, amount, or legal status of a debt by claiming and collecting interest not authorized by the underlying contracts.

Furnishing.  CFPB examiners found:

  • One or more furnishers violated the FCRA requirement for completing an investigation of dispute after receiving notice from a consumer reporting agency by failing to complete investigations within the required time frame.
  • One or more furnishers violated the FCRA requirement to promptly notify a CRA and provide corrected or additional information if the furnisher determines previously furnished information is not complete or accurate by failing to promptly send corrections or updates to all applicable CRAs after making such as determination.
  • One or more furnishers violated the FCRA prohibition on furnishing information to a CRA without notice that such information is disputed by continuing to furnish information about deposit accounts for several months after receiving consumer disputes without notifying the applicable nationwide specialty CRA that the furnished information was disputed.
  • One or more furnishers violated the Regulation V requirement to establish and implement reasonable written policies and procedures regarding the accuracy of information furnished to CRAs by failing to implement such policies and procedures for deposit account information furnished to a nationwide specialty CRA that were not appropriate to the nature, size, complexity, and scope of the furnishing activities.  For example, existing policies did not address compliance with FCRA dispute requirements and there were no policies and procedures for training, monitoring, or conducting internal audits of business units’ responsibilities to forward disputes of disputed information, or to conduct investigations of consumer disputes alleging account abuse caused by fraud.  One or more furnishers also violated the Regulation V requirement to consider and incorporate, as appropriate, the guidelines in Appendix E of Regulation V.

Mortgage originations.  CFPB examiners found one or more creditors violated Regulation Z by:

  • Disclosing inaccurate APRs on closed-end reverse mortgages by using a unit-period of one month instead of one year to calculate the APR
  • Disclosing inaccurate APRs on closed-end reverse mortgages with a life expectancy set-aside by using a unit-period of one month instead of six months to calculate the APR
  • Disclosing improperly calculated total annual loan costs by not using a one-year unit-period for closed-end and open-end reverse mortgages with a line of credit

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