The CFPB just issued its Spring 2024 Supervisory Highlights. It issues these a few times a year to call attention to issues it deems significant. Once again, credit reporting and the duties and obligations of creditors made its list.
Credit Reporting Strikes Again
The Bureau's highlights state:
Inaccuracy in the credit reporting system is a long-standing issue that remains a problem today. Accordingly, the CFPB continues to prioritize examinations of consumer reporting companies (CRCs) and furnishers.
Specific to furnishers, the CFPB said:
Examiners are continuing to find that furnishers are violating the FCRA duty to promptly correct and update furnished information after determining that such information is incomplete or inaccurate. Specifically, in recent reviews of auto loan furnishers, examiners found that furnishers continued to furnish incomplete or inaccurate information for several months, and in some cases years, after the furnishers determined, through either dispute handling or identification of systemic issues, the information was furnished incompletely or inaccurately. For example, examiners found that furnishers continued to report dates of first delinquency inaccurately for several months after determining that they were reporting inaccurately due to various system coding issues. Examiners also found that after determining accounts were in a bankruptcy status and therefore should have been reported as current with dates of first delinquency that reflect the bankruptcy filing dates, furnishers failed to update the dates of first delinquency for the accounts to the bankruptcy filing dates.
There's nothing new here folks. The CFPB has been highlighting these issues for the past few years and we've brought up these issues in recent tips of the week as well as in our March Webinar. The same risks that are being highlighted with servicers are also found with all furnishers, be they big or small. Reporting and dispute handling is also the most frequent lawsuit being brought against creditors, so it's imperative that all creditors, regardless of size, conduct audits to make sure their files are accurate and have strong controls in place (policies, procedure, training) to manage these risks.
Enforcement Action
Next, the CFPB focused on an enforcement action it took in late 2023 against one of the largest auto finance companies in the country. The Bureau found the company:
(1) unfairly and abusively making it unreasonably difficult for consumers to cancel unwanted add-ons, including when consumers complained that dealers had forced add-ons on consumers without their consent; (2) unfairly failing to ensure consumers received refunds of unearned Guaranteed Asset Protection and Credit Life and Accidental Health premiums when they paid off their loans early or ended lease agreements early, making the products no longer of any value to consumers; and (3) unfairly failing to provide accurate refunds to consumers who canceled their vehicle service agreements as a result of flawed system logic.
It also found violations for:
(1) failing to promptly correct negative information it had sent to Credit reporting companies, where the negative information was falsely reporting customer accounts as delinquent even though customers had already returned their vehicles; and (2) failing to maintain reasonable policies and procedures to ensure related payment information it sent to credit reporting companies was accurate.
This action resulted in the Company paying $48 million in consumer redress and a $12 million civil money penalty. and the Company was also required to stop its unlawful practices and come into compliance with the law and prohibits incentive-based employee compensation or performance measurements in relation to add-on products.
Conclusions
I'm dating myself, but these Supervisory Highlights remind me of the old investment firm E.F. Hutton's advertising slogan: "When E.F. Hutton Talks, People Listen". The Bureau is laying it out there for everyone so it would be a great idea to listen. In the immortal words of my favorite basketball coach, John Wooden, "Failing to Prepare is Preparing to Fail".
Please reach out to Ignite at info@ignitecp.com if you need help on these or any other consumer sale and finance matters.