Supervisory Highlights, Issue 18 (Winter 2019)

Published date18 March 2019
Record Number2019-04987
SectionNotices
CourtConsumer Financial Protection Bureau
Federal Register, Volume 84 Issue 52 (Monday, March 18, 2019)
[Federal Register Volume 84, Number 52 (Monday, March 18, 2019)]
                [Notices]
                [Pages 9762-9767]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-04987]
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                BUREAU OF CONSUMER FINANCIAL PROTECTION
                Supervisory Highlights, Issue 18 (Winter 2019)
                AGENCY: Bureau of Consumer Financial Protection.
                ACTION: Supervisory highlights.
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                SUMMARY: The Bureau of Consumer Financial Protection (CFPB or Bureau)
                is issuing its eighteenth edition of its Supervisory Highlights. In
                this issue of Supervisory Highlights, we report examination findings in
                the areas of automobile loan servicing, deposits, mortgage servicing,
                and remittances that were generally completed between June 2018 and
                November 2018. The report does not impose any new or different legal
                requirements, and all violations described in the report are based only
                on those specific facts and circumstances noted during those
                examinations. As in past editions, this report includes information
                about recent public enforcement actions that were a result, at least in
                part, of our supervisory work.
                DATES: The Bureau released this edition of the Supervisory Highlights
                on its website on March 1, 2019.
                FOR FURTHER INFORMATION CONTACT: Vanessa Careiro, Counsel, at (202)
                435-9394. If you require this document in an alternative electronic
                format, please contact [email protected].
                SUPPLEMENTARY INFORMATION:
                1. Introduction
                 The Consumer Financial Protection Bureau (CFPB or Bureau) is
                committed to a consumer financial marketplace that is free, innovative,
                competitive, and transparent, where the rights of all parties are
                protected by the rule of law, and where consumers are free to choose
                the products and services that best fit their individual needs. To
                effectively accomplish this, the Bureau remains committed to sharing
                with the public key findings from its supervisory work to help industry
                limit risks to consumers and comply with Federal consumer financial
                law.
                 The findings included in this report cover examinations in the
                areas of automobile loan servicing, deposits, mortgage servicing, and
                remittances that were generally completed between June and November
                2018 (unless otherwise stated).
                 It is important to keep in mind that institutions are subject only
                to the requirements of relevant laws and regulations. The information
                contained in Supervisory Highlights is disseminated to help
                institutions better understand how the Bureau examines institutions for
                compliance with those requirements. This document does not impose any
                new or different legal requirements. In addition, the legal violations
                described in this and previous issues of Supervisory Highlights are
                based on the particular facts and circumstances reviewed by the Bureau
                as part of its examinations. A conclusion that a legal violation exists
                on the facts and circumstances described here may not lead to such a
                finding under different facts and circumstances.
                 We invite readers with questions or comments about the findings and
                legal analysis reported in Supervisory Highlights to contact us at
                [email protected].
                2. Supervisory Observations
                 Recent supervisory observations are reported in the areas of
                automobile loan servicing, deposits, mortgage servicing, and
                remittances.
                2.1 Automobile Loan Servicing
                 The Bureau continues to examine auto loan servicing activities,
                primarily to assess whether servicers have engaged in unfair,
                deceptive, or abusive acts or practices (UDAAPs) prohibited by the
                Consumer Financial Protection Act of 2010 (CFPA). Recent auto loan
                servicing examinations identified unfair acts or practices related to
                collecting incorrectly calculated deficiency balances. Recent
                examinations have also identified deceptive acts or practices related
                to representations on deficiency balance notices.
                2.1.1 Unfair and Deceptive Practices Regarding Rebates for Certain
                Ancillary Products
                 Examiners reviewed the servicing operations of one or more captive
                auto finance companies. A captive auto finance company is a finance
                company that is owned by an auto manufacturer that finances retail
                purchases of autos from that manufacturer. Borrowers financing a car
                sometimes purchased ancillary products such as an extended warranty and
                financed the products through the same loan. If the borrower later
                experiences a total loss or repossession, the servicer or borrower may
                cancel such ancillary products in order to obtain pro-rated rebates of
                the premium amounts for the unused portion of the products. In these
                situations, the rebate is payable first to the servicer to cover any
                deficiency balance and then to the borrower. Generally, the servicer
                contractually reserves the right to request the rebate without the
                borrower's participation, although it does not obligate itself to do
                so. The borrower also retains a right to request the rebate.
                 In the extended warranty products reviewed during the
                examination(s), the amount of potential rebates for the products
                depended on the number of miles driven. Examiners observed instances
                where one or more servicers used the wrong mileage amounts to calculate
                the rebate for extended-warranty cancellations. For some borrowers who
                financed used vehicles, the servicers applied the total number of miles
                the car had been driven to calculate rebates. However, the servicer(s)
                should have applied the net number of miles driven since the borrower
                purchased the automobile. The miscalculation reduced the rebate
                available to certain borrowers and led to deficiency balances that were
                higher by hundreds of dollars. The servicer(s) then attempted to
                collect the deficiency balances.
                 One or more examinations found that servicer attempts to collect
                miscalculated deficiency balances were unfair. Collecting inaccurately
                inflated deficiency balances caused or was likely to cause substantial
                injury to consumers. And these borrowers could not reasonably have
                avoided collection attempts on inaccurate balances because they were
                uninvolved in the servicer's calculation process. The injury of this
                activity is not outweighed by the countervailing benefits to consumers
                or
                [[Page 9763]]
                competition. For example, the additional expense the servicers would
                incur to train staff or service providers to ensure that refund
                calculations are correct would not outweigh the substantial injury to
                consumers. In response to these findings, the servicer(s) conducted
                reviews to identify and remediate affected borrowers based on the
                mileage they drove before the repossession or total loss of their
                vehicles. The servicer(s) also began to verify mileage calculations
                directly with the issuers of the products subject to rebate.
                 Additionally, examiners observed instances where one or more
                servicers did not request rebates for eligible ancillary products after
                a repossession or a total loss. The servicer(s) then sent these
                borrowers deficiency notices listing a final deficiency balance
                purporting to net out available ``total credits/rebates'' including
                insurance and other rebates. The notices also stated that future
                additional rebates may affect the amount of the surplus or deficiency,
                but that ``[a]t this time, we are not aware of any such charges.''
                However, the servicers' records contained information that it had not
                sought the eligible rebates. The examination(s) showed that the average
                unclaimed rebate was roughly $1,700.
                 One or more examinations identified these communications as a
                deceptive act or practice. The deficiency notice misled borrowers
                because it created the net impression that the deficiency balance
                reflected a setoff of all eligible ancillary-product rebates, when in
                fact, the servicer(s)' systems showed that it had not sought one or
                more eligible rebates. It was reasonable for consumers to interpret
                this deficiency balance as reflecting any eligible rebates because the
                servicer(s) were both contractually entitled and financially
                incentivized to seek and apply eligible rebates to the deficiency
                balance. And the misrepresentation was material to consumers because
                they may have pursued rebates on their own had the servicer(s) not
                represented that there were not additional rebates available.
                 In response to these findings, the servicer(s) conducted reviews to
                identify and remediate affected borrowers. The servicer(s) also changed
                deficiency notices to clarify the status of eligible ancillary product
                rebates.
                2.2 Deposits
                 The CFPB continues to review the deposits operations of the
                entities under its supervisory authority for compliance with relevant
                statutes and regulations, including the CFPA's prohibition on UDAAPs.
                2.2.1 Deceptive Representations About Bill-Pay Debited Date
                 Examiners found that one or more institutions engaged in a
                deceptive act or practice by representing that payments made through an
                institution's online bill-pay service would be debited on the date
                selected by the consumer or a few days after the selected date, while
                failing to disclose or failing to disclose adequately that, in
                instances where a payee accepts only a paper check, the debit may occur
                earlier than the selected date. These paper bill-pay checks were sent
                several days prior to the consumer-designated payment date, at the
                discretion of the institution(s). The payment would be debited from the
                consumer's account when the payee presented and cashed the check, which
                may have occurred earlier or later than the date selected by the
                consumer. The failure to notify consumers that their bill-pay payments,
                if made by paper check, may be debited on a date sooner than the date
                selected as part of the transaction caused some consumers to pay
                overdraft fees.
                 The failure by the institution(s) to disclose or failure to
                disclose adequately the possible earlier debit date in light of online
                bill-pay service representations created the net impression that
                payments made through the online bill-pay service would be withdrawn no
                earlier than the payment date designated by the consumer. It would be
                reasonable for consumers to understand that the payment date they
                designated would be the earliest date that the payment would be
                withdrawn from their account. Consumers' understanding of when funds
                will be withdrawn is material to consumers' decisions regarding which
                payment date to designate in the first instance and then how to manage
                funds in the accounts on a going-forward basis, to ensure there is a
                sufficient balance to cover the anticipated withdrawals.
                 In response to the examination findings, the institution(s)
                undertook a revision of consumer-facing online bill-pay materials to
                disclose paper checks will be mailed before the payment date selected
                by the consumer and that the payment would be debited from the
                consumer's account when the payee presented the check. The
                institution(s) also undertook a plan to remediate consumers charged an
                overdraft fee as a result of a paper check being negotiated before the
                payment date selected by the consumer through the online bill-pay
                system.
                2.3 Mortgage Servicing
                 The Bureau continues to examine mortgage servicers, including
                servicers of manufactured home loans and reverse mortgage loans, for
                compliance with Federal consumer financial laws. Recent examinations
                identified unfair acts or practices for charging consumers unauthorized
                amounts, deceptive acts or practices for misrepresenting aspects of
                private mortgage insurance cancellation, violation(s) of Regulation X
                loss mitigation requirements, and potentially misleading statements to
                successors-in-interest on reverse mortgages.
                2.3.1 Charging Consumers Unauthorized Amounts
                 One or more examinations observed that servicers charged consumers
                late fees greater than the amount permitted by mortgage notes.
                Examiners identified several types of affected mortgage notes. For
                example, certain Federal Housing Authority (FHA) mortgage notes permit
                servicers to collect late fees in the amount of 4.00% of the overdue
                principal and interest. However, on large numbers of loans, the
                servicer(s) charged late fees on 4.00% of the overdue principal,
                interest, taxes and insurance, rather than on only the principal and
                interest. Examiners also identified mortgage notes containing
                provisions that limit the late fee amount. For example, certain West
                Virginia mortgage notes permit servicers to collect ``5.00% of that
                portion of the installment of principal and interest that is overdue,
                but not more than U.S. $15.00.'' However, on large numbers of loans,
                the servicer(s) charged a late fee greater than $15.
                 Programming errors in the servicing platform and lapses in service
                provider oversight caused the overcharges. The examination(s) found
                that the servicer(s) engaged in an unfair practice. The conduct caused
                a substantial injury to consumers because they paid more in late fees
                than required by their mortgage notes. The conduct of the servicer(s)
                affected thousands of consumers, making the aggregate injury
                substantial. Consumers could not reasonably avoid this injury since the
                servicer(s) automatically imposed the late fees. And since the
                servicer(s) were not contractually permitted to collect the excessive
                late charges, the practice had no countervailing benefits. In response
                to the examination findings, the servicer(s) conducted a review to
                identify and remediate affected borrowers. The servicer(s) also changed
                policies and procedures to assist in charging the late fee amount
                authorized by the mortgage note.
                [[Page 9764]]
                2.3.2 Misrepresenting Private Mortgage Insurance Cancellation Denial
                Reasons
                 In relevant part, the Homeowners Protection Act (HPA) requires
                servicers to cancel private mortgage insurance (PMI) in connection with
                a residential mortgage transaction if certain conditions are met. Among
                other conditions, the consumer must request the cancellation in
                writing, and the principal balance of the mortgage must have: (1)
                Reached 80% of the original value (LTV) of the property based solely on
                actual payments; or (2) reached the date on which it was first
                scheduled to fall to 80% of the original value of the property, based
                solely on the amortization schedule in effect at a particular point in
                time depending on the loan type regardless of the outstanding
                balance.\1\
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                 \1\ 12 U.S.C. 4901(2).
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                 At one or more servicers, borrowers who verbally requested PMI
                cancellation were informed that they were declined because they had not
                reached 80% LTV. Although the relevant amortization schedules did not
                yet provide for 80% LTV, examiners found that these borrowers had in
                fact reached 80% LTV based on actual payments because they had made
                extra principal payments. Although the borrowers did not satisfy other
                criteria necessary to trigger borrower-initiated cancellation rights
                under the HPA, such as certifying that the property is unencumbered by
                subordinate liens or submitting the requests in writing, the
                servicer(s) did not provide these as reasons to borrowers for denying
                the requests.
                 One or more examinations identified servicer representations as
                deceptive because they misrepresented the conditions for PMI
                removal.\2\ The servicer communications would likely mislead consumers
                about whether and when the HPA entitled them to request that the
                servicer cancel PMI, and about the actual reasons the borrowers were
                not eligible for PMI cancellation. It would be reasonable for consumers
                to believe that they were not eligible for PMI cancellation for the
                reasons stated in the letters because most consumers would not have a
                basis to question the misrepresentations. A consumer might think that
                she had miscalculated payments such that she had not yet reached 80%
                LTV, or had misunderstood some other aspect of meeting the LTV
                requirement. Lastly, the servicers' misrepresentations were material
                because they were likely to affect a borrower's choice as to whether to
                continue to request PMI cancellation, including whether to address the
                actual, uncommunicated reasons for ineligibility. For instance,
                borrowers receiving the incorrect denial reason may fail to address
                other eligibility requirements to obtain PMI cancellation. They may
                also be discouraged from requesting PMI cancellation in some
                circumstances in which Federal law or the servicer's policies would
                give them a right to cancel PMI. In response to examiners' findings,
                the servicer(s) changed templates, as well as policies and procedures,
                to ensure that PMI cancellation notices state accurate denial reasons.
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                 \2\ The HPA does not require servicers to respond to verbal
                requests to eliminate PMI and therefore the servicer(s) did not
                violate the HPA.
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                2.3.3 Failing To Exercise Reasonable Diligence To Complete Loss
                Mitigation Applications
                 Regulation X requires servicers to exercise ``reasonable
                diligence'' in obtaining documents and information to complete a loss
                mitigation application.\3\ The actions that would satisfy this
                requirement depend on the facts and circumstances at hand.\4\
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                 \3\ 12 CFR 1024.41(b)(1).
                 \4\ Comment 41(b)(1)-4.i-iii. For example, reasonable diligence
                might include promptly contacting the applicant to obtain the
                missing information; or, if the servicer has offered a short-term
                payment forbearance program based upon an evaluation of an
                incomplete application, actions like notifying the borrower about
                the option to complete the application to receive a full evaluation
                and, if necessary, contacting the borrower near the end of the
                forbearance period and prior to the end of the forbearance period to
                determine if the borrower wishes to complete the application and
                proceed with a full evaluation.
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                 In examination(s) covering 2016 activity, examiners found one or
                more servicers did not meet the Regulation X ``reasonable diligence''
                requirements. These servicer(s) offered short-term payment forbearance
                programs during collection calls to delinquent borrowers who expressed
                interest in loss mitigation and submitted financial information that
                the servicer would consider in evaluating them for loss mitigation. The
                short-term payment forbearance programs deferred some or all of the
                borrower's past due payments to the end of the loan, thereby extending
                its maturity. However, the servicer(s) did not notify the borrowers
                that such short-term payment forbearance programs were based on an
                incomplete application evaluation. And near the end of the forbearance
                period, the servicer(s) did not contact the borrowers as to whether
                they wished to complete the applications to receive a full loss
                mitigation evaluation. As a result, one or more examinations found that
                the servicer(s) violated 1024.41(b)(1) requirements to exercise
                reasonable diligence in obtaining documents and information to complete
                a loss mitigation application. The examination(s) did not review
                currently applicable 1024.41(c)(2) requirements, as those requirements
                went into effect on October 19, 2017. In response to these findings,
                the servicer(s) used enhanced processes, such as a centralized queue,
                to track borrowers receiving short-term forbearance programs and
                subsequently notify them that additional loss mitigation options may be
                available and that they could apply for such options over the phone or
                in writing.
                2.3.4 Representing the Requirements for Foreclosure Timeline Extensions
                in Home Equity Conversion Mortgages
                 One or more examinations reviewed servicing of Home Equity
                Conversion Mortgage (HECM) loans, a type of reverse mortgage insured by
                the United States Department of Housing and Urban Development (HUD).
                Under the terms of such mortgages, the death of the borrower on the
                loan constitutes default, and HUD generally requires HECM servicers to
                refer such loans to foreclosure within six months of the death of the
                borrower to be eligible for HUD insurance. HUD also allows servicers to
                request up to two 90-day extensions to enable successors to purchase
                the property or market the property for sale without losing the benefit
                of HUD insurance.
                 One or more servicers sent a notice to successors-in-interest after
                the borrower on the loan died. The notice stated that the loan balance
                was due and payable, but that the successor could qualify for an
                extension of time to delay or avoid foreclosure. The notice directed
                the successor to return an enclosed form stating the intentions for the
                property within thirty days. The notice also listed several documents
                that may be applicable to the successor's evaluation, but did not
                direct the successor to submit any of the documents within a certain
                timeframe to be eligible for an extension.
                 Examiners found that some successors did not receive a complete
                list of all the documents needed to evaluate them for an extension.
                Some of these successors returned the form indicating their intentions
                to purchase the property or market the property for sale, but did not
                return all the documents that were needed for the evaluation. As a
                result, the servicer(s) did not seek an extension for these successors.
                Instead, the servicer(s) assessed foreclosure fees and in some
                instances foreclosed on the
                [[Page 9765]]
                property. The examination(s) did not find that this conduct amounted to
                a legal violation but observed that it could pose a risk of a deceptive
                act or practice by giving the net impression that the statement of
                intent was all that was needed, until further notice, to delay
                foreclosure, when in fact that was insufficient to delay foreclosure.
                In response to the examiner observations, the servicer(s) planned to
                improve communications with successors, including specifying the
                documents successors needed for an extension and the relevant
                deadlines.
                2.4 Remittances
                 The Bureau continues to examine banks and nonbanks under its
                supervisory authority for compliance with Regulation E, Subpart B
                (Remittance Rule).\5\ The Bureau also reviews for any UDAAPs in
                connection with remittance transfers.
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                 \5\ See 78 FR 30662 (May 22, 2013) (codified at 12 CFR 1005),
                available at http://www.gpo.gov/fdsys/pkg/FR-2013-05-22/pdf/2013-10604.pdf.
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                2.4.1 Failure To Refund Fees and Taxes Upon Delayed Availability of
                Remitted Funds
                 Examiners found that one or more supervised entities violated the
                error resolution provisions of the Remittance Rule by failing to refund
                fees and, as allowed by law, taxes, to consumers when remitted funds
                were made available to designated recipients later than the date of
                availability stated in the institution's remittance disclosures and the
                delay was not due to one of the four exceptions specified in the Rule.
                 A remittance transfer provider's failure to make funds available to
                a designated recipient by the date of availability stated in the
                disclosures constitutes an error under the Remittance Rule, unless the
                delay was of the result of one of the four exceptions described in 12
                CFR 1005.33(a)(1)(iv).\6\ Upon notice from a consumer of the delayed
                availability of funds, a remittance transfer provider must either
                refund the sender the amount of funds provided by the sender in
                connection with the remittance transfer which was not properly
                transmitted or the amount appropriate to resolve the error, or make
                available to the designated recipient the amount appropriate to resolve
                the error at no additional cost to the sender or the designated
                recipient.\7\ In addition, the remittance transfer provider must refund
                to the sender any fees imposed in connection with the transfer by any
                party, and, to the extent not prohibited by law, any taxes collected on
                the remittance transfer.\8\
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                 \6\ The four events are: (A) Extraordinary circumstances outside
                the remittance transfer provider's control that could not have been
                reasonably anticipated; (B) delays related to a necessary
                investigation or other special action by the remittance transfer
                provider or a third party as required by the provider's fraud
                screening procedures or in accordance with the Bank Secrecy Act, 31
                U.S.C. 5311 et seq., Office of Foreign Assets Control requirements,
                or similar laws or requirements; (C) the remittance transfer being
                made with fraudulent intent by the sender or any person acting in
                concert with the sender; and (D) the sender having provided the
                remittance transfer provider an incorrect account number or
                recipient institution identifier for the designated recipient's
                account or institution, provided that the remittance transfer
                provider meets certain other conditions.
                 \7\ 12 CFR 1005.33(c)(2)(ii)(A).
                 \8\ 12 CFR 1005.33(c)(2)(ii)(B).
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                 Examiners observed that one or more entities failed to refund to
                consumers fees and, as allowed by law, taxes, when funds were not made
                available to the designated recipients by the date disclosed by the
                institution due to a mistake on the part of a non-agent foreign payer
                institution. Because the delayed availability of funds did not result
                from one of the exceptions listed in 12 CFR 1005.33(a)(1)(iv), the
                senders were entitled to the remedies described in 12 CFR
                1005.33(c)(2)(ii). Neither the relationship between a remittance
                transfer provider and the institution disbursing the funds to the
                designated recipient, nor the particular entity that is at fault for
                the delayed receipt of funds, is relevant to whether the remittance
                transfer provider must refund fees and taxes to the consumer. In
                response to examination findings, institutions are refunding any fees
                imposed and, to the extent not prohibited by law, taxes collected on
                the remittance transfer to the sender, where applicable.
                3. Remedial Actions
                3.1 Public Enforcement Actions
                 The Bureau's supervisory activities resulted in or supported the
                following public enforcement actions.
                3.1.1 Cash Tyme
                 On February 5, 2019, the CFPB announced a settlement with Cash
                Tyme, a payday retail lender with outlets in seven States.\9\ The
                Bureau found that Cash Tyme violated the CFPA by:
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                 \9\ See Cash Tyme Consent Order, available at https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-settles-cash-tyme/.
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                 Failing to take adequate steps to prevent unauthorized
                charges;
                 Failing to promptly monitor, identify, correct, and refund
                overpayments by consumers;
                 Making collection calls to third parties named as
                references on borrowers' loan applications that disclosed or risked
                disclosing the debts to those third parties, including to borrowers'
                places of employment as well as to third parties who were themselves
                harassed by such calls;
                 Misrepresenting that it collected third-party references
                from borrowers on loan applications for verification purposes, when in
                fact it was using that information to make marketing calls to the
                references; and
                 Advertising unavailable services, including check cashing,
                phone reconnections, and home telephone connections, on the
                storefronts' outdoor signage where such advertisements contained
                information that was likely to be deemed important by consumers and
                likely to affect their conduct or decision regarding visiting a Cash
                Tyme store.
                 The Bureau also found that Cash Tyme violated the Gramm-Leach-
                Bliley Act and Regulation P by failing to provide initial privacy
                notices to borrowers, and, as to customers in Kentucky, violated the
                Truth in Lending Act and Regulation Z when calculating and advertising
                annual percentage rates. Cash Tyme must, among other provisions, pay a
                $100,000 civil money penalty.
                3.1.2 Enova International, Inc.
                 On January 25, 2019, the Bureau announced a settlement with Enova
                International, Inc., an online lender based in Chicago, Illinois, that
                extends unsecured payday and installment loans, and lines of
                credit.\10\
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                 \10\ See Enova International, Inc. Consent Order, available at
                https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-reaches-settlement-enova-international-inc/.
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                 The Bureau found that Enova violated the CFPA by debiting
                consumers' bank accounts without authorization. While consumers
                authorized Enova to deduct payments from certain accounts, the company
                in many instances debited different accounts that the consumers had not
                authorized it to use. The Bureau also found that Enova failed to honor
                loan extensions it granted to consumers.
                 Under the terms of the consent order, Enova is, among other things,
                barred from making or initiating electronic fund transfers without
                valid authorization and must pay a $3.2 million civil money penalty.
                3.1.3 State Farm Bank, FSB
                 On December 6, 2018, the Bureau announced a settlement with State
                Farm Bank, FSB, a Federal savings association
                [[Page 9766]]
                headquartered in Bloomington, Illinois.\11\
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                 \11\ See State Farm Bank, FSB Consent Order, available at
                https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-settles-state-farm-bank/.
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                 The Bureau found that State Farm Bank violated the Fair Credit
                Reporting Act, Regulation V, and the CFPA by obtaining consumer reports
                without a permissible purpose; furnishing to credit-reporting agencies
                (CRAs) information about consumers' credit that the bank knew or had
                reasonable cause to believe was inaccurate; failing to promptly update
                or correct information furnished to CRAs; furnishing information to
                CRAs without providing notice that the information was disputed by the
                consumer; and failing to establish and implement reasonable written
                policies and procedures regarding the accuracy and integrity of
                information provided to CRAs.
                 Under the terms of the consent order, State Farm Bank must not
                violate the Fair Credit Reporting Act or Regulation V and must
                implement and maintain reasonable written policies, procedures, and
                processes to address the practices at issue in the consent order and
                prevent future violations.
                3.1.4 Santander Consumer USA, LLC
                 On November 20, 2018, the Bureau announced a settlement with
                Santander Consumer USA Inc., a consumer financial services company
                based in Dallas, Texas.\12\
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                 \12\ See Santander Consumer USA, LLC Consent Order, available at
                https://www.consumerfinance.gov/policy-compliance/enforcement/actions/santander-consumer-usa-inc/.
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                 The Bureau found that Santander violated the CFPA by not properly
                describing the benefits and limitations of its S-GUARD GAP product,
                which it offered as an add-on to its auto loan products. Santander also
                failed to properly disclose the impact on consumers of obtaining a loan
                extension, including by not clearly and prominently disclosing that the
                additional interest accrued during the extension period would be paid
                before any payments to principal when the consumer resumed making
                payments.
                 Under the terms of the consent order, Santander must, among other
                provisions, provide approximately $9.29 million in restitution to
                certain consumers who purchased the add-on product, clearly and
                prominently disclose the terms of its loan extensions and the add-on
                product, and pay a $2.5 million civil money penalty.
                3.1.5 Cash Express, LLC
                 On October 24, 2018, the Bureau announced a settlement with Cash
                Express, LLC, a small-dollar lender based in Cookeville, Tennessee,
                that offers high-cost, short-term loans, such as payday and title
                loans, as well as check-cashing services.\13\
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                 \13\ See Cash Express, LLC Consent Order, available at https://www.consumerfinance.gov/policy-compliance/enforcement/actions/cash-express-llc/.
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                 As described in the consent order, the Bureau found that Cash
                Express violated the CFPA's prohibition on deceptive acts or practices
                by threatening in collection letters that it would take legal action
                against consumers, even though the debts were past the date for suing
                on legal claims, and it was not Cash Express's practice to file
                lawsuits against these consumers. The Bureau also found that Cash
                Express violated the CFPA by misrepresenting that it might report
                negative credit information to consumer reporting agencies for late or
                missed payments, when the company did not actually report this
                information. The Bureau also found that Cash Express engaged in an
                abusive practice in violation of the CFPA by withholding funds during
                check-cashing transactions to satisfy outstanding amounts on prior
                loans, without disclosing this practice to the consumer during the
                initiation of the transaction.
                 The order requires Cash Express to pay approximately $32,000 in
                restitution to consumers, and pay a $200,000 civil money penalty.
                4. Supervision Program Developments
                4.1 Recent Bureau Rules and Guidance
                4.1.1 Bulletin 2018-01: Changes to Types of Supervisory Communications
                 On September 25, 2018, the Bureau issued a bulletin \14\ to
                announce changes to how it articulates supervisory expectations to
                institutions in connection with supervisory events. The bulletin notes
                that the Bureau will continue to communicate findings to institutions
                in writing by way of examination reports and supervisory letters.
                However, effective immediately, those reports and letters will include
                two categories of findings that convey supervisory expectations.
                ---------------------------------------------------------------------------
                 \14\ The bulletin can be found at: https://www.consumerfinance.gov/documents/6848/bcfp_bulletin-2018-01_changes-to-supervisory-communications.pdf.
                ---------------------------------------------------------------------------
                 Matters Requiring Attention (MRAs) will continue to be used by the
                Bureau to communicate to an institution's Board of Directors, senior
                management, or both, specific goals to be accomplished in order to
                correct violations of Federal consumer financial law, remediate harmed
                consumers, and address weaknesses in the compliance management system
                (CMS) that the examiners found are directly related to violations of
                Federal consumer financial law.
                 A new findings category--Supervisory Recommendations (SRs)--will be
                used by the Bureau to recommend actions for management to consider
                taking if it chooses to address the Bureau's supervisory concerns
                related to CMS. SRs will be used when the Bureau has not identified a
                violation of Federal consumer financial law, but has observed
                weaknesses in CMS.
                 Neither MRAs nor SRs have been or are legally enforceable. The
                Bureau will, however, consider an institution's response in addressing
                identified violations of Federal consumer financial law, weaknesses in
                CMS, or other noted concerns when assessing an institution's compliance
                rating, or otherwise considering the risks that an institution poses to
                consumers and to markets. These risk considerations may be used by the
                Bureau when prioritizing future supervisory work or assessing the need
                for potential enforcement action.
                4.1.2 Statement on Supervisory Practices Regarding Financial
                Institutions and Consumers Affected by a Major Disaster or Emergency
                 On September 14, 2018, the Bureau issued a statement \15\
                highlighting the existing laws and regulations that can provide
                supervised entities regulatory flexibility to take certain actions that
                can benefit consumers in communities under stress and hasten recovery
                in light of major disasters or emergencies. In the statement, the
                Bureau also noted that it will consider the impact of major disasters
                or emergencies on supervised entities themselves when conducting
                supervisory activities.
                ---------------------------------------------------------------------------
                 \15\ The full statement can be found at: https://www.consumerfinance.gov/documents/6837/bcfp_statement-on-supervisory-practices_disaster-emergency.pdf.
                ---------------------------------------------------------------------------
                4.1.3 Interagency Statement on the Role of Supervisory Guidance
                 On September 11, 2018, the Bureau, along with the Board of
                Governors of the Federal Reserve System, the Federal Deposit Insurance
                Corporation, the National Credit Union Administration, and the Office
                of the Comptroller of the Currency issued a joint statement \16\
                explaining the role of supervisory guidance and describing the
                agencies' approach to supervisory guidance.
                [[Page 9767]]
                Among other things, the joint statement confirms that supervisory
                guidance does not have the force and effect of law, and the agencies do
                not take enforcement actions based on supervisory guidance. The joint
                statement also explains that supervisory guidance outlines the
                agencies' supervisory expectations or priorities and articulates the
                agencies' general views regarding appropriate practices for a given
                subject area.
                ---------------------------------------------------------------------------
                 \16\ The Interagency Statement can be found at: https://www.consumerfinance.gov/documents/6830/interagency-statement_role-of-supervisory-guidance.pdf.
                ---------------------------------------------------------------------------
                4.1.4 Updates to HMDA Small Entity Compliance Guide
                 On October 30, 2018, the Bureau updated the HMDA Small Entity
                Compliance Guide to reflect changes made by section 104(a) of the
                Economic Growth, Regulatory Relief, and Consumer Protection Act (signed
                into law on May 24, 2018) to the Home Mortgage Disclosure Act (HMDA).
                More details, including an executive summary of a recent Bureau HMDA
                rulemaking and other resources for compliance, can be found at: https://www.consumer finance.gov/policy-compliance/guidance/implementation-guidance/hmda-implementation/.\17\
                ---------------------------------------------------------------------------
                 \17\ On August 31, 2018, the Bureau issued an interpretive and
                procedural rule to implement and clarify changes made by the Act.
                The full text of the Rule can be found at: https://www.federalregister .gov/documents/2018/09/07/2018-19244/partial-
                exemptions-from-the-requirements-of-the-home-mortgage-disclosure-
                act-under-the-economic.
                ---------------------------------------------------------------------------
                5. Conclusion
                 The Bureau will continue to publish Supervisory Highlights to aid
                Bureau-supervised entities in their efforts to comply with Federal
                consumer financial law. The report shares information regarding general
                supervisory and examination findings (without identifying specific
                institutions, except in the case of public enforcement actions),
                communicates operational changes to the program, and provides a
                convenient and easily accessible resource for information on the
                Bureau's guidance documents.
                6. Regulatory Requirements
                 This Supervisory Highlights summarizes existing requirements under
                the law, summarizes findings made in the course of exercising the
                Bureau's supervisory and enforcement authority, and is a non-binding
                general statement of policy articulating considerations relevant to the
                Bureau's exercise of its supervisory and enforcement authority. It is
                therefore exempt from notice and comment rulemaking requirements under
                the Administrative Procedure Act pursuant to 5 U.S.C. 553(b). Because
                no notice of proposed rulemaking is required, the Regulatory
                Flexibility Act does not require an initial or final regulatory
                flexibility analysis. 5 U.S.C. 603(a), 604(a). The Bureau has
                determined that this Supervisory Highlights does not impose any new or
                revise any existing recordkeeping, reporting, or disclosure
                requirements on covered entities or members of the public that would be
                collections of information requiring OMB approval under the Paperwork
                Reduction Act, 44 U.S.C. 3501, et seq.
                 Dated: February 25, 2019.
                Kathleen L. Kraninger,
                Director, Bureau of Consumer Financial Protection.
                [FR Doc. 2019-04987 Filed 3-15-19; 8:45 am]
                BILLING CODE 4810-AM-P
                

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