CFPB Reaches Settlement With Mortgage Lender That Self-Reported Violations

On February 24^th, the CFPB entered a consent order with a Connecticut mortgage lender to pay an $83,000 civil money penalty for violating the Real Estate Settlement Procedures Act (RESPA) by splitting real estate settlement fees.¹  The lender self-reported these violations to the CFBP, admitted liability, and also provided information of other actors involved in the arrangement that facilitated other enforcement investigations. In prepared remarks announcing the settlement, CFPB Director Richard Cordray stated that the CFPB will “continue to take into account the self-reporting and cooperation of companies in determining how to resolve [enforcement] matters.”

The lender’s business consisted of obtaining troubled mortgages from mortgage servicers and providing loss-mitigation financing to these distressed borrowers. To finance its business, the lender originally split revenues and fees with affiliates of a hedge fund. When the lender secured better financing terms, it ended its funding arrangement with the hedge fund and its affiliates. However, the lender still continued to split origination and loss-mitigation fees with them. In 2013, the lender reported to the CFPB that it had potentially violated RESPA. RESPA prohibits a person from paying or receiving a portion or split of a fee that has not been earned in connection with a real estate settlement.

CFPB Director Calls for Employers to Provide Financial Education to Employees

On February 25^th, CFPB Director Richard Cordray spoke at a Financial Literacy and Education Commission (FLEC) field hearing regarding financial education in the workplace.²   Director Cordray serves as the FLEC vice chair. In his remarks, he encouraged both public and private sector employers to implement financial education programs as a set of best practices. He stated that implementing such education programs is the “smart thing for their employees and their businesses.” Cordray described a range of programs and practices that could be implemented at “little or no cost.” Such programs and practices might include automatic enrollment in retirement accounts with high percentage contributions as defaults, financial education benefits and savings options, and ensuring that employees understand and utilize the benefits made available to them.

CFPB Director Speaks at the National Association of Attorneys General

On February 26^th, CFPB Director Cordray spoke at the winter meeting of the National Association of Attorneys General.³   Director Cordray praised the CFPB’s collaboration with state attorneys general, saying that it has “yielded some excellent and historical results.” He also said that the coordination and information-sharing between the two will continue in numerous areas, including the areas of online lending and unfair and deceptive marketing practices by for-profit colleges. Several state attorneys general already have real-time access to the CFPB’s consumer complaint database.

CFPB Turns Focus on Credit Reporting Industry

On February 27^th, Director Richard Cordray spoke at the CFPB’s Consumer Advisory Board meeting in Washington, D.C.⁴   The Consumer Advisory Board, which is composed of experts in consumer protection, financial services, community development, fair lending, civil rights, and consumer financial products or services, was created by the Dodd-Frank Act in order to provide advice to CFPB leadership on a broad range of consumer financial issues and emerging market trends.
Director Cordray’s remarks focused on the credit reporting industry. Based on its review of consumer credit reporting complaints received over the past two years,⁵ the CFPB’s top three concerns with the industry are:

• Incorrect information on a credit report. Almost 75% of the credit reporting complaints the CFPB has received relate to consumers believing that their credit reports contain incorrect information.

• Frustration with the credit reporting company’s investigation. About 11% of complainants were frustrated with how the company handled a dispute they filed regarding possible errors in their credit report. Director Cordray stated in his remarks that the current system the largest nationwide credit reporting agencies use to resolve such consumer disputes is “completely unacceptable.”

• Difficulty obtaining a credit report or score. About 9% of complaints concerned consumers who were unable to obtain their free annual credit report or another copy of their credit report or score.

To address these issues, and to encourage consumers to check their credit report and correct errors, Director Cordray recently sent letters to the nation’s top credit card companies urging them to provide consumers with monthly free credit scores.⁶   Current law only entitles consumers to one free credit report per year and some issuers already offer their customers free credit scores, but the CFPB now considers providing free credit scores a “best practice in the industry.”

In conjunction with these actions, the CFPB also published a supervisory bulletin warning furnishers (companies that provide information to credit reporting agencies) not to avoid investigating consumer disputes.⁷   The CFPB is concerned that furnishers are not diligently addressing consumer disputes.

CFPB Sues For-Profit College

On February 27^th, the CFPB filed suit in federal district court in Indiana against a for-profit college, alleging that the college engaged in unfair, deceptive, or abusive practices in the marketing and financing of its degrees.⁸   The CFPB is also alleging a violation of the Truth in Lending Act. Among other allegations, the CFPB alleges the following conduct:

• Financing. The CFPB alleges that the college pressured students during an automated application process without providing them a fair opportunity to understand the private student loan obligations involved.

• Job prospects. The CFPB alleges that the college misrepresented to students that when they graduated they were likely to earn sufficient income to repay their student loans.

• Default prospects. The CFPB alleges that the college knew that approximately 64% of its students would default on their private student loans.

The CFPB is seeking restitution for students, a civil fine, and an injunction against the college.

Mortgage Servicing Company Discloses Potential CFPB Enforcement Action

A mortgage servicing company disclosed in its annual report filed this week that it may be facing a CFPB enforcement action over alleged violations of various federal consumer financial laws.⁹  The company anticipates meeting with CFPB staff soon in the hope that the matter can be resolved.

 _{1 A copy of the consent order is available here.} 

 _{2 See the Director’s prepared remarks here.}

 _{3 See the Director’s prepared remarks here.}

 _{4 See the Director’s prepared remarks here.} 

 _{5 See the report on complaints here.} 

 _{6 See a copy of the letter here.} 

 _{7 See the supervisory bulletin here.} 

 _{8 See the complaint here.} 

 _{9 See the 10-K here.}