The CFPB released the Fall 2016 issue of its Supervisory Highlights. Included are –
Repossession fees and refusal to return property
Supervision found that companies were holding borrowers’ personal belongings and refusing to return the property to borrowers until after the borrower paid a fee for storing the property. If borrowers did not pay the fee before the company was no longer obligated to hold on to the property under state law (often 30-45 days), the companies would dispose of the property instead of returning it to the borrower and add the fee to the borrowers’ balance.
CFPB examiners concluded that it was an unfair practice to detain or refuse to return personal property found in a repossessed vehicle until the consumer paid a fee or where the consumer requested return of the property, regardless of what the consumer agreed to in the contract. Even when the consumer agreements and state law may have supported the lawfulness of charging the fee, examiners concluded there were no circumstances in which it was lawful to refuse to return property until after the fee was paid, instead of simply adding the fee to the borrower’s balance as companies do with other repossession fees.
Unlawful fees
Under Section 808(1) of the FDCPA, 4 a debt collector may not collect any amount unless such amount is expressly authorized by the agreement creating the debt or permitted by law. In one or more exams, examiners observed that one or more debt collectors charged consumers a “convenience fee” to process payments by phone and online. Examiners determined that this convenience fee violated Section 808(1) where the consumer’s contract does not expressly permit convenience fees and the applicable state’s law was silent on whether such fees are permissible.
Failure to verify total monthly income in determining ability to repay
Supervised entities offered mortgage loan programs that accepted alternative income documentation for salaried consumers as part of their underwriting requirements. According to the supervised entities, they relied primarily on the assets of each consumer when making an ATR determination, but also established a maximum monthly DTI ratio in their underwriting policies and procedures.26 For these loans, examiners confirmed the assets were verified using reasonably reliable third-party records such as financial institution records. However, examiners found that the income disclosed on the application to calculate the consumer’s monthly DTI ratio was not verified, but instead was tested for reasonableness using an internet-based tool that aggregates employer data and estimates income based upon each consumer’s residence zip code address, job title, and years in their current occupation.
Provision of language services to limited English proficient (LEP) consumers
Examiners have observed a number of factors that financial institutions consider in determining whether to provide services in languages other than English and the extent of those services, some of which include: Census Bureau data on the demographics or prevalence of non-English languages within the financial institution’s footprint; communications and activities that most significantly impact consumers (e.g., loss mitigation and/or default servicing); and compliance with Federal, state, and other regulatory provisions that address obligations pertaining to languages other than English. Factors relevant in the compliance context may vary depending on the institution and circumstances.
Examiners also have observed situations in which financial institutions’ treatment of LEP and non-English-speaking consumers posed fair lending risk. For example, examiners observed one or more institutions marketing only some of their available credit card products to Spanish-speaking consumers, while marketing several additional credit card products to English-speaking consumers. One or more such institutions also lacked documentation describing how they decided to exclude those products from Spanish language marketing, raising questions about the adequacy of their compliance management systems related to fair lending. To mitigate any compliance risks related to these practices, one or more financial institutions revised their marketing materials to notify consumers in Spanish of the availability of other credit card products and included clear and timely disclosures to prospective consumers describing the extent and limits of any language services provided throughout the product lifecycle. Institutions were not required to provide Spanish language services to address this risk beyond the Spanish language services they were already providing.
Read the Supervisory Highlights for more information on these, and other CFPB observations.
