The Consumer Financial Protection Bureau (CFPB) published a Special Edition of Supervisory Highlights to share its observations in its prioritized assessment supervisory work conducted last year after the sudden onset of the COVID-19 pandemic. These assessments focused on assessing risks to consumers resulting from the pandemic.
In May of 2020, the CPFB rescheduled about half of its planned examination work and instead conducted assessments in response to the pandemic. Prioritized assessments were higher-level inquiries than traditional examinations, designed to obtain real-time information from a broad group that operate in markets posing elevated risk of consumer harm due to pandemic-related issues.
The CFPB made the following observations.
Accommodations – Many entities offered accommodations to consumers that experienced pandemic-related hardships. The CARES Act mandated forbearance options on federally-backed mortgages and placed most student loans owned by the Department of Education into forbearance, and mandated zero interest accrual for all federally-owned student loans. Even where not legally required, many entities also offered accommodations, including expanded payment assistance programs and fee waivers.
Call Volume – Many institutions experienced increased call volumes from consumers requesting relief or disputing charges, with corresponding increases in hold times for many consumers. For some entities, the combination of rapid program implementation and operational challenges resulted in elevated risk of consumer harm.
Other Issues – Other risks ranged from inaccurate credit reporting to failure to provide timely disclosures, often caused by staffing shortages or inaccurate training material.
COVID Response Teams/ Staffing – Many institutions created COVID-19 response teams to identify and address consumer and industry challenges caused by the pandemic. Many entities monitored key processes well, leading them to self-identify issues and implement corrective actions where needed.
Commonly seen changes made by institutions included:
• Providing consumer remediation
• Reversing fees
• Updating scripts to provide accurate information to consumers
• Transitioning from manual to
• Automated processes
• Çorrecting inaccurate credit reporting
• Correcting account histories
Some entities also increased staffing to clear backlogs and to address increased demand for accommodations.
The CFPB particularly noticed certain issues in the following areas:
Mortgage, Particularly Mortgage Servicing – Servicers faced a number of significant challenges, ranging from implementing CARES Act protections and investor guidance. Many servicers reported operational constraints, resource burdens, and service interruptions, as well as moved employees from other duties to respond to forbearance requests. The CFPB discovered the following issues that raised the risk of consumer harm: Providing incomplete or inaccurate information to consumers about forbearance; Sending collections and default notices, assessing late fees, and initiating foreclosures for borrowers enrolled in forbearance; Cancelling or providing inaccurate information about borrower’s preauthorized electronic funds transfers; Failing to timely process forbearance requests; Enrolling borrowers in automatic or unwanted forbearances; Loss mitigation process deficiencies.
Auto Loan Servicing – Servicers expanded existing payment assistance programs, including waiving late fees, permitting non-delinquent and delinquent enrollments, and providing longer payment deferrals. Most deferral periods were three or more months, coupled with loan extensions and interest being charged during the period. Repossessions were generally suspended during March, April, and May 2020. The CFPB discovered the following issues that raised the risk of consumer harm:
• Providing inaccurate or insufficient information regarding the impact of interest accrual during deferment periods on the final loan payment amount
• Withdrawing funds after servicers agreed to deferments
• Failing to process certain payment assistance requests
• Providing inaccurate warnings about repossession
Consumer Reporting and Furnishing – The CARES Act amended the Fair Credit Reporting Act, which applies if a furnisher makes an accommodation with respect to one or more payments on a credit obligation or account of a consumer, and the consumer makes the payments or is not required to make one or more payments pursuant to the accommodation. The CFPB discovered the following issues that raised the risk of consumer harm:
• Having staffing challenges that affected ability to timely complete dispute investigations
• Handling increased volume for new or expanded payment accommodations
• Changing procedures to account for the CARES Act revision of the FCRA
• Inaccurately reporting of accommodations
• Insufficiently furnishing policies and procedures
Debt Collection – The CFPB noted increased consumer contacts and payments, as well as state-instituted measures that prohibited new wage garnishments or bank attachments. The CFPB discovered the following issues that raised the risk of consumer harm:
• Delaying the processing of suspensions of administrative wage garnishments
• Violating FDCPA due to the new restrictions on wage garnishments and bank attachments
• Delaying payment processing
Deposits – A number of institutions transitioned staff to remote work, increased call center staffing in order to deal with the influx of customer questions, and increased ATM deposit and withdrawal limits to maintain consumers’ access to their funds. A number of institutions activated their existing disaster relief programs. Numerous institutions made temporary changes to existing policies and procedures and documented those changes in informal documents, including job aids, playbooks, and FAQs issued to employees. A few institutions also made changes to formal policies and procedures.
The CFPB discovered the following issues that raised the risk of consumer harm: Failing to fully implement protections that states put in place to protect consumers’ access to the full amount of their government benefits, specifically Economic Impact Payments and unemployment insurance benefits; Failing to properly waive setoff rights in response to state actions; Waiving setoff rights through the issuance of provisional credit in the amount of the overdrawn account balance, and if such credits were revoked later, this potentially left consumers with negative account balance; Failing to clearly communicate how and when provisional credits would be revoked; Failing to implement policies and procedures that used account fee waivers and refunds
Small Business Lending – The CFPB noted that many institutions, in implementing the Paycheck Protection Program, restricted eligibility beyond the requirements of the program (e.g., limiting access only to existing customers). While neutral on its face, this may have a disproportionate negative impact on a prohibited basis and run the risk of violating the Equal Credit Opportunity Act and Regulation B. The CFPB found that the institutions’ stated reasons for adopting these restrictions (e.g., BSA requirements, prevention of fraud, operational issues) reflected legitimate business needs but did not conduct a full analysis.
The CFPB further noted concerns and potential harm in the following areas: student loan servicing; credit card account management; and prepaid cards.
The Supervisory Highlights may be found at: https://files.con- sumerfinance.gov/f/documents/ cfpb_supervisory-highlights_is- sue-23_2021-01.pdf.