The CFPB has issued a notice regarding its plans to conduct an assessment of its remittance transfer rule which became effective on October 28, 2013.

The assessment is being conducted under Section 1022(d) of the Dodd-Frank Act which requires the CFPB to conduct an assessment “of each significant rule or order adopted by the Bureau under Federal consumer financial law.”  The assessment must include a review of “the effectiveness of the rule or order in meeting the purposes and objectives of [Title X] and the specific goals stated by the Bureau.”  The CFPB must publish a report of its assessment “not later than 5 years after the effective date of the subject rule or order.”  The notice lists six issues on which the CFPB seeks information and other comments.  Comments must be received on or before 60 days after date the notice is published in the Federal Register.

According to the notice, the CFPB’s reasons for designating the remittance rule “significant” for purposes of Section 1022(d) include the estimated aggregate annual compliance costs and the CFPB’s expectations for the rule “to have important effects on remittance transfer service features, provider operations, and the overall market,” such as those resulting from the rule’s new error resolution procedures.  The CFPB plans to focus its assessment on two areas: (1) whether the remittances market has evolved after the rule in ways that promote access, efficiency, and limited market disruption by considering how remittance volumes, prices, and competition in the remittance market may have changed, and (2) whether the rule’s consumer protections have brought more information, transparency, and greater price predictability to the market.

In conducting the assessment, the CFPB seeks to compare consumer outcomes to a baseline that would exist if the rule’s requirements were not in effect (something the CFPB acknowledges is “challenging” to do).  The CFPB may also seek to compare outcomes observed with the rule “to counterfactual outcomes” if specific elements of the rule were not in effect, such as “the effects of specific amendments, provisions, or exceptions, which only makes sense when compared to a baseline in which the balance of the Remittance Rule is in effect.”  The data that the CFPB plans to use includes its consumer complaint database, information obtained from CFPB supervisory and enforcement activities, and information provided by banks and credit unions in call reports.  The CFPB also intends to interview market participants.

 

 

In its Winter 2016 Supervisory Highlights, which covers supervision work generally completed between September and December 2015, the CFPB highlights violations found by CFPB examiners involving consumer reporting, debt collection, mortgage origination, remittances, and student loan servicing.

The report states that recent non-public supervisory actions have resulted in restitution of approximately $14.3 million to more than 228,000 consumers.  It  indicates that these non-public supervisory actions generally have resulted from CFPB ongoing supervision and/or targeted examinations.  The non-public resolutions involved deposits, debt collection, and mortgage origination.  The report also indicates that the CFPB’s supervisory activities “have either led to or supported” three recent public enforcement actions described in the report that resulted in $52.75 million in consumer remediation and $8.5 million in civil money penalties.

The CFPB’s “supervisory observations” include the following:

  • Credit reporting.  CFPB reviews of compliance with FCRA furnisher obligations focused on furnishers of information to nationwide specialty consumer reporting agencies (NSCRA) that specialize in reporting in connection with deposit accounts and the NSCRAs themselves.  CFPB examiners found that while one or more furnishers generally had policies and procedures regarding FCRA furnishing requirements, they did not have policies and procedures for furnishing deposit account information.  Deficiencies involving deposit account information found at one or more furnishers involved a lack of processes for verifying data furnished to NSCRAs through automated internal systems, the failure to correct and update information furnished to NSCRAs, or the failure to institute reasonable policies and procedures regarding accuracy, including prompt updating of outdated information.  Specifically, CFPB examiners found that although such furnishers would update their records to reflect a consumer’s payment in full of a charged off account, they would not send an update of the change in status from “charged-off” to “paid-in-full” to NSCRAs.  The report also describes various deficiencies found at NSCRAs such as weaknesses in their systems for credentialing of furnishers before accepting deposit account information from a furnisher.
  • Debt collection.  The CFPB observed that the use of exception reports by consumer reporting agencies (CRA) had led to greater accuracy in the information furnished to CRAs.  CFPB examiners found that one or more debt collectors had failed to comply with the general FDCPA requirement to stop contacting a consumer after receiving written notice from the consumer that he or she refuses to pay a debt or wants the collector to stop contacting him or her.  One or more debt collectors were also found to have made false, deceptive, or misleading representations regarding administrative wage garnishment when collecting defaulted student loans for the Department of Education.  Specifically, collectors were found to have threatened garnishment against borrowers who were not eligible for garnishment or to have given borrowers inaccurate information about when garnishment would begin, creating a false sense of urgency.
  • Student loan servicing.  The CFPB describes supervising the student loan servicing market as “a priority” for its supervision program. The CFPB noted that its examiners found improved practices regarding payment allocation and modification practices at some servicers.  CFPB examiners found that one or more student loan servicers had used “auto-default” clauses to place loans into default when a co-borrower filed for bankruptcy, regardless of whether the borrower was current on all payments, or to disclose the potential impact of forbearance on the availability of cosigner release.  Examiners also found that one or more servicers, in connection with “converting” an account to reflect a new loan owner, had incorrectly updated the account by using an interest rate that was higher than the rate for which the borrower was contractually liable.  Such servicers were directed to implement a plan to reimburse all affected borrowers.
  • Mortgage origination.  Deficiencies found by CFPB examiners involved failing to maintain written policies and procedures required by the loan originator rule and weak compliance management systems.
  • Remittances.  The CFPB’s press release notes that the Winter 2016 report is the first Supervisory Highlights to cover exams of banks and nonbanks in the remittance market.  Deficiencies found by CFPB examiners at one or more remittance providers included giving incomplete and/or inaccurate disclosures to consumers, failing to refund cancelled transactions within the required timeframe, and failing to promptly credit consumers’ accounts when errors occurred.