Introduction
The Consumer Financial Protection Bureau (CFPB) publishes a report every six months on violations of the law that were identified during inspections. The Bureau vetted companies and suppliers for compliance with the Fair Credit Reporting Act (FCRA). The CFPB found multiple violations, especially inaccurate information in credit reporting and illegal “pay-to-play” (Consumer Financial Protection Bureau, 2022) Fees in Mortgage Servicing. In addition, the Bureau found violations and problems with The Coronavirus Aid, Relief, and Economic Security Act (CARES Act-related or COVID-19-related workflow (Consumer Financial Protection Bureau, 2022). The CFPB assessed mortgage lending operations and found consumer protection law violations and Regulation Z.
The Mishandling of COVID-19 Relief
During the coronavirus pandemic, benefits were transferred to consumer accounts to help those who lost some or all of their earnings. The CFPB investigated how financial institutions handled pandemic relief benefits and whether policies and procedures were used that caused people to lose their benefits. The Bureau identified cases of abuse by financial institutions that used payments to pay off loan balances, which was illegal. The CFPB instructed companies to make amends to borrowers and change procedures to comply with state and local consumer protection measures. Moreover, the Bureau found violations related to the late provision of benefits to homeowners following the CARES Act. The reviewers also found that service providers unfairly charged some individuals while operating under the CARES Act and did not follow policies and procedures reasonably designed to evaluate homeowners’ loss mitigation options properly.
Inaccurate Information in Credit Reporting
Nationwide consumer reporting companies (NCRCs) are required to provide national credit reporting, including complaints received from consumers. NCRCs must take action to verify complaints to verify that all legal obligations have been met. CFPB experts found that NCRCs violated the law in several ways. First, they should have reported to the Bureau on the results of the inspections and the fulfillment of legal obligations. Second, NCRCs must resolve consumer complaints regardless of the validity of the claims, but many companies ignore this requirement (Consumer Financial Protection Bureau, 2022). The CFPB has requested consumer reporting and changes to complaints policy and procedures to make the process more transparent (Consumer Financial Protection Bureau). Moreover, similar violations by furnishers regarding NCRCs have been found. Furnishers had to correct the inaccurate information and simplify for consumer’s submission process.
Illegal “Pay-to-Pay” Fees in Mortgage Servicing
The CFPB concluded that federal law prohibits collectors from using a “pay-to-play” fee, often referred to as a “convenience fee.” Mortgage brokers violated this law by collecting a significant pay-to-pay fee. When borrowers telephoned the support line, they were unaware of the availability of phone calls and counseling fees. However, borrowers were charged a significant amount of money illegally. The CFPB required service companies to refund all money taken from borrowers for telephone calls if they were not warned about a charge (Consumer Financial Protection Bureau, 2022). The CFPB has taken a general look at the practices of charging for unnecessary services. The Federal Consumer Financial Protection Act prohibits collection companies from charging a “convenience fee” to pay off balances.
Conclusion
Having inspected financial institutions’ activities in the first half of 2022, CFPB found several violations of legislation in the field of mortgage lending. The original press release covered many topics and violations in different areas. This article looked at mortgage breaches related to the misuse of COVID-19 assistance, inaccurate credit reporting, and illegal pay-to-pay payments. All of them were regulated by the recommendations of the CFPB, and the affected borrowers received compensation.
Reference
Consumer Financial Protection Bureau. (2022, November). Supervisory highlights. Issue 28.