The Consumer Financial Protection Bureau (CFPB or Bureau) recently released its Spring Supervisory Highlights summarizing findings from supervisory exams it conducted between July and December 2021.
The CFPB has made various statements and numerous public-facing communications, including the Supervisory Highlights document, about its mission and priorities. For instance, the Bureau has issued comments or taken action related to technology companies, fintechs, auto finance, consumer reporting, credit cards, debt collection, deposits, mortgage discrimination, prepaid accounts, small business lending, and student loans. In fact, the CFPB released a special edition of its Supervisory Highlights focusing solely on COVID-19-related issues, a topic on which the Bureau has been particularly active. Unlike the CFPB’s previous special edition, the Bureau’s Spring Supervisory Highlights provide a comprehensive depiction of where the CFPB has focused efforts across the industry in various areas, and where industry members can expect continued scrutiny by the Bureau going forward as well as by other related federal agencies and state attorneys general and state banking regulators.
The Spring Supervisory Highlights cover a broad array of topics, including credit cards, fair lending, consumer reporting, debt collection, small dollar lending, and student loan servicing, among many subjects. Consistent with previous communications, the Highlights also identify three major items that have repeatedly been raised by Director Rohit Chopra in his public statements, and by the Bureau in its enforcement actions and other formal filings: (1) customer service, (2) disclosures to consumers, and (3) reticular adherence to regulatory requirements. According to the CFPB, these alleged programmatic deficiencies pervade the specific types of products discussed—e.g., auto servicing, consumer reporting, credit card account management, debt collection, deposits, mortgage origination, prepaid accounts, remittances, and student loan servicing. The assertions are backed up by scathing references to practices identified in CFPB public actions it has recently taken against a money transmission business, a credit reporting agency, a specialty money transmission business, and a student loan servicer.
The Highlights’ focus on customer service may be most helpful for regulated entities, especially smaller and newer entrants in the fintech and related space. While disclosures and regulatory adherence can be “baked” into operations, albeit at a cost, customer service can be very expensive to implement and particularly hard to understand for new entrants. Examples could include a failure to promptly acknowledge emails and other web submissions, return phone calls, act on customer complaints (even if unfavorably), investigate customer complaints in a timely manner, and follow up when there has been an error. The Bureau’s unfairness authority gives the agency significant leverage to critique these types of customer-experience issues because they arise out of consumers’ frustrations about existing accounts and therefore are arguably outside consumers’ ability to avoid or control.
Furthermore, the Highlights make clear that the Bureau intends to follow on its practice of holding what amounts to the entire “financial supply chain” responsible for failures to remedy. Whether as primary actors, secondary actors, or “assisters and facilitators,” the ultimate liability for enforcement and associated penalties remains the same.
Finally, the Bureau’s decision to name a senior executive of a public company in a Complaint carries through on the director’s intention to hold individuals and companies accountable, one he has made not only at the CFPB but at his prior position as a commissioner of the Federal Trade Commission.
It should also be noted that the Highlights document comes on the heels of the CFPB’s recent publication of an updated exam manual for evaluating unfair, deceptive, and abusive acts and practices (UDAAP); these updates cover discriminatory practices that may also be deemed “unfair” under the DFA.
The takeaway is for affected businesses to carefully review the specifics of the Highlights—and to remember that the Bureau’s supervision authority, which it recently announced plans to expand, is a powerful tool for quickly addressing priority issues and what the agency sees as recurring violations. While it may seem aggressive in tone, the Spring Supervisory Highlights is also a useful roadmap for what to expect from the CFPB in the near and mid-term.