CFPB Releases Supervisory Highlights Focusing on Debt Collection and Loan Servicing Practices

On July 2, the Consumer Financial Protection Bureau (CFPB or Bureau) published the summer edition of its Supervisory Highlights, focusing on examinations of auto and student loan servicing companies and debt collectors that were completed between April 1, 2023 and December 31, 2023. The report also highlights consumer complaints about medical payment products and identifies concerns with financial institutions freezing deposit accounts.

Student and Auto Loan Servicing:

• Auto Loan Servicing: Examiners detailed instances of alleged unfair, deceptive, or abusive acts or practices (UDAAP) where certain auto loan servicers failed to provide adequate notification to borrowers enrolled in autopay that they must make their final payments manually. According to the CFPB, this led to late fees being charged when the final payments were not made on time, purportedly violating the “unfair” prong of UDAAP.
  
  In response, these servicers agreed to revise their procedures to ensure that they either include the final payment in autopay withdrawals or adequately notify consumers enrolled in autopay if and when a payment is required to be submitted manually.
  
  
• Student Loan Servicing: Examiners found instances of alleged UDAAP violations, such as excessive barriers to assistance, long hold times, and understaffed call centers. Additionally, certain servicers purportedly provided inaccurate information about the forms required for forbearance programs and failed to notify consumers about preauthorized electronic funds transfers that exceeded previous amounts.
  
  In response, servicers agreed to develop and implement plans to reduce hold times and drop rates, improved employee training, and, in certain instances, provided remediation to consumers who were adversely impacted by inadequate customer support.
  

Debt Collectors:

• Disclosure Violations: CFPB examiners detailed certain instances of alleged Fair Debt Collection Practices Act (FDCPA) violations where some debt collectors, including those handling student loans, failed to provide validation notices within five days of initial communication with borrowers. Some collectors also allegedly violated the prohibition on the use of false or misleading representations, such as misleading borrowers about their right to dispute the debts.
  
  In response, the debt collectors were required to update their written communications with borrowers to provide the validation information and enhance employee training.
  
  
• Harassment and Inconvenient Communication: Examiners detailed instances of debt collectors purportedly using aggressive or verbally abusive language, communicating at inconvenient times or places, making over 100 calls despite requests to stop, and failing to cease communication through specific mediums as requested by consumers.
  
  In response, debt collectors were required to enhance their training and oversight efforts to prevent harassment.

Medical Payment Products:

• Consumer Complaints: CFPB examiners identified complaints about how dentists and other healthcare providers promoted, offered, and sold medical credit cards to consumers. According to the report, consumers complained about healthcare providers misrepresenting the specifics of “deferred interest” promotions and pressuring patients to open a credit card while receiving treatment.
  
  The CFPB stated that it expects supervised entities to have effective processes for managing the risks of service provider relationships, including relationships with medical payment product providers.

Practices Preventing Access to Funds or Account Information:

• Account Freezes: Examiners detailed certain alleged UDAAP violations where institutions failed to notify consumers when their accounts were frozen due to suspected fraud or other suspicious activity and did not provide clear guidance on how to unfreeze those accounts. In particular, according to the report, customer service representatives were often unavailable to assist consumers with frozen accounts.
  
  In response, the institutions agreed to enhance their processes to provide automatic notice of account freezes and to describe in the notices the process by which consumers can unfreeze their accounts. Institutions also changed their processes to allow consumers to communicate directly with customer service representatives and challenge account freezes over the telephone.
  
  
• Compliance with § 1034(c): The CFPB assessed industry compliance with § 1034(c) of the Consumer Financial Protection Act, which prohibits large banks and credit unions from creating unreasonable barriers for customers seeking basic account information.
  
  The CFPB acknowledged that some institutions have eliminated fees for obtaining account information, such as printed check images and statements, and now offer free balance inquiries at third-party ATMs.

Troutman's Take:

Overall, the CFPB’s observations appear consistent with the types of issues we have seen the CFPB flag in prior Supervisory Highlights, interpretative guidance, and advisory circulars, and that we are seeing in a supervision and examination context. In addition, industry members should note the recent uptick of concerns expressed by the CFPB in two areas in particular — customer service levels and medical debt financing products.