The CFPB recently released its Spring 2022 Oversight Highlights, discussing the results of its audits related to auto maintenance, consumer reporting, credit card account management, debt collection, deposits, mortgage origination, prepaid accounts, remittances, and student loan management.

This is the 26th edition of the CFPB Oversight Highlights and covers the exams that were completed in the second half of 2021. Key takeaways from the spring 2022 supervisory highlights include:

• mortgage initiation. Among other things, the investigators found that certain lender loan-compensation arrangements provided for higher compensation when Fannie Mae-compliant fixed-rate loans exceeded a specified threshold percentage of the total loans underwritten by the lender. The CFPB found that such practices constitute payment of compensation based on the credit product type, which violates Regulation Z as compensation based on the term of a transaction. The CFPB also stated that certain lenders failed to retain sufficient documentation to demonstrate the validity of changed circumstances used to justify a reassessment of tolerances on the amounts listed on the LE. The violations were specifically identified in relation to appraisal fees, which were increased due to a rush appraisal for revised LEs. In addition, the investigators identified instances where the lenders’ CDs did not reflect the full indexed interest rate as required by the promissory note because the lenders’ software miscalculated the disclosed interest rates. As a result, the CDs did not reflect the terms of the legal commitment between the parties.

• Consumer Reporting. The Bureau found that certain consumer reporting companies (i.e., consumer reporting agencies or “CRAs”) have violated FCRA and its Executive Order V by failing to: (i) conduct adequate investigations of disputes, including by deleting thousands of disputed trade lines; (ii) send notifications of Disputes to Vendors within five business days of receipt of the Dispute; and (iii) send an FCRA-compliant Findings Statement within the required five business days of the conclusion of the Dispute investigation. The examiners also found that certain providers that are required to conduct an investigation related to disputed information violated Regulation V by failing to: (i) conduct an appropriate investigation of indirect disputes; (ii) report the results more directly investigations of disputes by consumers prior to the expiration of the required period, (iii) prompt notification to the CRA of a determination that the information provided to the CRA is not complete or accurate, (iv) providing the CRA with any corrections or additional information that may be required provide complete and accurate information to the CRA to prepare the information provided, and (v) establish and implement appropriate policies and procedures related to the accuracy and integrity of the information provided.

• car service. The CFPB also found that certain auto service providers violated UDAAP regulations. In particular, the auditors found that car service providers: (i) took back vehicles after consumers took steps that should have prevented the take-back, (ii) misled consumers about their final loan payment amount after a deferral, and (iii) failed to do so have to claim refunds from the third-party administrator for certain unearned fees and failed to apply the corresponding refunds to the accounts after withdrawal and termination of the contracts.

• transfers. Regarding remittance providers, the investigators identified instances where providers: (i) engaged in fraudulent acts or practices by making false and misleading representations of “instant” and “30-second” transfers, (ii) having remittance service agreements Consumers who acted against EFTA, (iii) failed to comply with the disclosure and time requirements set out in the Remittance Rule, (iv) failed to develop and maintain written policies and procedures aimed at ensuring compliance with the comply with the Remittance Transfer Rule’s troubleshooting requirements, and (v) fails to comply with its obligation to communicate the results of the error investigations, including the indication of available remedial actions.

• Collection of debts. The Bureau also found that certain collection agencies have violated the FDCPA by misrepresenting or implying to consumers that they are responsible for paying fees on their accounts incurred as a result of fraudulent activity. In particular, the auditors found breaches where the collection agent continued to attempt to collect a claim and offered a settlement even after the consumer informed the collection agency of the fraud. In addition, certain collection agencies failed to timely refund overpayments and balances to consumers.

• insoles. In relation to deposits, the CFPB auditors found that institutions: (i) engaged in unfair acts or practices by mistakenly making multiple deposits for mobile checks deemed suspicious instead of making the intended individual deposits, resulting in charging overdrafts resulted in fees, (ii) breached Regulation E’s payment stop requirements by failing to comply with payment stop requirements for pre-authorized transfers tied to debit cards, (iii) failed to follow Regulation E’s error resolution procedures, and (iv) Failed to provide appropriate revocation notices of provisional credit to consumers in connection with error investigations related to ATM check deposits under Regulation E.

• Management of credit card accounts. With respect to the credit card account management of certain regulated entities, the auditors found that those entities had failed to comply with Regulation Z’s billing error resolution requirements. The auditors also found that credit card issuers have failed to comply with their Regulation Z obligation to periodically review the appropriateness of reducing an account’s APR after the APR has been increased. In addition, the CFPB found that certain companies engaged in fraudulent acts or practices by promoting their credit card’s interest-free funding feature without adequately disclosing the eligibility requirements for receiving funding.

• Prepaid Accounts. In relation to prepaid accounts and prepaid account providers, the examiners found that institutions violated Regulation E by failing to: (i) file prepaid account agreements with the CFPB within 30 days of the Effective Date; after modifying certain Prepaid Account Agreements, (ii) complying with verbal requests for payment in respect of payments originating through certain bill payment systems, including those initiated at the Merchant, and within the bill payment system hosted by the Prepaid Account Program Manager and (iii) contain a statement mentioning the consumer’s right to request the documents on which the institution based its determination, after finding that no error or other error occurred in the report of the findings .

• Supervision of student loans. Finally, the investigators identified instances where service providers engaged in unfair acts or practices related to the administration of private student loans by failing to: (i) make incentive payments that they offered in advertisements and agreed to in the relevant contracts with consumers , and (ii) issue timely reimbursement payments according to the payment schedules in Loan Modifications.

Similar to previous Oversight Highlights, the Spring 2022 Report provides information on recent public enforcement actions that were at least in part the result of the CFPB’s oversight work. The report also includes certain developments in the oversight program, including the CFPB’s recent announcement that it will begin expanding its oversight oversight to additional non-bank financial firms, which WBK reports on here.