The Consumer Financial Protection Bureau, in a report released Wednesday, found deceptive student loan debt collection practices, unfair and deceptive overdraft practices, mortgage origination violations, fair lending violations and mishandled disputes by consumer reporting agencies.

The report, the seventh edition of supervisory highlights, covers supervisory activities between July 2014 and December 2014. Among the findings:

  • Deceptive student loan debt collection practices: Examiners found that some student loan debt collectors made deceptive statements to consumers with defaulted federal student loans. In collection calls and call scripts, examiners found that collectors overpromised the restoration of credit profiles if borrowers participated in a federal student loan rehabilitation program; and collectors misinformed consumers by telling them that they could not participate in the rehabilitation program unless they paid by credit card, debit card, or ACH payments, when, in fact, no such requirement existed.
  • Unfair and deceptive overdraft practices: Examiners found that certain banks changed the way in which they assessed overdraft fees – and that the new approaches increased the likelihood that consumers would incur fees that they did not anticipate. The institutions did not explain the changes in a way that consumers could understand and use to avoid overdraft fees. Based on the specific situation at these institutions, examiners found that the banks had carried out unfair and deceptive practices.
  • Mortgage origination violations: Examiners found that some loan originators illegally received compensation based on the terms of the loan. Examiners also found that at some loan originators the amounts disclosed on the HUD-1 form improperly exceeded those disclosed on the Good Faith Estimate. Some loan originators advertised the length of payment, amount of payments, numbers of payments, and finance charges without providing the required disclosures. And, the Bureau found weaknesses in compliance management systems that played a significant role in the identified violations.
  • Fair lending violations: Examiners found that one or more institutions rejected mortgage applications from consumers because they relied on public assistance income, such as Social Security or retirement benefits, in order to repay the loan. Marketing materials contained written statements regarding the prohibition on non-employment sources of income, and discouraged applicants who received public assistance from applying for credit. This violates the Equal Credit Opportunity Act. CFPB examiners directed that remediation be made to harmed applicants.
  • Mishandling of disputes by consumer reporting agencies: Over the past several years, the CFPB has been examining consumer reporting agencies to see how they handle consumer disputes. While Bureau examiners found great improvements in how some handle disputes in its most recent exams, one or more agencies are still failing to consistently forward all relevant consumer information to furnishers. Such inadequate processes can lead to errors in credit files and incorrect dispute investigation outcomes.

"We are sharing our latest supervisory highlights report with the public so that industry can see trends, examine their own practices, and be proactive to make needed changes before consumers are hurt," said CFPB Director Richard Cordray. "The CFPB will continue to monitor both bank and nonbank markets to ensure deception is rooted out, deficiencies are corrected, remediation is given to consumers, and violations are stopped in their tracks."
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to supervise banks and credit unions with more than $10 billion in assets and certain nonbanks. Those nonbanks include mortgage companies, private student loan lenders and payday lenders, as well as nonbanks the CFPB defines through rulemaking as "larger participants.” 

To date, the CFPB has issued rules to supervise the larger participants in the markets of debt collection, consumer reporting, international money transfer and student loan servicing. 

When CFPB examiners find violations of law, they alert the institutions to their concerns and outline remedial measures. The CFPB sometimes opens investigations for potential enforcement actions. 

The CFPB reports it often finds problems during supervisory examinations that are resolved without an enforcement action. Recent non-public supervisory actions and self-reported violations at banks and nonbanks resulted in $19.4 million in remediation to more than 92,000 consumers. These non-public actions have occurred in areas such as payday lending, mortgage servicing and mortgage origination.

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