On July 26, the CFPB released its Summer 2023 Supervisory Highlights reporting unfair, deceptive, and abusive acts or practices (UDAAPs) across a number of consumer financial products, including auto origination, auto servicing, consumer reporting, debt collection, deposits, fair lending, information technology, mortgage origination, mortgage servicing, payday and small dollar lending, and remittances, in violation of the CFPA. Below we focus on some key areas in particular.
- Auto: The Highlights detail multiple instances of UDAAPs, including lenders utilizing advertisements for loan offers that depicted larger, newer and more expensive cars for which the offers did not actually apply. On the auto servicing side, the report cites servicers charging interest on loans based on fraudulent representations by dealers that the vehicle had options and enhancements that it did not actually have, and servicers failing to properly notify consumers that the final payment of an auto loan often had to be made manually to close out the loan.
- Debt collection: The CFPB found debt collectors commonly continued collection attempts for work-related medical debt after receiving sufficient information to render the debt uncollectible under state worker’s compensation law. The Highlights also noted that debt collectors violated the FDCPA by collecting an amount not permitted by law or agreement, by falsely representing the character, amount, or legal status of a debt, by engaging in conduct which had the natural consequence of harassing, oppressing, or abusing the consumer, and by using false, deceptive, or misleading representations in connection with the collection of a debt.
- Payday lending: The Highlights focused on payday lenders that put language in loan agreements prohibiting consumers from revoking their consent for the lender to call, text, or e-mail the consumers about collection on the outstanding balance. Payday lenders also made false collection threats that would often purport their authority to garnish wages of borrowers, when no such authority exists.
Notably, the report focuses on the material impact that information technology and controls utilized by supervised entities can have on causing risks to consumers and, by extension, compliance with federal consumer financial protection laws. The report also discusses other nonbank supervisory developments, including with respect to larger market participants and organizations identified based on the CFPB’s risk-based analysis.
Putting it into Practice: The new Supervisory Highlights builds on the policy statement that the CFPB issued in April of this year (see previous blog post here). The policy statement summarizes existing UDAAP precedent, provides an analytical framework for identifying abusive conduct, and offers guiding principles for institutions to follow. Supervised entities and other potentially impacted institutions should review the Supervisory Highlights report, the policy statement, and continue to monitor agency interpretations of what conduct in financial markets qualifies as abusive and agency actions with respect to alleged violators.