Supervisory Highlights: Summer 2018, 52816-52822 [2018-22726]

Download as PDF 52816 ACTION: Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Notices Notice. The Information Security and Privacy Advisory Board (ISPAB) will meet Thursday, November 01, 2018 from 9:00 a.m. until 5:00 p.m., Eastern Time, and Friday, November 02, 2018 from 9:00 a.m. until 4:30 p.m. Eastern Time. All sessions will be open to the public. DATES: The meeting will be held on Thursday, November 01, 2018, from 9:00 a.m. until 5:00 p.m., Eastern Time, and Friday, November 02, 2018, from 9:00 a.m. until 4:30 p.m. Eastern Time. ADDRESSES: The meeting will be held at the American University Washington College of Law, 4300 Nebraska Ave. NW, Washington, DC, 20016. FOR FURTHER INFORMATION CONTACT: Jeff Brewer, Information Technology Laboratory, NIST, 100 Bureau Drive, Stop 8930, Gaithersburg, MD 20899– 8930, Telephone: (301) 975–2489, Email address: jeffrey.brewer@nist.gov. SUPPLEMENTARY INFORMATION: Pursuant to the Federal Advisory Committee Act, as amended, 5 U.S.C. App., notice is hereby given that the ISPAB will meet Thursday, November 01, 2018, from 9:00 a.m. until 5:00 p.m., Eastern Time, and Friday, November 02, 2018 from 9:00 a.m. until 4:30 p.m. Eastern Time. All sessions will be open to the public. The ISPAB is authorized by 15 U.S.C. 278g–4, as amended, and advises the National Institute of Standards and Technology (NIST), the Secretary of Homeland Security, and the Director of the Office of Management and Budget (OMB) on information security and privacy issues pertaining to Federal government information systems, including thorough review of proposed standards and guidelines developed by NIST. Details regarding the ISPAB’s activities are available at http://csrc.nist.gov/groups/SMA/ispab/ index.html. The agenda is expected to include the following items: —Deliberations and discussions by the ISPAB on security and privacy issues, —Presentation and discussion on NIST cybersecurity standards and guidance, —Briefings from the Department of Homeland Security National Risk Management Center, —Presentation and discussion on supply chain risk management programs, —Briefing from NIST on Internet of Things (IOT) guidance, —Presentation and discussion on the draft roadmap from the Report to the President on Enhancing the khammond on DSK30JT082PROD with NOTICES SUMMARY: VerDate Sep<11>2014 17:28 Oct 17, 2018 Jkt 247001 Resilience of the internet and Communications Ecosystem Against Botnets and Other Automated, Distributed Threats (May 22, 2018), —Presentation and discussion on cybersecurity and privacy issues related to Quantum Computing, —Presentation and discussion on the NIST privacy framework program, and —Updates on NIST Information Technology Laboratory cybersecurity work. Note that agenda items may change without notice. The final agenda will be posted on the website indicated above. Seating will be available for the public and media. Pre-registration is not required to attend this meeting. Public Participation: The ISPAB agenda will include a period, not to exceed thirty minutes, for oral comments from the public (Thursday, November 01, 2018, between 4:30 p.m. and 5:00 p.m.). Speakers will be selected on a first-come, first-served basis. Each speaker will be limited to five minutes. Questions from the public will not be considered during this period. Members of the public who are interested in speaking are requested to contact Jeff Brewer at the contact information indicated in the FOR FURTHER INFORMATION CONTACT section of this notice. Speakers who wish to expand upon their oral statements, those who had wished to speak but could not be accommodated on the agenda, and those who were unable to attend in person are invited to submit written statements. In addition, written statements are invited and may be submitted to the ISPAB at any time. All written statements should be directed to the ISPAB Secretariat, Information Technology Laboratory, 100 Bureau Drive, Stop 8930, National Institute of Standards and Technology, Gaithersburg, MD 20899–8930. Kevin A. Kimball, Chief of Staff. [FR Doc. 2018–22735 Filed 10–17–18; 8:45 am] BILLING CODE 3510–13–P BUREAU OF CONSUMER FINANCIAL PROTECTION Supervisory Highlights: Summer 2018 Bureau of Consumer Financial Protection. ACTION: Supervisory Highlights; notice. AGENCY: The Bureau of Consumer Financial Protection (Bureau) is issuing its seventeenth edition of its SUMMARY: PO 00000 Frm 00017 Fmt 4703 Sfmt 4703 Supervisory Highlights. In this issue of Supervisory Highlights, we report examination findings in the areas of auto finance lending; credit card account management; debt collection; deposits; mortgage servicing; mortgage origination; service providers; shortterm, small-dollar lending; remittances; and fair lending. As in past editions, this report includes information on the Bureau’s use of its supervisory and enforcement authority, recently released examination procedures, and Bureau guidance. DATES: The Bureau released this edition of the Supervisory Highlights on its website on September 06, 2018. FOR FURTHER INFORMATION CONTACT: Adetola Adenuga, Consumer Financial Protection Analyst, Office of Supervision Policy, at (202) 435–9373. If you require this document in an alternative electronic format, please contact CFPB_Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: 1. Introduction The Bureau of Consumer Financial Protection (Bureau) is committed to a consumer financial marketplace that is free, innovative, competitive, and transparent, where the rights of all parties are protected by the rule of law, and where consumers are free to choose the products and services that best fit their individual needs. To effectively accomplish this, the Bureau remains committed to sharing with the public key findings from its supervisory work to help industry limit risks to consumers and comply with Federal consumer financial law. The findings included in this report cover examinations in the areas of automobile loan servicing, credit cards, debt collection, mortgage servicing, payday lending, and small business lending that were generally completed between December 2017 and May 2018 (unless otherwise stated). It is important to keep in mind that institutions are subject only to the requirements of relevant laws and regulations. The information contained in Supervisory Highlights is disseminated to help institutions better understand how the Bureau examines institutions for compliance with those requirements. This document does not impose any new or different legal requirements. In addition, the legal violations described in this and previous issues of Supervisory Highlights are based on the particular facts and circumstances reviewed by the Bureau as part of its examinations. A conclusion that a legal violation exists on the facts and circumstances E:\FR\FM\18OCN1.SGM 18OCN1 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Notices described here may not lead to such a finding under different facts and circumstances. We invite readers with questions or comments about the findings and legal analysis reported in Supervisory Highlights to contact us at cfpb_Supervision@cfpb.gov. 2. Supervisory Observations Recent supervisory observations are reported in the areas of automobile loan servicing, credit cards, debt collection, mortgage servicing, payday lending, and, for the first time, small business lending. khammond on DSK30JT082PROD with NOTICES 2.1 Automobile Loan Servicing The Bureau continues to examine auto loan servicing activities, primarily to assess whether servicers have engaged in unfair, deceptive, or abusive acts or practices prohibited by the Consumer Financial Protection Act of 2010 (CFPA). Recent auto loan servicing examinations identified deceptive and unfair acts or practices related to billing statements and wrongful repossessions. 2.1.1 Billing Statements Showing PaidAhead Status After Applying Insurance Proceeds One or more examinations observed instances in which notes required that insurance proceeds from a total vehicle loss be applied as a one-time payment to the loan with any remaining balance to be collected according to the consumer’s regular billing schedule. However, in some instances after consumers experienced a total vehicle loss, the servicers sent billing statements showing that the insurance proceeds had been applied to the loan payments so that the loan was paid ahead and that the next payment on the remaining balance was due many months or years in the future. Servicers then treated consumers who failed to pay by the next month as late and in some cases also reported the negative information to consumer reporting agencies. The examination found that servicers engaged in a deceptive practice by sending billing statements indicating that consumers did not need to make a payment until a future date when in fact the consumer needed to make a monthly payment.1 The billing statements contained due dates inconsistent with the note and the servicer’s insurance payment application. Such information would mislead reasonable consumers to think they did not need to make the next monthly payment. The misrepresentation is material because it likely affected consumers’ conduct with regard to auto loans. Consumers would have been more likely to make a monthly payment if they knew that not doing so would result in a late fee, delinquency notice, or adverse credit reporting. In response to examination findings, the servicers are sending billing statements that accurately reflect the account status of the loan after applying insurance proceeds from a total vehicle loss. 2.1.2 Repossessions Many auto servicers provide options to consumers to avoid repossession once a loan is delinquent or in default. Servicers may offer formal extension agreements that allow consumers to forbear payments for a certain period of time or may cancel a repossession order once a consumer makes a payment. One or more recent examinations found that servicers repossessed vehicles after the repossession was supposed to be cancelled. In these instances, the servicers incorrectly coded the account as remaining delinquent or customer service representatives did not timely cancel the repossession order after the consumer’s agreement with the servicers to avoid repossession. The examinations identified this as an unfair practice.2 The practice of wrongfully repossessing vehicles causes substantial injury because it deprives borrowers of the use of their vehicles and potentially leads to additional associated harm, such as lost wages and adverse credit reporting. Such injury is not reasonably avoidable when consumers take action they believed would halt the repossession and there is no additional action the borrower can take to prevent it. Finally, the injury is not outweighed by countervailing benefits to the consumer or to competition. No benefits to competition are apparent from erroneous repossessions. And the expense to better monitor repossession activity is unlikely to be substantial enough to affect institutional operations or pricing. In response to the examination findings, the servicers are stopping the practice, reviewing the accounts of consumers affected by a wrongful repossession, and removing or remediating all repossession-related fees. 2.2 Credit Cards The Bureau continues to examine the credit card account management operations of one or more supervised entities. Typically, examinations assess advertising and marketing, account origination, account servicing, payments and periodic statements, dispute resolution, and the marketing, sale and servicing of credit card add-on products. With some notable exceptions, the examinations found that supervised entities generally are complying with applicable Federal consumer financial laws. 2.2.1 Periodic Re-Evaluation of Rate Increases Regulation Z, as revised to implement the Card Accountability Responsibility and Disclosure (CARD) Act, requires credit card issuers to periodically reevaluate consumer credit card accounts subjected to certain increases in the applicable Annual Percentage Rate(s) (APR or rate) to assess whether it is appropriate to reduce the account’s APR(s).3 Issuers must first re-evaluate each such account no later than six months after the rate increase and at least every six months thereafter.4 In reevaluating each account, the issuer must apply either (a) the factors on which the rate increase was originally based or (b) the factors the issuer currently considers when determining the APR applicable to similar, new consumer credit card accounts.5 One or more examinations between January and July 2018 found that entities: (a) Failed to re-evaluate all eligible accounts, (b) failed to consider the appropriate factors when reevaluating eligible accounts, or (c) failed to appropriately reduce the rates of accounts eligible for rate reduction. In one or more instances, the issuers failed to re-evaluate all eligible accounts because they inadvertently excluded some eligible accounts from the pool of accounts they re-evaluated. In one or more instances, the issuers failed to consider the appropriate factors because they inappropriately conflated reevaluation factors, among other reasons. In one or more instances, the issuers failed to appropriately reduce the rates for eligible accounts because they effectively imposed additional criteria for a rate reduction. The issuers have undertaken, or developed plans to undertake, remedial and corrective actions in response to these examination findings. 2.3 Debt Collection The Bureau’s Supervision program has authority to examine certain entities that engage in consumer debt collection activities, including nonbanks that are larger participants in the consumer debt collection market. Recent examinations 3 12 CFR 1026.59(a). CFR 1026.59(c). 5 12 CFR 1026.59(d)(1). 4 12 1 12 U.S.C. 5531, 5536. VerDate Sep<11>2014 17:28 Oct 17, 2018 2 Id. Jkt 247001 PO 00000 Frm 00018 Fmt 4703 Sfmt 4703 52817 E:\FR\FM\18OCN1.SGM 18OCN1 52818 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Notices of larger participants identified one or more violations of the Fair Debt Collection Practices Act (FDCPA).6 2.3.1 Failure To Obtain and Mail Debt Verification Before Engaging in Further Collection Activities Section 809(b) of the FDCPA requires a debt collector, upon receipt of a written debt validation request from a consumer, to cease collection of the debt until it obtains verification of the debt and mails it to the consumer.7 Examinations found that one or more debt collectors routinely failed to mail debt verifications before engaging in further collections activities. Instead, one or more debt collectors forwarded consumer debt validation requests to originating creditors; the creditors then reviewed the debts and mailed responses directly to consumers. One or more debt collectors accepted creditor determinations that the debt was owed by the relevant consumer for the amount claimed without receiving information verifying the debt and without mailing the required verification to consumers. One or more debt collectors then continued collection activities on accounts in violation of section 809(b) of the FDCPA.8 In response to these examination findings, one or more debt collectors are revising their debt validation policies, procedures, and practices to ensure both that they obtain appropriate verification of the debt when requested and that they mail the verification to consumers prior to engaging in further collection activities. khammond on DSK30JT082PROD with NOTICES 2.4 Mortgage Servicing Bureau examinations continue to focus on the loss mitigation process and, in particular, on how servicers handle trial modifications where consumers are paying as agreed. One or more recent mortgage servicing examinations observed unfair acts or practices relating to conversion of trial modifications to permanent status and initiation of foreclosures after consumers accepted loss mitigation offers. Recent examinations also identified unfair acts or practices when institutions charged consumers amounts not authorized by modification agreements or by mortgage notes. 2.4.1 Converting Trial Modifications to Permanent Status Past editions of Supervisory Highlights discussed how one or more servicers failed to place consumers who successfully completed trial 6 15 7 15 U.S.C. 1692–1692p. U.S.C. 1692g(b). 8 Id. VerDate Sep<11>2014 17:28 Oct 17, 2018 Jkt 247001 modifications into permanent modifications in a timely manner.9 Such delays may harm consumers when interest accrues at a higher nonmodified rate or when servicers report consumers as delinquent or still in trial modifications to consumer reporting agencies during the delay. Where a servicer does not provide full financial remediation to the consumer for such a delay, one or more examinations have identified an unfair practice. One or more recent examinations reviewed the practices of servicers with policies providing for permanent modifications of loans if consumers made four timely trial modification payments. However, for nearly 300 consumers who successfully completed the trial modification, the servicers delayed processing the permanent modification for more than 30 days. During these delays, consumers accrued interest and fees that would not have been accrued if the permanent modification had been processed. The servicers did not remediate all of the affected consumers nor did they have policies or procedures for remediating consumers in such circumstances. The servicers attributed the modification delays to insufficient staffing. As a result, one or more examinations identified an unfair act or practice. Consumers experienced substantial injury that could not be reasonably avoided. The accrued fees and interest that the servicers failed to fully remediate were likely significant because the delays were more than 30 days. And consumers could not reasonably avoid these injuries. They could neither control the processing of their loan modifications nor compel remediation from the servicers. The harm to consumers outweighs the cost to consumers or to competition, given that the servicers acknowledged that the delay was in error and did not indicate that the cost of remediation was burdensome. In response to examination findings, the servicers are fully remediating affected consumers and developing and implementing policies and procedures to timely convert trial modifications to permanent modifications where the consumers have met the trial modification conditions.10 In September 2017, examinations also found that one or more servicers mitigated the potential consumer harm associated with trial conversion delays 9 See, e.g., Issue 11 of Supervisory Highlights, section 3.2, available at, https:// www.consumerfinance.gov/documents/509/ Mortgage_Servicing_Supervisory_Highlights_11_ Final_web_.pdf. 10 12 U.S.C. 5531, 5536. PO 00000 Frm 00019 Fmt 4703 Sfmt 4703 by maintaining communication with consumers during the delay and by proactively remediating individual consumers for the costs associated with the delay after eventually making the consumers’ modifications permanent. 2.4.2 Charging Consumers Unauthorized Amounts One or more examinations found instances in which mortgage servicers charged consumers more than the amounts authorized by their loan modification agreements. The overcharges were caused by data errors affecting the modified loan’s starting balance, step-rate and interest-rate changes, deferred interest, and amortization maturity date when the loan was entered into the servicing system. The examinations identified this as an unfair practice.11 The overcharges resulted in substantial injury to consumers when consumers made payments higher than those stipulated in the modification agreements or when they made payments for a term longer than stipulated in the modification agreements. Consumers could not reasonably avoid this injury, which was caused by errors in the servicers’ systems. The injury to consumers is not outweighed by any countervailing benefits to consumers or to competition. No benefits to competition are apparent from the systemic errors that resulted in erroneous billing statements. And the expense of instituting validation procedures for loan-modification data is unlikely to be substantial enough to affect institutional operations or pricing. In response to the examination findings, the servicers are remediating affected consumers and correcting loan modification terms in their systems. 2.4.3 Representations Regarding Initiation of Foreclosure When one or more mortgage servicers approved borrowers for a loss mitigation option on a non-primary residence, the servicers represented to borrowers that the servicers would not initiate foreclosure if the borrower accepted loss mitigation offers in writing or by phone by a specified date. However, the servicers then initiated foreclosure even if borrowers had called or written to accept the loss mitigation offers by that date. Examinations identified this as a deceptive act or practice. The misrepresentations were likely to mislead borrowers when the servicers expressly indicated that the servicers would not initiate foreclosure proceedings if borrowers accepted the 11 12 E:\FR\FM\18OCN1.SGM U.S.C. 5531, 5536. 18OCN1 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Notices loss mitigation offers. The borrowers’ interpretation of the misrepresentations was reasonable in this circumstance, i.e., that the servicers would not initiate foreclosure after the borrowers accepted the loss mitigation offers. The misrepresentations were material because they were likely to prompt borrowers to accept the loss mitigation offers to avoid the initiation of foreclosure proceedings. 2.4.4 Representations Regarding Foreclosure Sales Examinations observed that when borrowers submitted complete loss mitigation applications less than 37 days from a scheduled foreclosure sale date, one or more servicers sent the borrowers notices indicating that the applications were complete and stating that the servicer(s) would notify the borrowers of the decision on the applications in writing within 30 days. But after sending these notices, the servicers proceeded to conduct the scheduled foreclosure sales without making a decision on the borrowers’ loss mitigation applications. The examinations did not find that this conduct amounted to a legal violation but observed that it could pose a risk of a deceptive practice. The notices could potentially mislead borrowers by stating that the borrowers would receive a decision on their loss mitigation applications. Borrowers reasonably could take that statement to mean that foreclosure sales would be postponed until a decision was reached. khammond on DSK30JT082PROD with NOTICES 2.5 Payday Lending The Bureau’s Supervision program covers entities that offer or provide payday loans. Examinations of payday lenders identified unfair and deceptive acts or practices as well as violations of Regulation E.12 2.5.1 Misleading Collection Letters Examinations observed one or more entities engaging in a deceptive act or practice in their collection letters. These entities represented in their letters that they will, or may have no choice but to, repossess consumers’ vehicles if the consumers fail to make payments or contact the entities. This was despite the fact that these entities did not have business relationships with any party to repossess vehicles and, as a general matter, did not repossess vehicles. Given these facts, the examination concluded that the net impression of these representations in the context of each letter was to mislead consumers to believe that these entities would 12 12 CFR 1005.10(b). VerDate Sep<11>2014 17:28 Oct 17, 2018 Jkt 247001 repossess or were likely to repossess consumers’ vehicles. The representations were material because they were likely to affect the behavior of consumers who were misled. The representations were likely to induce consumers to make payments to these entities, as opposed to allocating their funds toward other expenses. In response to the examination findings, the entity or entities are ensuring that their collection letters do not contain deceptive content. 2.5.2 Debiting Consumers’ Accounts Without Valid Authorization by Using Account Information Previously Provided for Other Purposes Examinations observed one or more entities using debit card numbers or Automated Clearing House (ACH) credentials that consumers had not validly authorized the entities to use to debit funds in connection with a singlepayment or installment loan in default. Upon a consumer’s failure to repay the loan obligation as agreed, one or more entities attempted to initiate electronic fund transfers (EFTs) using debit card numbers or ACH credentials that borrowers had identified on authorization forms executed in connection with the defaulted loan at issue. If those attempts were unsuccessful, the entities would then seek to collect balances due and owing via EFTs using debit card numbers or ACH credentials that the borrowers had supplied to the entities for other purposes, such as when obtaining other loans or making one-time payments on other loans or the loan at issue. Through these invalidly authorized EFTs, the entities sought payment of up to the entire amount due on the loan. The examinations identified these as unfair acts or practices and also, in some cases, as violations of Regulation E. With respect to unfairness, the invalidly authorized debits caused substantial injury in the form of debits that consumers could not anticipate, leading to potential fees. Because the credentials were provided to the entities for other purposes, such as account information consumers provided in previous credit applications, consumers could not anticipate that the entities would use them for the defaulted loan at issue and thus could not reasonably avoid such injury. Finally, the injury was not outweighed by any countervailing benefits to consumers, such as satisfying their debts, or to competition, such as passing on lower costs to consumers derived from easier debt collection. By giving an unfair advantage over other entities that obtain authorization to initiate debits from PO 00000 Frm 00020 Fmt 4703 Sfmt 4703 52819 consumers pursuant to clear and readily understandable terms, the unfair acts or practices likely harmed competition.13 With respect to loans for which the consumer entered into preauthorized EFTs that recurred at substantially regular intervals, the examinations identified this practice as a violation of Regulation E, which requires that preauthorized EFTs from a consumer’s account be authorized only by a writing signed or similarly authenticated by the consumer.14 Here, the loan agreements and EFT authorization forms failed to provide clear and readily understandable terms regarding the entities’ use of debit card numbers or ACH credentials that consumers provided for other purposes. Accordingly, the entities did not obtain valid preauthorized EFT authorizations for the debits they initiated using debit card numbers or ACH credentials consumers provided for other purposes. In response to examination findings, the entity or entities are ceasing the violations, remediating borrowers impacted by the invalid EFTs, and revising loan agreement templates and ACH authorization forms. 2.6 Small Business Lending The Equal Credit Opportunity Act (ECOA) prohibition against discrimination is not limited to consumer transactions; it also applies to business-purpose credit transactions, including credit extended to small businesses. In 2016 and 2017, the Bureau began conducting supervision work to assess ECOA compliance in institutions’ small business lending product lines, focusing in particular on the risks of an ECOA violation in underwriting, pricing, and redlining. The Bureau anticipates an ongoing dialogue with supervised institutions and other stakeholders as the Bureau moves forward with supervision work in small business lending. 2.6.1 Supervisory Observations In the course of conducting ECOA small business lending reviews, Bureau examination teams have observed instances in which one or more financial institutions effectively managed the risks of an ECOA violation in their small business lending programs. Examinations at one or more institutions observed that the board of directors and management maintained active oversight over the institutions’ compliance management system (CMS) framework. Institutions developed and 13 12 14 12 E:\FR\FM\18OCN1.SGM U.S.C. 5531, 5536. CFR 1005.10(b). 18OCN1 52820 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Notices implemented comprehensive riskfocused policies and procedures for small business lending originations and actively addressed the risks of an ECOA violation by conducting periodic reviews of small business lending policies and procedures and by revising those policies and procedures as necessary. Examinations also observed that one or more institutions maintained a record of policy and procedure updates to ensure that they were kept current. With regard to self-monitoring, one or more institutions implemented small business lending monitoring programs and conducted semi-annual ECOA risk assessments that include assessments of small business lending. In addition, one or more institutions actively monitored pricing-exception practices and volume through a committee. When examinations included file reviews of manual underwriting overrides at one or more institutions, they found that credit decisions made by the institutions were consistent with the requirements of ECOA, and thus the examinations did not find any violations of ECOA. At one or more institutions, however, examinations observed that institutions collect and maintain (in useable form) only limited data on small business lending decisions. Limited availability of data could impede an institution’s ability to monitor and test for the risks of ECOA violations through statistical analyses. 3. Remedial Actions khammond on DSK30JT082PROD with NOTICES 3.1 Public Enforcement Actions methodologies. After the Bank promptly self-disclosed the violations, the Bureau ultimately found through its supervisory process that Citibank violated TILA by failing to reevaluate and reduce the APRs for approximately 1.75 million consumer credit card accounts and thereby imposed on those accounts excess interest charges of $335 million. Under the terms of the resulting consent order, Citibank was required to correct these practices and pay $335 million in restitution to the impacted consumers.15 The Bureau did not assess civil money penalties based on a number of factors, including Citibank’s self-identifying and self-reporting the violations to the Bureau and its selfinitiating remediation to affected consumers. 3.1.2 Triton Management Group On July 19, 2018, the Bureau entered into a consent order with Triton Management Group, Inc., a payday lender that operates in Alabama, Mississippi, and South Carolina under several names including ‘‘Always Money’’ and ‘‘Quik Pawn Shop.’’ The Bureau found that Triton violated the CFPA and the disclosure requirements of TILA by failing to properly disclose finance charges associated with their auto title loans in Mississippi. The Bureau also found that Triton used advertisements that failed to disclose the annual percentage rate and other information in violation of TILA. The consent order bars Triton from misrepresenting the costs of its loans and requires Triton to remediate consumers $1,522,298. Based on Triton’s inability to pay, it will remediate consumers $500,000.16 The Bureau’s supervisory activities resulted in or supported the following public enforcement actions. Supervision Program Developments 3.1.1 3.2 Citibank N.A. On June 29, 2018, the Bureau announced an enforcement action against Citibank, N.A., (Citibank or Bank). The Bureau found Citibank violated the Truth in Lending Act (TILA) and its implementing regulation, Regulation Z, by failing to properly periodically re-evaluate and reduce the Annual Percentage Rates (rates) applicable to credit card accounts that had been subject to certain rate increases between 2011 and 2017 and by failing to have in place reasonable written policies and procedures to do so. In 2016, Citibank initiated a significant compliance review program across its credit cards line of business. That review led to Citibank’s selfidentifying several deficiencies and errors in its rate re-evaluation VerDate Sep<11>2014 17:28 Oct 17, 2018 Jkt 247001 Recent Bureau Rules and Guidance 3.2.1 Mortgage Servicing Final Rule On March 8, 2018, the Bureau issued a final rule to help mortgage servicers communicate with certain borrowers facing bankruptcy. The final rule gives mortgage servicers a clearer and more straightforward standard for providing periodic statements to consumers entering or exiting bankruptcy by amending the Bureau’s 2016 mortgage servicing rule. Specifically, the final rule provides a clear single-statement exemption for servicers to make the 15 See Citibank Consent Order available at, https://www.consumerfinance.gov/about-us/ newsroom/bureau-consumer-financial-protectionsettles-citibank-na/. 16 See Triton Management Group Consent Order available at, https://www.consumerfinance.gov/ about-us/newsroom/bureau-consumer-financialprotection-settles-triton-management-group/. PO 00000 Frm 00021 Fmt 4703 Sfmt 4703 transition, superseding the singlebilling-cycle exemption included in the 2016 rule. The effective date for the rule was April 19, 2018.17 3.2.2 2017–2018 Amendments of the TILA–RESPA Integrated Disclosure Rule On August 11, 2017, the Bureau published a final rule 18 in the Federal Register amending the Federal mortgage disclosure requirements under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) as implemented by Regulation Z (2017 TILA–RESPA Rule). These amendments are intended to provide greater certainty and clarity to the 2013 TILA–RESPA Rule, which went into effect on October 3, 2015. Changes and clarifications in the 2017 TILA–RESPA Rule include creating a tolerance for the total of payments disclosure, clarifying the partial exemption for housing assistance lending, expanding coverage of the disclosure rule to include operative units regardless of whether State law considers the units real property or personal property, and clarifying when disclosures may be shared with third parties. Additionally, the 2017 TILA–RESPA Rule includes several additional clarifications and technical changes addressing various parts of the 2013 TILA–RESPA Rule, including the calculating cash to close table, construction-to-permanent lending, principal reductions, rounding requirements, and simultaneous second lien loans. The 2017 TILA–RESPA Rule became effective October 10, 2017. However, compliance with the 2017 TILA–RESPA Rule is mandatory only with respect to transactions for which a creditor or mortgage broker receives an application on or after October 1, 2018 (except for compliance with the escrow cancellation notice 19 and compliance with the partial payment policy disclosure requirements,20 which will become mandatory on October 1, 2018, regardless of when an application was received). On May 2, 2018, the Bureau published a final rule in the Federal Register amending the Federal mortgage disclosure requirements to address when a creditor may use a Closing Disclosure to determine if an estimated closing cost was disclosed in good faith 17 See Mortgage Service Rules under the Truth in Lending Act (Regulation Z), 83 FR 10553 (Mar. 8, 2018), https://files.consumerfinance.gov/f/ documents/cfpb_mortgage-servicing_final-rule_ 2018-amendments.pdf. 18 Amendments to Federal Mortgage Disclosure Requirements under the Truth in Lending Act (Regulation Z), 82 FR (Aug. 11, 2017). 19 12 CFR 1026.20(e). 20 12 CFR 1026.39(d)(5). E:\FR\FM\18OCN1.SGM 18OCN1 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Notices and within tolerance (2018 TILA– RESPA Rule).21 The 2013 TILA–RESPA Rule in effect as of October 3, 2015 included a timing restriction limiting the use of the Closing Disclosure to reset tolerances to a period relative to the date of consummation, resulting in a creditor’s inability to pass through closing cost increases 22 to the consumer in certain limited circumstances. The 2018 TILA–RESPA Rule removes this timing restriction, permitting the use of the Closing Disclosure to establish good faith and reset tolerances regardless of when the Closing Disclosure is provided relative to consummation. The final rule took effect on June 1, 2018. On December 21, 2017, the Bureau provided the following statement regarding HMDA implementation: Recognizing the impending January 1, 2018 effective date of the Bureau’s amendments to Regulation C and the significant systems and operational challenges needed to adjust to the revised regulation, for HMDA data collected in 2018 and reported in 2019 the Bureau does not intend to require data resubmission unless data errors are material. Furthermore, the Bureau does not intend to assess penalties with respect to errors in data collected in 2018 and reported in 2019. Collection and submission of the 2018 HMDA data will provide financial institutions an opportunity to identify any gaps in their implementation of amended Regulation C and make improvements in their HMDA CMS for future years. Any examinations of 2018 HMDA data will be diagnostic to help institutions identify compliance weaknesses and will credit good faith compliance efforts. The Bureau intends to engage in a rulemaking to reconsider various aspects of the 2015 HMDA Rule such as the institutional and transactional coverage tests and the rule’s discretionary data points. For data collected in 2017, financial institutions will submit their reports in 2018 in accordance with the current Regulation C using the Bureau’s HMDA Platform.23 On July 5, 2018, the Bureau provided the following statement regarding recent HMDA amendments: The President signed the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act) on May 24, 2018, a section of which amends the Home Mortgage Disclosure Act (HMDA). The Act provides partial exemptions for some insured depository institutions and insured credit unions from certain HMDA requirements.24 The partial exemptions are generally available to insured depository institutions and insured credit unions: D For closed-end mortgage loans if the institution originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years. D For open-end lines of credit if the institution originated fewer than 500 open-end lines of credit in each of the two preceding calendar years. For closed-end mortgage loans or open-end lines of credit subject to the partial exemptions, the Act states that the ‘‘requirements of [HMDA section 304(b)(5) and (6)]’’ shall not apply. Accordingly, for these transactions, those institutions are exempt from the collection, recording, and reporting requirements for some, but not all, of the data points specified in current Regulation C. The Bureau expects to provide further guidance soon on the applicability of the Act to HMDA data collected in 2018.25 For all institutions filing HMDA data collected in 2018, the Act will not affect the format of the LARs: D LARs will be formatted according to the previously released 2018 Filing Instructions Guide for HMDA Data Collected in 2018 (2018 FIG).26 D If an institution does not report information for a certain data field due to the Act’s partial exemptions, the institution will enter an exemption code for the field specified in a revised 2018 FIG that the Bureau expects to release later this summer. D All LARs will be submitted to the same HMDA Platform. A beta version of the HMDA Platform for submission of data collected in 2018 will be available later this year for filers to test. 21 Federal Mortgage Disclosure Requirements under the Truth in Lending Act (Regulation Z), 83 FR 19159 (May 2, 2018). 22 12 CFR 1026.19(e)(3)(iv). 23 CFPB Issues Public Statement on Home Mortgage Disclosure Act Compliance (December 21, 2017), available at https:// www.consumerfinance.gov/about-us/newsroom/ cfpb-issues-public-statement-home-mortgagedisclosure-act-compliance/. 24 Public Law 115–174, section 104(a) (to be codified at 12 U.S.C. 2803). 25 The partial exemptions are not available to insured depository institutions that do not meet certain Community Reinvestment Act performance evaluation rating standards. Guidance will include information on how this provision will be implemented. 26 https://s3.amazonaws.com/cfpb-hmda-public/ prod/help/2018-hmda-fig.pdf. 3.3 Fair Lending Developments khammond on DSK30JT082PROD with NOTICES 3.3.1 HMDA Implementation and New Data Submission Platform VerDate Sep<11>2014 17:28 Oct 17, 2018 Jkt 247001 PO 00000 Frm 00022 Fmt 4703 Sfmt 4703 52821 3.3.2 Small Business Lending Review Procedures Each ECOA small business lending review includes a fair lending assessment of the institution’s CMS related to small business lending. To conduct this portion of the review, examinations use Module II of the ECOA Baseline Review Modules. CMS reviews include assessments of the institution’s board and management oversight, compliance program (policies and procedures, training, monitoring and/or audit, and complaint response), and service provider oversight. Examinations also use the Interagency Fair Lending Examination Procedures, which have been adopted in the Bureau’s Supervision and Examination Manual. In some ECOA small business lending reviews, examination teams may evaluate an institution’s fair lending risks and controls related to origination or pricing of small business lending products. Some reviews may include a geographic distribution analysis of small business loan applications, originations, loan officers, or marketing and outreach, in order to assess potential redlining risk. As with other in-depth ECOA reviews, ECOA small business lending reviews may include statistical analysis of lending data in order to identify fair lending risks and appropriate areas of focus during the examination. Notably, statistical analysis is only one factor taken into account by examination teams that review small business lending for ECOA compliance. Reviews typically include other methodologies to assess compliance, including policy and procedure reviews, interviews with management and staff, and reviews of individual loan files. 3.3.3 FFIEC HMDA Examiner Transaction Testing Guidelines Effective Date On August 22, 2017, the Federal Financial Institutions Examination Council (FFIEC) members, including the Bureau, announced new FFIEC Home Mortgage Disclosure Act (HMDA) Examiner Transaction Testing Guidelines for all financial institutions that report HMDA data.27 The Guidelines apply to the examination of HMDA data collected beginning in 27 The Guidelines were published by the FFIEC member agencies including the Bureau, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the State Liaison Committee. These new Guidelines are available at https://files.consumerfinance.gov/f/ documents/201708_cfpb_ffiec-hmda-examinertransaction-testing-guidelines.pdf. E:\FR\FM\18OCN1.SGM 18OCN1 khammond on DSK30JT082PROD with NOTICES 52822 Federal Register / Vol. 83, No. 202 / Thursday, October 18, 2018 / Notices 2018, which financial institutions must report to the Bureau by March 1, 2019.28 accessible resource for information on the Bureau’s guidance documents. 3.3.4 Upstart No-Action Letter The Bureau is continuing to monitor Upstart Network, Inc. (Upstart) regarding its compliance with the terms of the no-action letter (NAL) it received from Bureau staff. As part of its request for a NAL, Upstart agreed to conduct ongoing fair lending testing of its underwriting model, notify the Bureau before new variables are considered eligible for use in production, and maintain a robust model-related compliance management system. In addition to the ongoing fair lending testing discussed above, Upstart agreed as part of its request for a NAL to employ other consumer safeguards. These safeguards, which are described in the application materials posted on the Bureau’s website, include ensuring compliance with requirements to provide adverse action notices under Regulation B and the Fair Credit Reporting Act and its implementing regulation, Regulation V, and ensuring that all of its consumer-facing communications are timely, transparent, and clear, and use plain language to convey to consumers the type of information that will be used in underwriting. Upstart has committed to monitoring the effectiveness of all safeguards and sharing the results of its testing, along with other relevant information, with the Bureau during the term of the NAL. On July 18, 2018, the Bureau announced the creation of its Office of Innovation, to foster consumer-friendly innovation, which is now a key priority for the Bureau. The Office of Innovation is in the process of revising the Bureau’s NAL and trial disclosure policies, in order to increase participation by companies seeking to advance new products and services. Dated: September 6, 2018. Mick Mulvaney, Acting Director, Bureau of Consumer Protection. 4. Conclusion The Bureau expects that the publication of Supervisory Highlights will continue to aid Bureau-supervised entities in their efforts to comply with Federal consumer financial law. The report shares information regarding general supervisory and examination findings (without identifying specific institutions, except in the case of public enforcement actions), communicates operational changes to the program, and provides a convenient and easily [FR Doc. 2018–22726 Filed 10–17–18; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF ENERGY DOE/NSF Nuclear Science Advisory Committee Office of Science, Department of Energy. ACTION: Notice of open meeting. AGENCY: This notice announces a meeting of the DOE/NSF Nuclear Science Advisory Committee (NSAC). The Federal Advisory Committee Act requires that public notice of these meetings be announced in the Federal Register. DATES: Friday, November 2, 2018; 8:30 a.m.–4:30 p.m. ADDRESSES: Crystal City Marriott at Reagan National Airport, 1999 Jefferson Davis Highway, Potomac Ballroom, Arlington, Virginia 22202, 703–413– 5500. SUMMARY: FOR FURTHER INFORMATION CONTACT: Brenda L. May, U.S. Department of Energy; SC–26/Germantown Building, 1000 Independence Avenue SW, Washington, DC 20585–1290; Telephone: 301–903–0536 or email: brenda.may@science.doe.gov. The most current information concerning this meeting can be found on the website: http://science.gov/np/ nsac/meetings/. SUPPLEMENTARY INFORMATION: Purpose of the Board: The purpose of the Board is to provide advice and guidance on a continuing basis to the Department of Energy and the National Science Foundation on scientific priorities within the field of basic nuclear science research. Tentative Agenda: Agenda will include discussions of the following: Friday, November 2, 2018 28 For HMDA data collected in 2017 and submitted in 2018, the Bureau will follow the HMDA resubmission guidelines published on October 9, 2013 and available at http:// files.consumerfinance.gov/f/201310_cfpb_hmda_ resubmission-guidelines_fair-lending.pdf. VerDate Sep<11>2014 17:28 Oct 17, 2018 Jkt 247001 PO 00000 • Perspectives from Department of Energy and National Science Foundation • Update from the Department of Energy and National Science Foundation’s Nuclear Physics Office • Presentation of the Mo–99 Charge • Presentation of the Committee of Visitors Charge • NSAC Business/Discussions Frm 00023 Fmt 4703 Sfmt 4703 • Presentation on Physics Case for an Electron Ion Collider • Presentation on Quantum Information Science and Nuclear Physics Note: The NSAC Meeting will be broadcast live on the internet. You may find out how to access the broadcast by going to the following site prior to the start of the meeting. A video record of the meeting, including presentations that are made, will be archived at this site after the meeting ends: http://www.tvworldwide.com/events/ DOE/181102/. Public Participation: The meeting is open to the public. If you would like to file a written statement with the Committee, you may do so either before or after the meeting. If you would like to make oral statements regarding any of these items on the agenda, you should contact Brenda L. May, 301–903– 0536 or Brenda.May@science.doe.gov (email). You must make your request for an oral statement at least five business days before the meeting. Reasonable provision will be made to include the scheduled oral statements on the agenda. The Chairperson of the Committee will conduct the meeting to facilitate the orderly conduct of business. Public comment will follow the 10-minute rule. Minutes: The minutes of the meeting will be available for review after 60 days on the U.S. Department of Energy’s Office of Nuclear Physics website at: http:// science.gov/np/nsac/meetings/. Signed in Washington, DC on October 4, 2018. LaTanya Butler, Deputy Committee Management Officer. [FR Doc. 2018–22734 Filed 10–17–18; 8:45 am] BILLING CODE 6450–01–P DEPARTMENT OF ENERGY Distribution of Residual Citronelle Settlement Agreement Funds Office of Hearings and Appeals, Department of Energy. ACTION: Implementation of special refund procedures. AGENCY: The Office of Hearings and Appeals (OHA) of the Department of Energy (DOE) finalizes the procedures for the disbursement of residual funds (totaling approximately $59,000) remaining in various Citronelle Settlement Agreement escrow accounts to the parties to the Agreement. DATES: This plan is applicable October 18, 2018. ADDRESSES: Inquiries should be sent to the Office of Hearings and Appeals, U.S. Department of Energy, 1000 Independence Ave. SW, Washington, DC 20585–0107, (202) 287–1550, Email: kristin.martin@hq.doe.gov. SUMMARY: E:\FR\FM\18OCN1.SGM 18OCN1

Agencies

[Federal Register Volume 83, Number 202 (Thursday, October 18, 2018)]
[Notices]
[Pages 52816-52822]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22726]



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BUREAU OF CONSUMER FINANCIAL PROTECTION




Supervisory Highlights: Summer 2018



AGENCY: Bureau of Consumer Financial Protection.



ACTION: Supervisory Highlights; notice.



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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 

issuing its seventeenth edition of its Supervisory Highlights. In this 

issue of Supervisory Highlights, we report examination findings in the 

areas of auto finance lending; credit card account management; debt 

collection; deposits; mortgage servicing; mortgage origination; service 

providers; short-term, small-dollar lending; remittances; and fair 

lending. As in past editions, this report includes information on the 

Bureau's use of its supervisory and enforcement authority, recently 

released examination procedures, and Bureau guidance.



DATES: The Bureau released this edition of the Supervisory Highlights 

on its website on September 06, 2018.



FOR FURTHER INFORMATION CONTACT: Adetola Adenuga, Consumer Financial 

Protection Analyst, Office of Supervision Policy, at (202) 435-9373. If 

you require this document in an alternative electronic format, please 

contact [email protected].



SUPPLEMENTARY INFORMATION:



1. Introduction



    The Bureau of Consumer Financial Protection (Bureau) is committed 

to a consumer financial marketplace that is free, innovative, 

competitive, and transparent, where the rights of all parties are 

protected by the rule of law, and where consumers are free to choose 

the products and services that best fit their individual needs. To 

effectively accomplish this, the Bureau remains committed to sharing 

with the public key findings from its supervisory work to help industry 

limit risks to consumers and comply with Federal consumer financial 

law.

    The findings included in this report cover examinations in the 

areas of automobile loan servicing, credit cards, debt collection, 

mortgage servicing, payday lending, and small business lending that 

were generally completed between December 2017 and May 2018 (unless 

otherwise stated).

    It is important to keep in mind that institutions are subject only 

to the requirements of relevant laws and regulations. The information 

contained in Supervisory Highlights is disseminated to help 

institutions better understand how the Bureau examines institutions for 

compliance with those requirements. This document does not impose any 

new or different legal requirements. In addition, the legal violations 

described in this and previous issues of Supervisory Highlights are 

based on the particular facts and circumstances reviewed by the Bureau 

as part of its examinations. A conclusion that a legal violation exists 

on the facts and circumstances



[[Page 52817]]



described here may not lead to such a finding under different facts and 

circumstances. We invite readers with questions or comments about the 

findings and legal analysis reported in Supervisory Highlights to 

contact us at [email protected].



2. Supervisory Observations



    Recent supervisory observations are reported in the areas of 

automobile loan servicing, credit cards, debt collection, mortgage 

servicing, payday lending, and, for the first time, small business 

lending.



2.1 Automobile Loan Servicing



    The Bureau continues to examine auto loan servicing activities, 

primarily to assess whether servicers have engaged in unfair, 

deceptive, or abusive acts or practices prohibited by the Consumer 

Financial Protection Act of 2010 (CFPA). Recent auto loan servicing 

examinations identified deceptive and unfair acts or practices related 

to billing statements and wrongful repossessions.



2.1.1 Billing Statements Showing Paid-Ahead Status After Applying 

Insurance Proceeds



    One or more examinations observed instances in which notes required 

that insurance proceeds from a total vehicle loss be applied as a one-

time payment to the loan with any remaining balance to be collected 

according to the consumer's regular billing schedule. However, in some 

instances after consumers experienced a total vehicle loss, the 

servicers sent billing statements showing that the insurance proceeds 

had been applied to the loan payments so that the loan was paid ahead 

and that the next payment on the remaining balance was due many months 

or years in the future. Servicers then treated consumers who failed to 

pay by the next month as late and in some cases also reported the 

negative information to consumer reporting agencies.

    The examination found that servicers engaged in a deceptive 

practice by sending billing statements indicating that consumers did 

not need to make a payment until a future date when in fact the 

consumer needed to make a monthly payment.\1\ The billing statements 

contained due dates inconsistent with the note and the servicer's 

insurance payment application. Such information would mislead 

reasonable consumers to think they did not need to make the next 

monthly payment. The misrepresentation is material because it likely 

affected consumers' conduct with regard to auto loans. Consumers would 

have been more likely to make a monthly payment if they knew that not 

doing so would result in a late fee, delinquency notice, or adverse 

credit reporting. In response to examination findings, the servicers 

are sending billing statements that accurately reflect the account 

status of the loan after applying insurance proceeds from a total 

vehicle loss.

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    \1\ 12 U.S.C. 5531, 5536.

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2.1.2 Repossessions



    Many auto servicers provide options to consumers to avoid 

repossession once a loan is delinquent or in default. Servicers may 

offer formal extension agreements that allow consumers to forbear 

payments for a certain period of time or may cancel a repossession 

order once a consumer makes a payment.

    One or more recent examinations found that servicers repossessed 

vehicles after the repossession was supposed to be cancelled. In these 

instances, the servicers incorrectly coded the account as remaining 

delinquent or customer service representatives did not timely cancel 

the repossession order after the consumer's agreement with the 

servicers to avoid repossession. The examinations identified this as an 

unfair practice.\2\ The practice of wrongfully repossessing vehicles 

causes substantial injury because it deprives borrowers of the use of 

their vehicles and potentially leads to additional associated harm, 

such as lost wages and adverse credit reporting. Such injury is not 

reasonably avoidable when consumers take action they believed would 

halt the repossession and there is no additional action the borrower 

can take to prevent it. Finally, the injury is not outweighed by 

countervailing benefits to the consumer or to competition. No benefits 

to competition are apparent from erroneous repossessions. And the 

expense to better monitor repossession activity is unlikely to be 

substantial enough to affect institutional operations or pricing. In 

response to the examination findings, the servicers are stopping the 

practice, reviewing the accounts of consumers affected by a wrongful 

repossession, and removing or remediating all repossession-related 

fees.

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    \2\ Id.

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2.2 Credit Cards



    The Bureau continues to examine the credit card account management 

operations of one or more supervised entities. Typically, examinations 

assess advertising and marketing, account origination, account 

servicing, payments and periodic statements, dispute resolution, and 

the marketing, sale and servicing of credit card add-on products. With 

some notable exceptions, the examinations found that supervised 

entities generally are complying with applicable Federal consumer 

financial laws.



2.2.1 Periodic Re-Evaluation of Rate Increases



    Regulation Z, as revised to implement the Card Accountability 

Responsibility and Disclosure (CARD) Act, requires credit card issuers 

to periodically re-evaluate consumer credit card accounts subjected to 

certain increases in the applicable Annual Percentage Rate(s) (APR or 

rate) to assess whether it is appropriate to reduce the account's 

APR(s).\3\ Issuers must first re-evaluate each such account no later 

than six months after the rate increase and at least every six months 

thereafter.\4\ In re-evaluating each account, the issuer must apply 

either (a) the factors on which the rate increase was originally based 

or (b) the factors the issuer currently considers when determining the 

APR applicable to similar, new consumer credit card accounts.\5\

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    \3\ 12 CFR 1026.59(a).

    \4\ 12 CFR 1026.59(c).

    \5\ 12 CFR 1026.59(d)(1).

---------------------------------------------------------------------------



    One or more examinations between January and July 2018 found that 

entities: (a) Failed to re-evaluate all eligible accounts, (b) failed 

to consider the appropriate factors when re-evaluating eligible 

accounts, or (c) failed to appropriately reduce the rates of accounts 

eligible for rate reduction. In one or more instances, the issuers 

failed to re-evaluate all eligible accounts because they inadvertently 

excluded some eligible accounts from the pool of accounts they re-

evaluated. In one or more instances, the issuers failed to consider the 

appropriate factors because they inappropriately conflated re-

evaluation factors, among other reasons. In one or more instances, the 

issuers failed to appropriately reduce the rates for eligible accounts 

because they effectively imposed additional criteria for a rate 

reduction. The issuers have undertaken, or developed plans to 

undertake, remedial and corrective actions in response to these 

examination findings.



2.3 Debt Collection



    The Bureau's Supervision program has authority to examine certain 

entities that engage in consumer debt collection activities, including 

nonbanks that are larger participants in the consumer debt collection 

market. Recent examinations



[[Page 52818]]



of larger participants identified one or more violations of the Fair 

Debt Collection Practices Act (FDCPA).\6\

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    \6\ 15 U.S.C. 1692-1692p.

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2.3.1 Failure To Obtain and Mail Debt Verification Before Engaging in 

Further Collection Activities



    Section 809(b) of the FDCPA requires a debt collector, upon receipt 

of a written debt validation request from a consumer, to cease 

collection of the debt until it obtains verification of the debt and 

mails it to the consumer.\7\ Examinations found that one or more debt 

collectors routinely failed to mail debt verifications before engaging 

in further collections activities. Instead, one or more debt collectors 

forwarded consumer debt validation requests to originating creditors; 

the creditors then reviewed the debts and mailed responses directly to 

consumers. One or more debt collectors accepted creditor determinations 

that the debt was owed by the relevant consumer for the amount claimed 

without receiving information verifying the debt and without mailing 

the required verification to consumers. One or more debt collectors 

then continued collection activities on accounts in violation of 

section 809(b) of the FDCPA.\8\ In response to these examination 

findings, one or more debt collectors are revising their debt 

validation policies, procedures, and practices to ensure both that they 

obtain appropriate verification of the debt when requested and that 

they mail the verification to consumers prior to engaging in further 

collection activities.

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    \7\ 15 U.S.C. 1692g(b).

    \8\ Id.

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2.4 Mortgage Servicing



    Bureau examinations continue to focus on the loss mitigation 

process and, in particular, on how servicers handle trial modifications 

where consumers are paying as agreed. One or more recent mortgage 

servicing examinations observed unfair acts or practices relating to 

conversion of trial modifications to permanent status and initiation of 

foreclosures after consumers accepted loss mitigation offers. Recent 

examinations also identified unfair acts or practices when institutions 

charged consumers amounts not authorized by modification agreements or 

by mortgage notes.



2.4.1 Converting Trial Modifications to Permanent Status



    Past editions of Supervisory Highlights discussed how one or more 

servicers failed to place consumers who successfully completed trial 

modifications into permanent modifications in a timely manner.\9\ Such 

delays may harm consumers when interest accrues at a higher non-

modified rate or when servicers report consumers as delinquent or still 

in trial modifications to consumer reporting agencies during the delay. 

Where a servicer does not provide full financial remediation to the 

consumer for such a delay, one or more examinations have identified an 

unfair practice.

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    \9\ See, e.g., Issue 11 of Supervisory Highlights, section 3.2, 

available at, https://www.consumerfinance.gov/documents/509/Mortgage_Servicing_Supervisory_Highlights_11_Final_web_.pdf.

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    One or more recent examinations reviewed the practices of servicers 

with policies providing for permanent modifications of loans if 

consumers made four timely trial modification payments. However, for 

nearly 300 consumers who successfully completed the trial modification, 

the servicers delayed processing the permanent modification for more 

than 30 days. During these delays, consumers accrued interest and fees 

that would not have been accrued if the permanent modification had been 

processed. The servicers did not remediate all of the affected 

consumers nor did they have policies or procedures for remediating 

consumers in such circumstances. The servicers attributed the 

modification delays to insufficient staffing.

    As a result, one or more examinations identified an unfair act or 

practice. Consumers experienced substantial injury that could not be 

reasonably avoided. The accrued fees and interest that the servicers 

failed to fully remediate were likely significant because the delays 

were more than 30 days. And consumers could not reasonably avoid these 

injuries. They could neither control the processing of their loan 

modifications nor compel remediation from the servicers. The harm to 

consumers outweighs the cost to consumers or to competition, given that 

the servicers acknowledged that the delay was in error and did not 

indicate that the cost of remediation was burdensome. In response to 

examination findings, the servicers are fully remediating affected 

consumers and developing and implementing policies and procedures to 

timely convert trial modifications to permanent modifications where the 

consumers have met the trial modification conditions.\10\

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    \10\ 12 U.S.C. 5531, 5536.

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    In September 2017, examinations also found that one or more 

servicers mitigated the potential consumer harm associated with trial 

conversion delays by maintaining communication with consumers during 

the delay and by proactively remediating individual consumers for the 

costs associated with the delay after eventually making the consumers' 

modifications permanent.



2.4.2 Charging Consumers Unauthorized Amounts



    One or more examinations found instances in which mortgage 

servicers charged consumers more than the amounts authorized by their 

loan modification agreements. The overcharges were caused by data 

errors affecting the modified loan's starting balance, step-rate and 

interest-rate changes, deferred interest, and amortization maturity 

date when the loan was entered into the servicing system. The 

examinations identified this as an unfair practice.\11\ The overcharges 

resulted in substantial injury to consumers when consumers made 

payments higher than those stipulated in the modification agreements or 

when they made payments for a term longer than stipulated in the 

modification agreements. Consumers could not reasonably avoid this 

injury, which was caused by errors in the servicers' systems. The 

injury to consumers is not outweighed by any countervailing benefits to 

consumers or to competition. No benefits to competition are apparent 

from the systemic errors that resulted in erroneous billing statements. 

And the expense of instituting validation procedures for loan-

modification data is unlikely to be substantial enough to affect 

institutional operations or pricing. In response to the examination 

findings, the servicers are remediating affected consumers and 

correcting loan modification terms in their systems.

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    \11\ 12 U.S.C. 5531, 5536.

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2.4.3 Representations Regarding Initiation of Foreclosure



    When one or more mortgage servicers approved borrowers for a loss 

mitigation option on a non-primary residence, the servicers represented 

to borrowers that the servicers would not initiate foreclosure if the 

borrower accepted loss mitigation offers in writing or by phone by a 

specified date. However, the servicers then initiated foreclosure even 

if borrowers had called or written to accept the loss mitigation offers 

by that date. Examinations identified this as a deceptive act or 

practice.

    The misrepresentations were likely to mislead borrowers when the 

servicers expressly indicated that the servicers would not initiate 

foreclosure proceedings if borrowers accepted the



[[Page 52819]]



loss mitigation offers. The borrowers' interpretation of the 

misrepresentations was reasonable in this circumstance, i.e., that the 

servicers would not initiate foreclosure after the borrowers accepted 

the loss mitigation offers. The misrepresentations were material 

because they were likely to prompt borrowers to accept the loss 

mitigation offers to avoid the initiation of foreclosure proceedings.



2.4.4 Representations Regarding Foreclosure Sales



    Examinations observed that when borrowers submitted complete loss 

mitigation applications less than 37 days from a scheduled foreclosure 

sale date, one or more servicers sent the borrowers notices indicating 

that the applications were complete and stating that the servicer(s) 

would notify the borrowers of the decision on the applications in 

writing within 30 days. But after sending these notices, the servicers 

proceeded to conduct the scheduled foreclosure sales without making a 

decision on the borrowers' loss mitigation applications.

    The examinations did not find that this conduct amounted to a legal 

violation but observed that it could pose a risk of a deceptive 

practice. The notices could potentially mislead borrowers by stating 

that the borrowers would receive a decision on their loss mitigation 

applications. Borrowers reasonably could take that statement to mean 

that foreclosure sales would be postponed until a decision was reached.



2.5 Payday Lending



    The Bureau's Supervision program covers entities that offer or 

provide payday loans. Examinations of payday lenders identified unfair 

and deceptive acts or practices as well as violations of Regulation 

E.\12\

---------------------------------------------------------------------------



    \12\ 12 CFR 1005.10(b).

---------------------------------------------------------------------------



2.5.1 Misleading Collection Letters



    Examinations observed one or more entities engaging in a deceptive 

act or practice in their collection letters. These entities represented 

in their letters that they will, or may have no choice but to, 

repossess consumers' vehicles if the consumers fail to make payments or 

contact the entities. This was despite the fact that these entities did 

not have business relationships with any party to repossess vehicles 

and, as a general matter, did not repossess vehicles. Given these 

facts, the examination concluded that the net impression of these 

representations in the context of each letter was to mislead consumers 

to believe that these entities would repossess or were likely to 

repossess consumers' vehicles. The representations were material 

because they were likely to affect the behavior of consumers who were 

misled. The representations were likely to induce consumers to make 

payments to these entities, as opposed to allocating their funds toward 

other expenses. In response to the examination findings, the entity or 

entities are ensuring that their collection letters do not contain 

deceptive content.



2.5.2 Debiting Consumers' Accounts Without Valid Authorization by Using 

Account Information Previously Provided for Other Purposes



    Examinations observed one or more entities using debit card numbers 

or Automated Clearing House (ACH) credentials that consumers had not 

validly authorized the entities to use to debit funds in connection 

with a single-payment or installment loan in default. Upon a consumer's 

failure to repay the loan obligation as agreed, one or more entities 

attempted to initiate electronic fund transfers (EFTs) using debit card 

numbers or ACH credentials that borrowers had identified on 

authorization forms executed in connection with the defaulted loan at 

issue. If those attempts were unsuccessful, the entities would then 

seek to collect balances due and owing via EFTs using debit card 

numbers or ACH credentials that the borrowers had supplied to the 

entities for other purposes, such as when obtaining other loans or 

making one-time payments on other loans or the loan at issue. Through 

these invalidly authorized EFTs, the entities sought payment of up to 

the entire amount due on the loan.

    The examinations identified these as unfair acts or practices and 

also, in some cases, as violations of Regulation E. With respect to 

unfairness, the invalidly authorized debits caused substantial injury 

in the form of debits that consumers could not anticipate, leading to 

potential fees. Because the credentials were provided to the entities 

for other purposes, such as account information consumers provided in 

previous credit applications, consumers could not anticipate that the 

entities would use them for the defaulted loan at issue and thus could 

not reasonably avoid such injury. Finally, the injury was not 

outweighed by any countervailing benefits to consumers, such as 

satisfying their debts, or to competition, such as passing on lower 

costs to consumers derived from easier debt collection. By giving an 

unfair advantage over other entities that obtain authorization to 

initiate debits from consumers pursuant to clear and readily 

understandable terms, the unfair acts or practices likely harmed 

competition.\13\

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    \13\ 12 U.S.C. 5531, 5536.

---------------------------------------------------------------------------



    With respect to loans for which the consumer entered into 

preauthorized EFTs that recurred at substantially regular intervals, 

the examinations identified this practice as a violation of Regulation 

E, which requires that preauthorized EFTs from a consumer's account be 

authorized only by a writing signed or similarly authenticated by the 

consumer.\14\ Here, the loan agreements and EFT authorization forms 

failed to provide clear and readily understandable terms regarding the 

entities' use of debit card numbers or ACH credentials that consumers 

provided for other purposes. Accordingly, the entities did not obtain 

valid preauthorized EFT authorizations for the debits they initiated 

using debit card numbers or ACH credentials consumers provided for 

other purposes.

---------------------------------------------------------------------------



    \14\ 12 CFR 1005.10(b).

---------------------------------------------------------------------------



    In response to examination findings, the entity or entities are 

ceasing the violations, remediating borrowers impacted by the invalid 

EFTs, and revising loan agreement templates and ACH authorization 

forms.



2.6 Small Business Lending



    The Equal Credit Opportunity Act (ECOA) prohibition against 

discrimination is not limited to consumer transactions; it also applies 

to business-purpose credit transactions, including credit extended to 

small businesses. In 2016 and 2017, the Bureau began conducting 

supervision work to assess ECOA compliance in institutions' small 

business lending product lines, focusing in particular on the risks of 

an ECOA violation in underwriting, pricing, and redlining. The Bureau 

anticipates an ongoing dialogue with supervised institutions and other 

stakeholders as the Bureau moves forward with supervision work in small 

business lending.



2.6.1 Supervisory Observations



    In the course of conducting ECOA small business lending reviews, 

Bureau examination teams have observed instances in which one or more 

financial institutions effectively managed the risks of an ECOA 

violation in their small business lending programs.

    Examinations at one or more institutions observed that the board of 

directors and management maintained active oversight over the 

institutions' compliance management system (CMS) framework. 

Institutions developed and



[[Page 52820]]



implemented comprehensive risk-focused policies and procedures for 

small business lending originations and actively addressed the risks of 

an ECOA violation by conducting periodic reviews of small business 

lending policies and procedures and by revising those policies and 

procedures as necessary. Examinations also observed that one or more 

institutions maintained a record of policy and procedure updates to 

ensure that they were kept current.

    With regard to self-monitoring, one or more institutions 

implemented small business lending monitoring programs and conducted 

semi-annual ECOA risk assessments that include assessments of small 

business lending. In addition, one or more institutions actively 

monitored pricing-exception practices and volume through a committee.

    When examinations included file reviews of manual underwriting 

overrides at one or more institutions, they found that credit decisions 

made by the institutions were consistent with the requirements of ECOA, 

and thus the examinations did not find any violations of ECOA.

    At one or more institutions, however, examinations observed that 

institutions collect and maintain (in useable form) only limited data 

on small business lending decisions. Limited availability of data could 

impede an institution's ability to monitor and test for the risks of 

ECOA violations through statistical analyses.



3. Remedial Actions



3.1 Public Enforcement Actions



    The Bureau's supervisory activities resulted in or supported the 

following public enforcement actions.



3.1.1 Citibank N.A.



    On June 29, 2018, the Bureau announced an enforcement action 

against Citibank, N.A., (Citibank or Bank). The Bureau found Citibank 

violated the Truth in Lending Act (TILA) and its implementing 

regulation, Regulation Z, by failing to properly periodically re-

evaluate and reduce the Annual Percentage Rates (rates) applicable to 

credit card accounts that had been subject to certain rate increases 

between 2011 and 2017 and by failing to have in place reasonable 

written policies and procedures to do so.

    In 2016, Citibank initiated a significant compliance review program 

across its credit cards line of business. That review led to Citibank's 

self-identifying several deficiencies and errors in its rate re-

evaluation methodologies. After the Bank promptly self-disclosed the 

violations, the Bureau ultimately found through its supervisory process 

that Citibank violated TILA by failing to reevaluate and reduce the 

APRs for approximately 1.75 million consumer credit card accounts and 

thereby imposed on those accounts excess interest charges of $335 

million.

    Under the terms of the resulting consent order, Citibank was 

required to correct these practices and pay $335 million in restitution 

to the impacted consumers.\15\ The Bureau did not assess civil money 

penalties based on a number of factors, including Citibank's self-

identifying and self-reporting the violations to the Bureau and its 

self-initiating remediation to affected consumers.

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    \15\ See Citibank Consent Order available at, https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-settles-citibank-na/.

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3.1.2 Triton Management Group



    On July 19, 2018, the Bureau entered into a consent order with 

Triton Management Group, Inc., a payday lender that operates in 

Alabama, Mississippi, and South Carolina under several names including 

``Always Money'' and ``Quik Pawn Shop.'' The Bureau found that Triton 

violated the CFPA and the disclosure requirements of TILA by failing to 

properly disclose finance charges associated with their auto title 

loans in Mississippi. The Bureau also found that Triton used 

advertisements that failed to disclose the annual percentage rate and 

other information in violation of TILA. The consent order bars Triton 

from misrepresenting the costs of its loans and requires Triton to 

remediate consumers $1,522,298. Based on Triton's inability to pay, it 

will remediate consumers $500,000.\16\

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    \16\ See Triton Management Group Consent Order available at, 

https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-settles-triton-management-group/.

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Supervision Program Developments



3.2 Recent Bureau Rules and Guidance



3.2.1 Mortgage Servicing Final Rule



    On March 8, 2018, the Bureau issued a final rule to help mortgage 

servicers communicate with certain borrowers facing bankruptcy. The 

final rule gives mortgage servicers a clearer and more straightforward 

standard for providing periodic statements to consumers entering or 

exiting bankruptcy by amending the Bureau's 2016 mortgage servicing 

rule. Specifically, the final rule provides a clear single-statement 

exemption for servicers to make the transition, superseding the single-

billing-cycle exemption included in the 2016 rule. The effective date 

for the rule was April 19, 2018.\17\

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    \17\ See Mortgage Service Rules under the Truth in Lending Act 

(Regulation Z), 83 FR 10553 (Mar. 8, 2018), https://files.consumerfinance.gov/f/documents/cfpb_mortgage-servicing_final-rule_2018-amendments.pdf.

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3.2.2 2017-2018 Amendments of the TILA-RESPA Integrated Disclosure Rule



    On August 11, 2017, the Bureau published a final rule \18\ in the 

Federal Register amending the Federal mortgage disclosure requirements 

under the Real Estate Settlement Procedures Act (RESPA) and the Truth 

in Lending Act (TILA) as implemented by Regulation Z (2017 TILA-RESPA 

Rule). These amendments are intended to provide greater certainty and 

clarity to the 2013 TILA-RESPA Rule, which went into effect on October 

3, 2015. Changes and clarifications in the 2017 TILA-RESPA Rule include 

creating a tolerance for the total of payments disclosure, clarifying 

the partial exemption for housing assistance lending, expanding 

coverage of the disclosure rule to include operative units regardless 

of whether State law considers the units real property or personal 

property, and clarifying when disclosures may be shared with third 

parties. Additionally, the 2017 TILA-RESPA Rule includes several 

additional clarifications and technical changes addressing various 

parts of the 2013 TILA-RESPA Rule, including the calculating cash to 

close table, construction-to-permanent lending, principal reductions, 

rounding requirements, and simultaneous second lien loans. The 2017 

TILA-RESPA Rule became effective October 10, 2017. However, compliance 

with the 2017 TILA-RESPA Rule is mandatory only with respect to 

transactions for which a creditor or mortgage broker receives an 

application on or after October 1, 2018 (except for compliance with the 

escrow cancellation notice \19\ and compliance with the partial payment 

policy disclosure requirements,\20\ which will become mandatory on 

October 1, 2018, regardless of when an application was received).

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    \18\ Amendments to Federal Mortgage Disclosure Requirements 

under the Truth in Lending Act (Regulation Z), 82 FR (Aug. 11, 

2017).

    \19\ 12 CFR 1026.20(e).

    \20\ 12 CFR 1026.39(d)(5).

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    On May 2, 2018, the Bureau published a final rule in the Federal 

Register amending the Federal mortgage disclosure requirements to 

address when a creditor may use a Closing Disclosure to determine if an 

estimated closing cost was disclosed in good faith



[[Page 52821]]



and within tolerance (2018 TILA-RESPA Rule).\21\ The 2013 TILA-RESPA 

Rule in effect as of October 3, 2015 included a timing restriction 

limiting the use of the Closing Disclosure to reset tolerances to a 

period relative to the date of consummation, resulting in a creditor's 

inability to pass through closing cost increases \22\ to the consumer 

in certain limited circumstances. The 2018 TILA-RESPA Rule removes this 

timing restriction, permitting the use of the Closing Disclosure to 

establish good faith and reset tolerances regardless of when the 

Closing Disclosure is provided relative to consummation. The final rule 

took effect on June 1, 2018.

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    \21\ Federal Mortgage Disclosure Requirements under the Truth in 

Lending Act (Regulation Z), 83 FR 19159 (May 2, 2018).

    \22\ 12 CFR 1026.19(e)(3)(iv).

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3.3 Fair Lending Developments



3.3.1 HMDA Implementation and New Data Submission Platform



    On December 21, 2017, the Bureau provided the following statement 

regarding HMDA implementation:

    Recognizing the impending January 1, 2018 effective date of the 

Bureau's amendments to Regulation C and the significant systems and 

operational challenges needed to adjust to the revised regulation, for 

HMDA data collected in 2018 and reported in 2019 the Bureau does not 

intend to require data resubmission unless data errors are material. 

Furthermore, the Bureau does not intend to assess penalties with 

respect to errors in data collected in 2018 and reported in 2019. 

Collection and submission of the 2018 HMDA data will provide financial 

institutions an opportunity to identify any gaps in their 

implementation of amended Regulation C and make improvements in their 

HMDA CMS for future years. Any examinations of 2018 HMDA data will be 

diagnostic to help institutions identify compliance weaknesses and will 

credit good faith compliance efforts. The Bureau intends to engage in a 

rulemaking to reconsider various aspects of the 2015 HMDA Rule such as 

the institutional and transactional coverage tests and the rule's 

discretionary data points. For data collected in 2017, financial 

institutions will submit their reports in 2018 in accordance with the 

current Regulation C using the Bureau's HMDA Platform.\23\

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    \23\ CFPB Issues Public Statement on Home Mortgage Disclosure 

Act Compliance (December 21, 2017), available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-public-statement-home-mortgage-disclosure-act-compliance/.

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    On July 5, 2018, the Bureau provided the following statement 

regarding recent HMDA amendments:

    The President signed the Economic Growth, Regulatory Relief, and 

Consumer Protection Act (the Act) on May 24, 2018, a section of which 

amends the Home Mortgage Disclosure Act (HMDA). The Act provides 

partial exemptions for some insured depository institutions and insured 

credit unions from certain HMDA requirements.\24\ The partial 

exemptions are generally available to insured depository institutions 

and insured credit unions:

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    \24\ Public Law 115-174, section 104(a) (to be codified at 12 

U.S.C. 2803).

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    [ssquf] For closed-end mortgage loans if the institution originated 

fewer than 500 closed-end mortgage loans in each of the two preceding 

calendar years.

    [ssquf] For open-end lines of credit if the institution originated 

fewer than 500 open-end lines of credit in each of the two preceding 

calendar years.

    For closed-end mortgage loans or open-end lines of credit subject 

to the partial exemptions, the Act states that the ``requirements of 

[HMDA section 304(b)(5) and (6)]'' shall not apply. Accordingly, for 

these transactions, those institutions are exempt from the collection, 

recording, and reporting requirements for some, but not all, of the 

data points specified in current Regulation C.

    The Bureau expects to provide further guidance soon on the 

applicability of the Act to HMDA data collected in 2018.\25\

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    \25\ The partial exemptions are not available to insured 

depository institutions that do not meet certain Community 

Reinvestment Act performance evaluation rating standards. Guidance 

will include information on how this provision will be implemented.

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    For all institutions filing HMDA data collected in 2018, the Act 

will not affect the format of the LARs:

    [ssquf] LARs will be formatted according to the previously released 

2018 Filing Instructions Guide for HMDA Data Collected in 2018 (2018 

FIG).\26\

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    \26\ https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2018-hmda-fig.pdf.

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    [ssquf] If an institution does not report information for a certain 

data field due to the Act's partial exemptions, the institution will 

enter an exemption code for the field specified in a revised 2018 FIG 

that the Bureau expects to release later this summer.

    [ssquf] All LARs will be submitted to the same HMDA Platform. A 

beta version of the HMDA Platform for submission of data collected in 

2018 will be available later this year for filers to test.



3.3.2 Small Business Lending Review Procedures



    Each ECOA small business lending review includes a fair lending 

assessment of the institution's CMS related to small business lending. 

To conduct this portion of the review, examinations use Module II of 

the ECOA Baseline Review Modules. CMS reviews include assessments of 

the institution's board and management oversight, compliance program 

(policies and procedures, training, monitoring and/or audit, and 

complaint response), and service provider oversight.

    Examinations also use the Interagency Fair Lending Examination 

Procedures, which have been adopted in the Bureau's Supervision and 

Examination Manual. In some ECOA small business lending reviews, 

examination teams may evaluate an institution's fair lending risks and 

controls related to origination or pricing of small business lending 

products. Some reviews may include a geographic distribution analysis 

of small business loan applications, originations, loan officers, or 

marketing and outreach, in order to assess potential redlining risk.

    As with other in-depth ECOA reviews, ECOA small business lending 

reviews may include statistical analysis of lending data in order to 

identify fair lending risks and appropriate areas of focus during the 

examination. Notably, statistical analysis is only one factor taken 

into account by examination teams that review small business lending 

for ECOA compliance. Reviews typically include other methodologies to 

assess compliance, including policy and procedure reviews, interviews 

with management and staff, and reviews of individual loan files.



3.3.3 FFIEC HMDA Examiner Transaction Testing Guidelines Effective Date



    On August 22, 2017, the Federal Financial Institutions Examination 

Council (FFIEC) members, including the Bureau, announced new FFIEC Home 

Mortgage Disclosure Act (HMDA) Examiner Transaction Testing Guidelines 

for all financial institutions that report HMDA data.\27\ The 

Guidelines apply to the examination of HMDA data collected beginning in



[[Page 52822]]



2018, which financial institutions must report to the Bureau by March 

1, 2019.\28\

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    \27\ The Guidelines were published by the FFIEC member agencies 

including the Bureau, the Federal Deposit Insurance Corporation, the 

Board of Governors of the Federal Reserve System, the National 

Credit Union Administration, the Office of the Comptroller of the 

Currency, and the State Liaison Committee. These new Guidelines are 

available at https://files.consumerfinance.gov/f/documents/201708_cfpb_ffiec-hmda-examiner-transaction-testing-guidelines.pdf.

    \28\ For HMDA data collected in 2017 and submitted in 2018, the 

Bureau will follow the HMDA resubmission guidelines published on 

October 9, 2013 and available at http://files.consumerfinance.gov/f/201310_cfpb_hmda_resubmission-guidelines_fair-lending.pdf.

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3.3.4 Upstart No-Action Letter



    The Bureau is continuing to monitor Upstart Network, Inc. (Upstart) 

regarding its compliance with the terms of the no-action letter (NAL) 

it received from Bureau staff. As part of its request for a NAL, 

Upstart agreed to conduct ongoing fair lending testing of its 

underwriting model, notify the Bureau before new variables are 

considered eligible for use in production, and maintain a robust model-

related compliance management system.

    In addition to the ongoing fair lending testing discussed above, 

Upstart agreed as part of its request for a NAL to employ other 

consumer safeguards. These safeguards, which are described in the 

application materials posted on the Bureau's website, include ensuring 

compliance with requirements to provide adverse action notices under 

Regulation B and the Fair Credit Reporting Act and its implementing 

regulation, Regulation V, and ensuring that all of its consumer-facing 

communications are timely, transparent, and clear, and use plain 

language to convey to consumers the type of information that will be 

used in underwriting. Upstart has committed to monitoring the 

effectiveness of all safeguards and sharing the results of its testing, 

along with other relevant information, with the Bureau during the term 

of the NAL.

    On July 18, 2018, the Bureau announced the creation of its Office 

of Innovation, to foster consumer-friendly innovation, which is now a 

key priority for the Bureau. The Office of Innovation is in the process 

of revising the Bureau's NAL and trial disclosure policies, in order to 

increase participation by companies seeking to advance new products and 

services.



4. Conclusion



    The Bureau expects that the publication of Supervisory Highlights 

will continue to aid Bureau-supervised entities in their efforts to 

comply with Federal consumer financial law. The report shares 

information regarding general supervisory and examination findings 

(without identifying specific institutions, except in the case of 

public enforcement actions), communicates operational changes to the 

program, and provides a convenient and easily accessible resource for 

information on the Bureau's guidance documents.



    Dated: September 6, 2018.

Mick Mulvaney,

Acting Director, Bureau of Consumer Protection.

[FR Doc. 2018-22726 Filed 10-17-18; 8:45 am]

 BILLING CODE 4810-AM-P