[Federal Register Volume 89, Number 139 (Friday, July 19, 2024)]
[Notices]
[Pages 58726-58731]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15960]



[[Page 58726]]

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CONSUMER FINANCIAL PROTECTION BUREAU


Supervisory Highlights: Servicing and Collection of Consumer 
Debt, Issue 34, Summer 2024

AGENCY: Consumer Financial Protection Bureau.

ACTION: Supervisory Highlights.

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SUMMARY: The Consumer Financial Protection Bureau (CFPB or Bureau) is 
issuing its thirty fourth edition of Supervisory Highlights.

DATES: The findings in this edition of Supervisory Highlights cover 
select examinations that were generally completed from April 1, 2023, 
to December 31, 2023.

FOR FURTHER INFORMATION CONTACT: Jaclyn Sellers, Senior Counsel, at 
(202) 435-7449. If you require this document in an alternative 
electronic format, please contact [email protected].

SUPPLEMENTARY INFORMATION:

1. Introduction

    This edition of Supervisory Highlights focuses on the Consumer 
Financial Protection Bureau's (CFPB's) work in connection with debt 
collection. The collection of debt is an important and necessary part 
of the consumer financial marketplace, whether through servicing of 
current loans or the collection of delinquent debt. But servicing and 
collections also present risk of harm to consumers if handled 
improperly, particularly where there are violations of applicable law. 
This edition highlights violations of law and consumer harm in the 
areas of auto and student loan servicing and debt collection, including 
credit card debt collections.
    This edition also presents findings in deposits and prepaid 
accounts as well as credit card account management with a focus on 
medical credit cards. The findings in this edition of Supervisory 
Highlights cover select examinations that were generally completed from 
April 1, 2023, to December 31, 2023.
    Additionally, this edition summarizes supervisory activity related 
to section 1034(c) of the Consumer Financial Protection Act of 2010 
(CFPA).\1\ Section 1034(c) requires large banks and credit unions to 
comply with consumer requests for information concerning their accounts 
for consumer financial products and/or services in a timely manner, 
subject to limited exceptions.\2\ The supervisory activity indicates 
that some entities have ceased charging consumers fees to obtain 
account information and items such as printed copies of check images 
and account statements. Some entities are also offering free balance 
inquiry information at third-party ATMs. The CFPB is continuing to 
gather information and assess industry compliance with section 1034(c) 
across products, including mortgage, deposit, and credit card accounts.
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    \1\ 12 U.S.C. 5534(c); CFPB, Consumer Information Requests to 
Large Banks and Credit Unions, 88 FR 71279 (Oct. 16, 2023), 
available at https://files.consumerfinance.gov/f/documents/cfpb-1034c-advisory-opinion-2023_10.pdf.
    \2\ Id.
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    To maintain the anonymity of the supervised institutions discussed 
in Supervisory Highlights, references to institutions generally are in 
the plural and the related findings may pertain to one or more 
institutions.\3\ We invite readers with questions or comments about 
Supervisory Highlights to contact us at [email protected].
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    \3\ If a supervisory matter is referred to the Office of 
Enforcement, Enforcement may cite additional violations based on 
these facts or uncover additional information that could impact the 
conclusion as to what violations may exist.
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2. Supervisory Observations

2.1 Auto Loan Servicing

    The CFPB continues to examine auto loan servicing activities, 
primarily to assess servicers' compliance with the CFPA's prohibition 
on unfair, deceptive or abusive acts or practices (UDAAP).\4\ Recent 
auto loan servicing examinations identified unfair acts or practices 
related to collecting the final payment for auto loans.
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    \4\ 12 U.S.C. 5531, 5536.
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2.1.1 Failing To Auto-Debit the Final Payments Without Adequate 
Notification That Borrowers Must Make the Final Payment Manually

    Examiners found that servicers engaged in unfair acts or practices 
by failing to debit consumers' final payment via their autopay system 
without adequate notification to borrowers enrolled in autopay that 
they need to make the final payment manually. An act or practice is 
unfair when: (1) it causes or is likely to cause substantial injury to 
consumers; (2) the injury is not reasonably avoidable by consumers; and 
(3) the injury is not outweighed by countervailing benefits to 
consumers or to competition.\5\
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    \5\ Id.
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    Servicers offered preauthorized recurring electronic fund transfer 
enrollment for consumers to make automatic payments on their loans. The 
servicers' autopay systems did not debit consumers' final payments when 
they were a different amount from their regular monthly payments. 
Servicers failed to adequately communicate to consumers that they must 
remit the final payment manually, despite being enrolled in autopay. 
Servicers then charged consumers late fees for failing to make the 
final payment on time.
    This practice caused substantial injury to the consumers in the 
form of late fees assessed when the final payment was not made. 
Consumers could not reasonably avoid the injury because they had no 
control over the autopay system the servicers chose to use. Further, 
consumers did not reasonably anticipate that a servicer's autopay 
system would not make the final payment. Consumers could not reasonably 
foresee incurring a late charge as a result. The injury was not 
outweighed by any countervailing benefits to consumers or competition.
    In response to these findings, servicers are revising their 
policies and 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.

2.2 Student Loan Servicing

    The CFPB continues to examine student loan servicing activities. 
This work includes assessing whether entities have engaged in any 
violations of the CFPA's prohibition against UDAAPs,\6\ the Electronic 
Fund Transfer Act and its implementing Regulation E,\7\ and the Fair 
Debt Collection Practices Act (FDCPA) and its implementing Regulation 
F.\8\
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    \6\ 12 U.S.C. 5531, 5536.
    \7\ 15 U.S.C. 1693 et seq.; 12 CFR part 1005 et seq.
    \8\ 15 U.S.C. 1692 et seq.; 12 CFR part 1006 et seq.
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    Examiners identified unfair and abusive acts or practices by 
student loan servicers related to failing to provide adequate avenues 
for communication due to excessive hold times. Examiners also 
identified deceptive acts or practices related to misrepresenting which 
forms consumers should use to enroll in certain programs. And examiners 
found that servicers failed to notify consumers of preauthorized funds 
transfers that exceeded the previous transfer amount.

2.2.1 Excessive Barriers to Assistance

    Consumers frequently contact their servicer by phone to make 
payments, access benefits, and resolve disputes. Examiners found 
certain servicers had excessive hold times when consumers contacted 
them, with average hold times of 40 minutes over a six-month period.

[[Page 58727]]

As a result of these long hold times almost half of consumers dropped 
their calls before speaking with an agent. During the six-month period 
the servicers significantly understaffed their call centers. The 
servicers also disabled consumers' access to their online account 
management portals where consumers could make payments after a 
relatively short amount of time and had problems with their interactive 
voice response systems, limiting consumers' ability to pay or obtain 
assistance accessing benefits without speaking to an agent.
    Examiners found that student loan servicers engaged in unfair and 
abusive acts or practices by failing to provide, for an extended 
period, an adequate avenue for consumers to timely resolve disputes or 
inquiries by phone or submit phone payments, when they offered the 
option of paying and resolving disputes or inquiries by phone.
    An abusive act or practice: (1) materially interferes with the 
ability of a consumer to understand a term or condition of a consumer 
financial product or service; or (2) takes unreasonable advantage of: a 
lack of understanding on the part of the consumer of the material 
risks, costs or conditions of the product or service; the ability of 
the consumer to protect the interest of the consumer in selecting or 
using a financial product or service; or the reasonable reliance by the 
consumer on a covered person to act in the interest of the consumer.\9\
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    \9\ 12 U.S.C. 5535(a)(1)(B). See also CFPB, Policy Statement on 
Abusive Acts or Practices (Apr. 3, 2023), available at https://www.consumerfinance.gov/compliance/supervisory-guidance/policy-statement-on-abusiveness/#1.
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    Examiners found that servicers engaged in abusive acts or practices 
because servicers took unreasonable advantage of consumers' inability 
to protect their interests. The servicers gained an advantage by 
understaffing their call centers because they reduced their salary 
expenses. The advantage gained by servicers was unreasonable because 
resolving disputes or inquires and receiving payments are essential 
functions of a loan servicer.
    Consumers were unable to protect their own interests, including 
their interest in ``limiting the amount of time or effort necessary'' 
to remedy problems,\10\ as well as their interest in making payments on 
their loans or accessing benefit programs. Typically, consumers are 
unable to choose their loan servicer and so are unable to switch to a 
new servicer when they encounter problems reaching their servicer. 
Because consumers were unable to switch servicers, they were unable to 
limit the amount of time spent resolving problems, make payments, or 
access benefit programs. Consumers may ordinarily have alternatives to 
calling their servicer, such as making payments online or through an 
interactive voice response system, but many consumers were unable to 
access these alternatives because of problems with the interactive 
voice response system and the servicers' disabling of many consumers' 
online accounts. As a result, consumers often had no other recourse 
than to contact their servicers by phone. Therefore, the servicers 
engaged in abusive acts or practices.
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    \10\ See id. at 14.
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    Examiners also found that the servicers' conduct was unfair. The 
long hold times were likely to cause substantial injury to consumers. 
First, some consumers were unable to make timely payments because of 
long hold times, which likely resulted in additional late fees. Second, 
some consumers called to obtain information about how to enroll in 
forbearance or deferment programs and were therefore unable to enter 
these programs, which could result in additional unnecessary payments 
or late fees. Third, servicers injured consumers by forcing them to 
spend considerable amounts of time resolving issues or making payments. 
Consumers could not reasonably avoid the injury because they could not 
switch servicers and they have no control over call hold times. Some 
consumers were also unable to make payments through alternative means 
because of problems with interactive voice response systems or online 
accounts. Finally, the injury to consumers was not outweighed by 
countervailing benefits to consumers or competition. Consumers do not 
benefit from excessive hold times, and adequate staffing is inherent to 
being a functioning student loan servicer.
    In response to these findings, servicers developed plans to reduce 
hold times and drop rates.

2.2.2 Providing Inaccurate Information About Benefit Forms

    Examiners found that servicers engaged in deceptive acts or 
practices by providing inaccurate information regarding which forms 
consumers should submit in order to qualify for certain loan programs. 
Student loans often include certain benefits which consumers are 
entitled to access, such as forbearance. To access these programs 
consumers often must submit specific forms.
    A representation, omission, act, or practice is deceptive when: (1) 
the representation, omission, act or practice misleads or is likely to 
mislead the consumer; (2) the consumer's interpretation of the 
representation, omission, act or practice is reasonable under the 
circumstances; and (3) the misleading representation, omission, act or 
practice is material.\11\
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    \11\ 12 U.S.C. 5531.
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    Examiners found that some consumers contacted their servicers to 
determine the appropriate forms to submit in order to apply for a 
specific benefit. The servicers misrepresented to consumers which form 
to submit and, when the consumers submitted the specified forms, their 
requests were denied. Consumers had a reasonable belief the forms were 
correct when specified by the servicers and were acting reasonably when 
they followed their instructions. And the misrepresentations were 
material because they affected the consumers' decision to fill out the 
incorrect forms, which delayed consumers' ability to successfully apply 
for the benefit. In response to these findings, servicers improved 
training and monitoring.

2.2.3 Failing To Notify Consumers of Larger Preauthorized Electronic 
Funds Transfers

    Regulation E, 12 CFR 1005.10(d)(1), requires the designated payee 
of a preauthorized electronic fund transfer from a consumer's account 
to provide the consumer with written notice of the amount and date of 
the transfer at least 10 days before the scheduled transfer date if the 
amount will vary from the previous transfer under the same 
authorization or from the preauthorized amount. Examiners found that 
servicers violated this provision when they did not provide written 
notices to consumers before withdrawing an amount that exceeded the 
previous transfer under the same authorization. In response to these 
findings, servicers are remediating consumers.

2.3 Debt Collection

    The CFPB has supervisory authority to examine certain institutions 
that engage in consumer debt collection activities, including very 
large depository institutions, nonbanks that are larger participants in 
the consumer debt collection market, including nonbanks that collect 
student loan debt, and nonbanks that are service providers to certain 
covered persons. Recent examinations of larger participant debt 
collectors identified violations of Regulation F,\12\ which implements 
the

[[Page 58728]]

FDCPA. Examiners also identified unfair practices related to incorrect 
documentation related to the statute of limitations in credit card 
collections.
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    \12\ 12 CFR part 1006 et seq.
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2.3.1 Failure To Provide Debt Validation Notice to Consumers

    Section 1006.34(a) of Regulation F requires that within five days 
after the initial communication with the consumer in connection with 
the collection of any debt, a debt collector must send a written or 
electronic validation notice unless the validation information is 
contained, or provided orally, in the initial communication or the 
consumer has paid the debt before the validation information is 
required to be provided.\13\ A written or electronic validation notice 
must be sent in a manner that is reasonably expected to provide actual 
notice to the consumer.\14\ The Official Interpretation of Regulation F 
states that a debt collector who sends the requisite validation 
disclosure in writing or electronically but receives notice that the 
disclosure was not delivered to the consumer has not sent the 
disclosure in a manner that is reasonably expected to provide actual 
notice.\15\
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    \13\ 12 CFR part 1006.34(a).
    \14\ 12 CFR part 1006.42(a).
    \15\ 12 CFR part 1006, supp. I, comment 42(a)(1)-2.
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    Examiners found that debt collectors failed to provide the 
requisite validation information either orally in, or in writing within 
five days of, the initial oral communication with consumers. This 
happened when the initial communication occurred via telephone, but 
after the debt collector had received notice that its prior written 
disclosure was not delivered to the consumer. In response to these 
findings, debt collectors are revising their procedures and enhancing 
monitoring and training with respect to providing debt validation 
notices in these circumstances.
    Examiners also found that student loan debt collectors failed to 
provide validation notices as required where the initial communication 
with the consumer occurred in writing. In response to these findings, 
the debt collectors will update their written communications with 
borrowers to provide the validation information.

2.3.2 Using False, Deceptive or Misleading Representations

    Examiners found that student loan debt collectors violated 
Regulation F's prohibition on the use of false or misleading 
representations, section 1006.18(c)(4) and (e)(1)-(2). As a result of 
these violations, the borrowers may have reasonably believed that the 
FDCPA did not apply and may have been misled about their rights under 
the FDCPA, such as their right to dispute the debt.
    First, examiners found that debt collectors used false, deceptive, 
or misleading representations or means in connection with collection of 
a debt when they used a business, company, or organization name other 
than the true name of the debt collectors' business, company, or 
organization.\16\ In written communications and telephone calls 
reviewed by examiners, the debt collectors used different names and 
failed to disclose their true company names. In response to these 
findings, the debt collectors will cease using incorrect names and 
update all call scripts and written correspondence to use their true 
company names.
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    \16\ 12 CFR part 1006.18(c)(4).
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    Second, examiners found that debt collectors also used false, 
deceptive, or misleading representations or means in connection with 
collection of a debt when they failed to provide key initial 
disclosures in communications with borrowers. Regulation F requires 
debt collectors to disclose, in initial communications with consumers, 
that the debt collectors are attempting to collect a debt and that any 
information obtained will be used for that purpose.\17\ If the debt 
collectors' initial communication with the consumer is oral, the debt 
collectors must make the disclosure again in their initial written 
communication with the consumer. And in all subsequent communications 
with the consumer, the debt collectors must disclose that the 
communication is from a debt collector.\18\ Examiners observed that the 
debt collectors failed to provide these disclosures in written 
communications and telephone calls with borrowers. In response to these 
findings, the debt collectors will update their written communications 
and call scripts to provide the required disclosures.
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    \17\ 12 CFR part 1006.18(e)(1).
    \18\ 12 CFR part 1006.18(e)(2).
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2.3.3. Communicating With Consumers at Inconvenient or Unusual Times of 
Places

    Section 1006.6(b)(1) of Regulation F prohibits communicating or 
attempting to communicate, including electronically, with a consumer at 
a time or place the debt collector knows or should know to be 
inconvenient or unusual, with communications before 8 a.m. or after 9 
p.m. in the consumer's time zone presumed to be inconvenient in the 
absence of any knowledge of circumstances to the contrary.\19\ 
Examiners found that debt collectors communicated with consumers at 
times and places known by the collectors to be inconvenient or unusual. 
For example, debt collectors sent payment reminder emails to the 
consumer before 8 a.m. in the consumer's time zone. Examiners 
identified multiple phone calls where the consumer directly informed 
the collectors' agent that it was an inconvenient time or place for the 
consumer, but the agents continued the conversations beyond permissible 
follow-up questions. For example, examiners identified multiple 
instances where consumers told debt collectors' agents that it was an 
inconvenient time to talk, either because they were at work or driving, 
but the agents continued the conversation. Examiners also identified 
instances in which a consumer informed a debt collector's agent that it 
was a ``bad time'' to discuss the debt in question because they were at 
church without a wallet, but the agent nevertheless continued to 
discuss the debt. In response to these findings, the debt collectors 
are enhancing their policies and procedures and training to ensure that 
they do not communicate with consumers at inconvenient or unusual times 
or places.
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    \19\ 12 CFR part 1006.6(b)(1).
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2.3.4 Harassing, Oppressive or Abusive Conduct in Connection With the 
Collection of Debt

    Section 1006.14(a) of Regulation F prohibits debt collectors, in 
connection with the collection of any debt, from engaging in any 
conduct the natural consequences of which would be to harass, oppress, 
or abuse any person.\20\ Examiners found that debt collectors engaged 
in harassing, oppressive, or abusive conduct in connection with the 
collection of debt. For example, in phone calls, consumers explained to 
the debt collectors' agents that they were unable to make payments 
according to a prior settlement agreement because of a recent hospital 
stay. In response to consumers' explanations of the medical 
difficulties that left them without enough money to pay the debt in 
question, the agents took an aggressive tone and were verbally abusive 
towards the consumers. At other debt collectors, consumers requested 
that the debt collectors stop contacting them. Despite this request, 
the debt collectors subsequently placed over 100 telephone calls to the 
consumers. Although the frequency of calls to the consumer was within 
the limits established by section

[[Page 58729]]

1006.14(b)(2)(i), and so the collectors were entitled to a presumption 
that their conduct was not harassing, examiners found that the 
collectors placing over 100 calls to the consumer after being 
specifically asked to stop overcame that presumption and had the effect 
of harassing the consumer. In response to these findings, debt 
collectors are enhancing their training and oversight to prevent 
harassing communications.
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    \20\ 12 CFR part 1006.14(a).
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2.3.5 Failure To Cease Communicating Through a Specific Medium After a 
Consumer Request

    Section 1006.14(h) of Regulation F provides that if a consumer has 
requested that the debt collector not use a medium of communication to 
communicate with the consumer, the debt collector must not use that 
medium to communicate or attempt to communicate with the consumer in 
connection with the collection of any debt, with certain 
exceptions.\21\ For example, Regulation F explains that if a consumer 
requests that a debt collector ``stop calling'' the consumer, the debt 
collector is prohibited from communicating or attempting to communicate 
with the consumer through telephone calls.\22\ The regulation also 
states that, within a medium of communication, a person may request 
that a debt collector not use a specific address or telephone 
number.\23\
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    \21\ 12 CFR part 1006.14(h).
    \22\ 12 CFR part 1006, supp. I, comment 14(h)(1)-3.
    \23\ 12 CFR part 1006, supp. I, comment 14(h)(1)-2.
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    Examiners found that debt collectors communicated or attempted to 
communicate with consumers through a medium of communication, such as a 
text message, and/or through a specific telephone number that the 
consumers had requested the debt collectors not use to communicate with 
the consumers. In response to these findings, debt collectors are 
revising their procedures and enhancing monitoring and training to 
prevent communications, or attempts to communicate, through specified 
mediums following a consumer's request.

2.3.6 Failure To Disclose in Subsequent Communications That 
Communication Is From a Debt Collector

    Section 1006.18(e) of Regulation F requires that a debt collector 
disclose, in each communication subsequent to the initial communication 
with the consumer, that the communication is from a debt collector. 
Examiners found that debt collectors failed to disclose in subsequent 
communications that those communications were from a debt collector. 
Examiners found that the debt collectors' service providers, when 
communicating about the debt with consumers on the telephone or via 
text message on behalf of the collectors, failed to disclose that the 
communication was from a debt collector. Examiners also found that when 
consumers requested an electronic payment confirmation, service 
providers responsible for producing those confirmations on behalf of 
debt collectors failed to include the required disclosure that the 
communication was from a debt collector. In response to these findings, 
the debt collectors are enhancing their service provider oversight.

2.3.7 Incorrect Documentation Related to the Statute of Limitations in 
Credit Card Collections

    Examiners found that credit card issuers engaged in an unfair act 
or practice when they failed to properly calculate and document the 
debt collection statute of limitations for a particular State and then 
sold the credit card debt to debt collectors. The statute of 
limitations for credit card debt is the amount of time--set by each 
State--that lenders and collection agencies have to file a lawsuit 
against consumers for nonpayment. Examiners determined that the 
entities sold thousands of credit card debts to debt collectors 
misrepresenting the State's statute of limitations for credit card debt 
as ten years rather than five years, including some accounts on which 
the statute of limitations had already expired. The entities' practices 
created the risk of substantial injury to consumers because third 
parties may rely on the entities' statute of limitations data when 
determining their ability to file a collections lawsuit. The injury was 
not reasonably avoidable because consumers could neither anticipate nor 
control how the entities coded accounts in their systems and were not 
likely to recognize the entities' errors. Finally, the injury caused by 
the miscoding of accounts for sale was not outweighed by countervailing 
benefits to consumers or competition. To remedy the issue, the entities 
contacted their debt buyers to ensure that they used the correct 
statute of limitations period for debts already sold. Also, the 
entities updated their systems and procedures to state the correct 
statute of limitations period for current and future debts.

2.4 Credit Card Account Management--Medical Payment Products

    In assessing the operations of supervised entities for compliance 
with Federal consumer financial laws, examiners reviewed medical 
payment products issued by supervised entities. Consumers may apply for 
medical payment products, such as a medical credit card--often at the 
point of sale, such as a doctor's office or hospital. Consumers then 
use these products to pay for healthcare-related products or services. 
When offering a medical payment product to consumers, healthcare 
providers commonly use sales and marketing materials provided by the 
issuer of the medical payment product.

2.4.1 Service Provider Oversight in Offering Medical Payment Products

    At one entity, examiners identified a significant number of 
consumer complaints regarding how dentists and other healthcare 
providers promoted, offered, and sold medical credit cards to 
consumers. For example, where credit card issuers offer ``deferred 
interest'' promotions--credit terms under which interest accrues, but 
consumers are not obligated to pay if the balances are paid in full by 
a specific date--consumers frequently complained of healthcare 
providers misrepresenting the specifics of these promotions. Consumers 
also complained that it was unclear whether their monthly payments 
would be allocated to their promotional or non-promotional balances. 
Other consumers complained that they felt pressured by healthcare 
providers to open a credit card while receiving treatment.
    Supervision expects supervised entities to have effective processes 
for managing the risks of service provider relationships, including 
relationships with medical providers who directly communicate with 
consumers about medical payment products. In examining entities that 
offer medical payment products, examiners reviewed materials related to 
oversight of medical providers that directly communicate with consumers 
about the entities' medical payment products. These materials did not 
provide enough information for examiners to assess the program's 
adequacy, and Supervision plans to continue to assess entities' 
oversight of medical providers, including whether the oversight is 
commensurate to the risks in the product offering. Additionally, 
Supervision intends to monitor the incentives entities offer to enroll

[[Page 58730]]

patients in specific products and marketing materials about the 
products.

2.5 Deposit and Prepaid Accounts

    In reviewing deposits and prepaid account practices, examiners have 
focused on practices that prevent consumers from accessing their funds 
or important account information, and have assessed whether entities 
have complied with the CFPA's prohibition against engaging in 
UDAAPs.\24\ In certain instances, examiners found that entities engaged 
in unfair acts or practices with respect to account freezes. Examiners 
also observed problems related to the failure to provide periodic 
statements for allotment accounts. Additionally, in reviewing bank 
practices in providing consumers access to account information, 
examiners have observed a number of changes in how supervised entities 
impose fees when customers seek to obtain basic account information. 
Many entities eliminated fees for responding to requests for account 
information.
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    \24\ 12 U.S.C. 5531, 5536.
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2.5.1 Account Freezes

    As part of administering deposit accounts and prepaid accounts, 
institutions regularly review account activity to identify fraud and 
other suspicious activity and then freeze funds to prevent such 
activity. Examiners found that institutions engaged in unfair practices 
in connection with how they handle consumer communications related to 
these account freezes.
    For example, some institutions failed to affirmatively notify 
consumers after blocking their accounts. In other instances, 
institutions provided notices but failed to provide clear guidance to 
consumers, such as directing them to write in by mail for more 
information without specifying the information the consumer needed to 
unfreeze their accounts. Institutions sometimes exacerbated these 
practices by frustrating consumers' ability to contact the institution. 
For example, certain institutions dropped or blocked most calls from 
numbers associated with the frozen accounts so that consumers could not 
connect with a customer service representative to ask questions or 
challenge the freezes. In other instances, institutions automatically 
forwarded calls from these numbers to a pre-recorded message that did 
not provide meaningful information about the consumer's account.
    These practices caused or were likely to cause substantial injury 
to consumers as those consumers were unable to access frozen funds for 
weeks or months. In these instances, this injury was not reasonably 
avoidable as consumers would not have reason to believe their account 
activity would trigger a freeze. Additionally, institutions deprived 
consumers of the information needed to address the account suspensions. 
The injury was not outweighed by countervailing benefits to consumers 
or competition as consumers need to be able to address holds on their 
accounts in a timely manner so they may access their own money.
    In response to these findings, the institutions planned to enhance 
their processes to provide automatic notice of account freezes and 
describe in these notices the process for consumers to 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, among other process 
improvements.

2.5.2 Failure To Provide Periodic Statements for Allotment Saving 
Accounts

    Supervision examined institutions holding allotment savings 
accounts for servicemembers and other Federal employees. Military and 
other Federal employee payroll deductions--called allotments--are one 
way that companies can collect first-in-line payments on contracts for 
expensive items such as insurance or rent. Without adequate oversight 
of these allotment accounts, servicemembers and other Federal employees 
may have had accounts opened without their knowledge, or kept open, 
resulting in excess fees and other harm.
    In its recent exam work, Supervision observed that institutions did 
not send periodic statements to consumers with dormant allotment 
accounts for an extended time period. The institutions charged fees on 
thousands of dormant accounts, including where consumers were not 
provided timely notice of their account information. In response to 
examiners' observations, the institutions corrected system issues and 
committed to remediating affected servicemembers and other Federal 
employees.

2.5.3 Consumer Requests for Information

    Section 1034(c) requires large banks and credit unions to comply 
with consumer requests for information concerning their accounts for 
consumer financial products and/or services in a timely manner, subject 
to limited exceptions.\25\ In a recent advisory opinion, the CFPB noted 
that responding to consumer requests for information is vital to 
ensuring high levels of customer service and enabling consumers to 
resolve issues with their accounts when they encounter problems.\26\ A 
large bank or credit union would not comply with section 1034(c) if it 
imposed conditions or requirements on consumer information requests 
that unreasonably impede a consumer's ability to request and receive 
account information.\27\ Charging fees to consumers to request account 
information can impede consumers' ability to exercise their rights 
under section 1034(c).\28\ To assess industry practices and compliance 
with section 1034(c), the CFPB issued information requests to select 
entities regarding their deposit and credit card-related services and 
fees associated with consumer requests for information.
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    \25\ Id.
    \26\ Id.
    \27\ Id.
    \28\ Id.
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    Examiners found that some responding entities ceased charging 
consumers fees to obtain account information. This has resulted in 
several changes, including consumers being able to request and obtain 
printed copies of check images and account statements without charge. 
Some responding entities have ceased the practice of charging consumers 
fees related to bank account research and analysis when consumers have 
questions about their accounts. Some entities are no longer imposing 
fees for balance inquiries at third-party ATMs. Finally, some 
responding entities are fulfilling requests to confirm a consumer's 
deposit activity--often called ``verifications of deposit''--at no 
charge.
    In line with eliminating these charges, some entities have taken 
steps to update policies and procedures and provide their employees 
with tailored instructions and training. These changes will ensure that 
frontline employees are aware of and able to implement the fee changes. 
Some entities have also updated applicable fee schedules to reflect 
``No Charge'' for services covered by section 1034(c) and are including 
updated fee schedules in consumer correspondence. Concurrently, these 
entities also have made relevant system changes to ensure that any 
applicable system-generated fees are no longer assessed. The steps 
taken also reflect the ability and willingness of these supervised 
entities to ensure they comply with Federal consumer financial

[[Page 58731]]

law. The CFPB estimates that these adjustments in fee schedules will 
result in millions of dollars in savings on an annual basis for 
customers seeking basic account information from these entities.

3. Supervisory Developments

3.1 Recent CFPB Supervisory Developments

    Set forth below are select supervision program developments 
including circulars and rules that have been issued since the last 
regular edition of Supervisory Highlights.

3.1.1 CFPB Creates Registry To Detect Corporate Repeat Offenders

    On June 3, 2024, the CFPB finalized a rule to establish a registry 
to detect and deter corporate offenders that have broken consumer laws 
and are subject to Federal, State, or local government or court 
orders.\29\ The registry will also help the CFPB to identify repeat 
offenders and recidivism trends.
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    \29\ The final rule is available at cfpb_nonbank-registration-
orders_final-rule.pdf (consumerfinance.gov).
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3.1.2 CFPB Issues Interpretive Rule Regarding Buy Now, Pay Later

    On May 22, 2024, the CFPB issued an interpretive rule that confirms 
that Buy Now, Pay Later lenders are credit card issuers.\30\ 
Accordingly, Buy Now, Pay Later lenders must provide consumers some key 
legal protections and rights that apply to conventional credit cards. 
These include a right to dispute charges and demand a refund from the 
lender after returning a product purchased with a Buy Now, Pay Later 
loan.
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    \30\ The interpretive rule is available at cfpb_bnpl-
interpretive-rule_2024-05.pdf (consumerfinance.gov).
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3.1.3 CFPB Issues Rule on Procedures for Supervisory Designation 
Proceedings

    On April 23, 2024, the CFPB updated its procedures for designating 
nonbank covered persons for supervision to conform to a recent 
organizational change and to further ensure that proceedings are fair, 
effective, and efficient for all parties.\31\
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    \31\ The final rule is available at https://www.federalregister.gov/documents/2024/04/23/2024-08430/procedures-for-supervisory-designation-proceedings.
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3.1.4 Consumer Financial Protection Circular 2024-02 on Remittance 
Transfers

    On March 27, 2024, the CFPB issued a circular regarding deceptive 
marketing practices about the speed or cost of sending a remittance 
transfer.\32\ The circular states that remittance transfer providers 
may be liable under the CFPA for deceptive marketing about the speed or 
cost of sending a remittance transfer. Providers may be liable under 
the CFPA for deceptive marketing practices regardless of whether the 
provider follows the disclosure requirements of the Remittance Rule. 
For example, among other things, it may be deceptive to: market 
remittance transfers as being delivered within a certain time frame 
when transfers actually take longer to be made available to recipients; 
marketing remittance transfers as ``no fee'' when in fact the provider 
charges fees; market promotional fees or promotional exchange rates for 
remittance transfers without sufficiently clarifying when an offer is 
temporary or limited; market remittance transfers as ``free'' if they 
are not in fact free.
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    \32\ The circular is available at https://www.consumerfinance.gov/compliance/circulars/consumer-financial-protection-circular-2024-02/.
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4. Remedial Actions

4.1 Public Enforcement Actions

    The CFPB's supervisory activities resulted in and supported the 
below enforcement actions.

4.1.1 Pennsylvania Higher Education Assistance Agency

    On May 31, 2024, the CFPB sued student loan servicer Pennsylvania 
Higher Education Assistance Agency (PHEAA), which does business as 
American Education Services, for illegally collecting on student loans 
that have been discharged in bankruptcy and sending false information 
about consumers to credit reporting companies.\33\ The CFPB's lawsuit 
asks the court to order PHEAA to stop its illegal conduct, provide 
redress to borrowers it has harmed, and pay a civil penalty.
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    \33\ The complaint is available at https://www.consumerfinance.gov/enforcement/actions/pennsylvania-higher-education-assistance-agency-pheaa-dba-american-education-services-or-aes/.
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4.1.2 Chime, Inc. d/b/a Sendwave

    On October 17, 2023, the CFPB issued an order against Chime, Inc., 
doing business as Sendwave, a nonbank remittance transfer provider. 
Sendwave offers and provides consumers international money transfer 
services, known as remittance transfers, in 50 States and the District 
of Columbia through its mobile application, the Sendwave App.\34\ The 
app enables users to send money to recipients in several countries 
primarily in Africa and Asia. The CFPB found that Sendwave violated the 
CFPA's prohibition on deceptive acts and practices by misrepresenting 
to consumers the speed and cost of its remittance transfers. The CFPB 
also found that Sendwave violated the Electronic Fund Transfer Act 
(EFTA) and its implementing Regulation E, including subpart B, known as 
the Remittance Transfer Rule, by: (1) wrongly requiring customers to 
waive their rights; (2) failing to provide required disclosures, 
including the date of fund availability and exchange rate; (3) failing 
to provide timely disclosures; and (4) failing to investigate errors 
properly and maintain required policies and procedures for error 
resolution. The violations of EFTA and Regulation E also constitute 
violations of the CFPA. The order requires Sendwave to provide 
approximately $1.5 million in redress to consumers and to pay a $1.5 
million civil money penalty. Sendwave must also take measures to ensure 
future compliance.
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    \34\ The consent order is available at cfpb-0012-chime-inc-dba-
sendwave-consent-order_2023-10.pdf (consumerfinance.gov).

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-15960 Filed 7-18-24; 8:45 am]
BILLING CODE 4810-AM-P