The CFPB recently issued a special edition of its Supervisory Highlights that focuses on the agency’s observations about COVID-19 Prioritized Assessments (PAs) conducted last year, which it designed to obtain real-time information from supervised entities operating in markets that it deemed to pose elevated risks of pandemic-related consumer harm, including prioritization of markets where Congress provided particular consumer-assisting provisions in the CARES Act.
The CFPB explained that PAs were not designed to identify violations of federal consumer financial law but rather to identify, assess, and communicate pandemic-related risks to supervised entities so that the entities could mitigate consumer harm. PA observations were made through targeted information requests which focused on, among other topics: (i) how the entity assisted and communicated with consumers; (ii) COVID-19 related challenges faced by the entity; (iii) changes the entity made to its compliance management system (CMS) due to the pandemic; and (iv) information on the entity’s response to the pandemic. The targeted information requests focused generally on the time period from May 2020 through September 2020.
In addition to various general observations of commonalities among entities in handing pandemic-related issues, the CFPB observed that mortgage servicers faced several significant challenges, including those related to CARES Act obligations and evolving investor guidance. While experiencing, among other difficulties, operational constraints, resource burdens, and service disruptions, servicers were expected to quickly implement CARES Act forbearances. Consumer risks included, but were not limited to, servicers:
- providing incomplete or inaccurate information to consumers about forbearances;
- taking erroneous action on borrower’s accounts for borrowers enrolled in forbearances (related to, e.g., collection and default notices sent, late fees assessed, and foreclosures initiated);
- improperly handling borrowers’ preauthorized electronic funds transfers;
- failing to process forbearance requests in a timely manner;
- erroneously enrolling borrowers in automatic or unwanted forbearances; and
- insufficient loss mitigation processes.
As for consumer reporting agencies and furnishers, the CFPB noted that these entities faced challenges in implementing CARES Act amendments to FCRA, which created certain obligations regarding accommodations. Consumer risks included inaccurate reporting of accommodations based on the furnisher’s own delays in processing the volume of accommodations made, insufficient furnishing policies and procedures, and delayed dispute investigations.
In the area of debt collection, the CFPB observed, among other things, that some entities reported increases in consumer contacts and payments, which may have been attributable to more consumers being at home, reduced spending, and pandemic-related assistance. Consumer risks included delays in processing suspensions of administrative wage garnishments, potential FDCPA compliance risks associated with new bank attachments or wage garnishments, and delays in payment processing.
The CFPB observed potential fair lending issues by institutions originating Paycheck Protection Program (PPP) loans under CARES Act amendments to the Small Business Act. Fair lending risks, which the CFPB asked lenders to consider and address when implementing the program, included lenders adopting policies that restricted access to PPP loans beyond the eligibility requirements in the CARES Act (e.g., requiring a small business to be an existing customer or to become a customer of the institution before applying for the loan from the institution).
The CFPB’s PA observations also included findings in the areas of auto loan servicing, student loan servicing, credit card account management, deposits, and prepaid accounts.