QUESTION
I know that you track all the regulations and acts that affect financial
institutions involved in the mortgage industry. I am a little concerned that
the CFPB is not enforcing violations of federal regulations since the new Administration
came to power. Specifically, I am concerned that the current Administration is not
enforcing UDAAP. I would like to know your sense of how much the CFPB is going
after such enforcement. What kinds of violations are they going after?
ANSWER
Thank you for your question. Your concern goes to the core of the CFPB’s
raison d’être.
Since the enactment of the Dodd-Frank Act – and especially since the toning
down of CFPB enforcement under the Trump Administration – commentators have
speculated about how aggressively the CFPB would continue to pursue its broad regulatory
authority. I think an impartial observer would say that enforcement has slowed
down, but it has certainly not stopped.
The CFPB has broad authority to regulate unfair, deceptive, or abusive
acts and practices (UDAAP). Federal statutes had previously given similar
authority to federal agencies, including the Federal Trade Commission under
Section 5 of the FTC Act and under Section 511 of the Credit CARD Act of 2009
(regulation of mortgage lending), and the Federal Reserve Board under the FTC
Act and the Truth-in-Lending Act. Most of the States have adopted their versions
of UDAAP statutes.
In our tracking of regulatory enforcement actions by the CFPB, there has
been a slew of enforcements over the years. If we go back four years to July
2015, there have been many enforcement actions involving UDAAP violations. Under
the current Administration, such enforcement has continued.
What should be of particular interest is the kinds of violations that
the CFPB has pursued since January 2017, the month that the Administration came
to power. Therefore, I would like you to consider the following brief list I
have compiled of UDAAP allegations and alleged violations since January 2017. Though the list is not meant to be comprehensive, I
have endeavored to narrow the focus to only mortgage lenders and servicers. I have
given myself some flexibility in identifying regulations that involve UDAAP
applicability.
The list will let you learn from the mistakes of others. The companies
run the range of small regional financial institutions all way up to the biggest
banks in the world. The companies’ names don’t matter. Their size and
complexity do not pertain. Don’t let yourself get caught in the regulatory net.
What matters are the alleged violations!
- Giving the runaround to borrowers trying to save their homes [RESPA and Reg. X 1024.41; D-F 1031, 1036]
- Collecting illegal fees from struggling borrowers [Telemarketing Sales Rule; D-F 1031]
- Illegal kickback scheme [RESPA 8(a) and Reg. X]
- Accepting illegal kickbacks [RESPA 8(a) and Reg. X]
- Consistently failing to report accurate HMDA data [HMDA]
- Falsely representing that attorneys were involved in collecting debts [D-F 1031, 1036; FDCPA]
- Mortgage servicing failures [D-F 1031, 1036; FDCPA; RESPA; TILA; HPA]
- Deceiving consumers by collecting debt not legally owed [TILA; D-F 1031, 1036, 1064(a)–(b)]
- Failing to provide mortgage borrowers with protections against foreclosure [RESPA, Reg. X]
- Misleading credit repair customers and charging illegal fees [Telemarketing Sales Rule; D-F 1031, 1036]
- Steering consumers to lenders who offered illegal or unlicensed loans void in the consumers’ states [D-F 1031, 1036]
- Lying in loan offerings to consumers awaiting payments from settlements [D-F 1054]
- Steering consumers to an affiliated title insurer without disclosing the affiliation [RESPA § 8]
- Lying about affiliation with the federal government to lure consumers into paying illegal advance fees [Telemarketing Sales Rule; D-F 1031]
- Misleading consumers about debt-settlement services [Telemarketing Act; Telemarketing Sales Rule; D-F 1031, 1036]
- Unfair fees for mortgage interest rate-lock extensions [FTC Act § 5; D-F 1031, 1036]
- Improper in-person and telephonic collection attempts [FCRA; D-F 1031, 1036]
- Unlawful debt collection practices [FDCPA; 1031, 1036]
- Failing to properly disclose finance charges and improper advertising [TILA; D-F 1031, 1036]
- Obtaining consumer reports without a permissible purpose, furnishing inaccurate information [FCRA]
- Misleading veterans regarding interest rate reduction loans [D-F 1031, 1036]
- Requesting and receiving payment of prohibited fees for credit repair services [Telemarketing Sales Rule; Telemarketing Consumer Fraud and Abuse Prevention Act; D-F 1031, 1036]
- Filing collection suits without meaningful attorney involvement [FDCPA; D-F 1031, 1036]
The CFPB has examination procedures for UDAAP examinations. We help companies
prepare for the UDAAP examination. Our compliance team reviews possible unfair,
deceptive, or abusive acts or practices that may also violate a host of federal
or state laws. UDAAP is a minefield of potential violations because of the
complex interlocking of regulatory frameworks. For example, pursuant to TILA,
creditors must “clearly and conspicuously” disclose the costs and terms of
credit, yet an act or practice that does not comply with these provisions of
TILA may also be unfair, deceptive, or abusive.
Even a transaction that is in technical
compliance with other federal or state laws may nevertheless violate the
prohibition against UDAAP. For example, an advertisement may comply with TILA’s
requirements but contain additional statements that are untrue or misleading,
and compliance with TILA’s disclosure requirements does not insulate the rest
of the advertisement from the possibility of being deceptive.
Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group
