Supervisory Highlights, Issue 18 (Winter 2019), 9762-9767 [2019-04987]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 84, Number 52 (Monday, March 18, 2019)]
[Notices]
[Pages 9762-9767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-04987]


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BUREAU OF CONSUMER FINANCIAL PROTECTION


Supervisory Highlights, Issue 18 (Winter 2019)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Supervisory highlights.

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SUMMARY: The Bureau of Consumer Financial Protection (CFPB or Bureau) 
is issuing its eighteenth edition of its Supervisory Highlights. In 
this issue of Supervisory Highlights, we report examination findings in 
the areas of automobile loan servicing, deposits, mortgage servicing, 
and remittances that were generally completed between June 2018 and 
November 2018. The report does not impose any new or different legal 
requirements, and all violations described in the report are based only 
on those specific facts and circumstances noted during those 
examinations. As in past editions, this report includes information 
about recent public enforcement actions that were a result, at least in 
part, of our supervisory work.

DATES: The Bureau released this edition of the Supervisory Highlights 
on its website on March 1, 2019.

FOR FURTHER INFORMATION CONTACT: Vanessa Careiro, Counsel, at (202) 
435-9394. If you require this document in an alternative electronic 
format, please contact CFPB_Accessibility@cfpb.gov.

SUPPLEMENTARY INFORMATION: 

1. Introduction

    The Consumer Financial Protection Bureau (CFPB or 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, deposits, mortgage servicing, and 
remittances that were generally completed between June and November 
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 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, deposits, mortgage servicing, and 
remittances.

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 (UDAAPs) prohibited by the 
Consumer Financial Protection Act of 2010 (CFPA). Recent auto loan 
servicing examinations identified unfair acts or practices related to 
collecting incorrectly calculated deficiency balances. Recent 
examinations have also identified deceptive acts or practices related 
to representations on deficiency balance notices.
2.1.1 Unfair and Deceptive Practices Regarding Rebates for Certain 
Ancillary Products
    Examiners reviewed the servicing operations of one or more captive 
auto finance companies. A captive auto finance company is a finance 
company that is owned by an auto manufacturer that finances retail 
purchases of autos from that manufacturer. Borrowers financing a car 
sometimes purchased ancillary products such as an extended warranty and 
financed the products through the same loan. If the borrower later 
experiences a total loss or repossession, the servicer or borrower may 
cancel such ancillary products in order to obtain pro-rated rebates of 
the premium amounts for the unused portion of the products. In these 
situations, the rebate is payable first to the servicer to cover any 
deficiency balance and then to the borrower. Generally, the servicer 
contractually reserves the right to request the rebate without the 
borrower's participation, although it does not obligate itself to do 
so. The borrower also retains a right to request the rebate.
    In the extended warranty products reviewed during the 
examination(s), the amount of potential rebates for the products 
depended on the number of miles driven. Examiners observed instances 
where one or more servicers used the wrong mileage amounts to calculate 
the rebate for extended-warranty cancellations. For some borrowers who 
financed used vehicles, the servicers applied the total number of miles 
the car had been driven to calculate rebates. However, the servicer(s) 
should have applied the net number of miles driven since the borrower 
purchased the automobile. The miscalculation reduced the rebate 
available to certain borrowers and led to deficiency balances that were 
higher by hundreds of dollars. The servicer(s) then attempted to 
collect the deficiency balances.
    One or more examinations found that servicer attempts to collect 
miscalculated deficiency balances were unfair. Collecting inaccurately 
inflated deficiency balances caused or was likely to cause substantial 
injury to consumers. And these borrowers could not reasonably have 
avoided collection attempts on inaccurate balances because they were 
uninvolved in the servicer's calculation process. The injury of this 
activity is not outweighed by the countervailing benefits to consumers 
or

[[Page 9763]]

competition. For example, the additional expense the servicers would 
incur to train staff or service providers to ensure that refund 
calculations are correct would not outweigh the substantial injury to 
consumers. In response to these findings, the servicer(s) conducted 
reviews to identify and remediate affected borrowers based on the 
mileage they drove before the repossession or total loss of their 
vehicles. The servicer(s) also began to verify mileage calculations 
directly with the issuers of the products subject to rebate.
    Additionally, examiners observed instances where one or more 
servicers did not request rebates for eligible ancillary products after 
a repossession or a total loss. The servicer(s) then sent these 
borrowers deficiency notices listing a final deficiency balance 
purporting to net out available ``total credits/rebates'' including 
insurance and other rebates. The notices also stated that future 
additional rebates may affect the amount of the surplus or deficiency, 
but that ``[a]t this time, we are not aware of any such charges.'' 
However, the servicers' records contained information that it had not 
sought the eligible rebates. The examination(s) showed that the average 
unclaimed rebate was roughly $1,700.
    One or more examinations identified these communications as a 
deceptive act or practice. The deficiency notice misled borrowers 
because it created the net impression that the deficiency balance 
reflected a setoff of all eligible ancillary-product rebates, when in 
fact, the servicer(s)' systems showed that it had not sought one or 
more eligible rebates. It was reasonable for consumers to interpret 
this deficiency balance as reflecting any eligible rebates because the 
servicer(s) were both contractually entitled and financially 
incentivized to seek and apply eligible rebates to the deficiency 
balance. And the misrepresentation was material to consumers because 
they may have pursued rebates on their own had the servicer(s) not 
represented that there were not additional rebates available.
    In response to these findings, the servicer(s) conducted reviews to 
identify and remediate affected borrowers. The servicer(s) also changed 
deficiency notices to clarify the status of eligible ancillary product 
rebates.

2.2 Deposits

    The CFPB continues to review the deposits operations of the 
entities under its supervisory authority for compliance with relevant 
statutes and regulations, including the CFPA's prohibition on UDAAPs.
2.2.1 Deceptive Representations About Bill-Pay Debited Date
    Examiners found that one or more institutions engaged in a 
deceptive act or practice by representing that payments made through an 
institution's online bill-pay service would be debited on the date 
selected by the consumer or a few days after the selected date, while 
failing to disclose or failing to disclose adequately that, in 
instances where a payee accepts only a paper check, the debit may occur 
earlier than the selected date. These paper bill-pay checks were sent 
several days prior to the consumer-designated payment date, at the 
discretion of the institution(s). The payment would be debited from the 
consumer's account when the payee presented and cashed the check, which 
may have occurred earlier or later than the date selected by the 
consumer. The failure to notify consumers that their bill-pay payments, 
if made by paper check, may be debited on a date sooner than the date 
selected as part of the transaction caused some consumers to pay 
overdraft fees.
    The failure by the institution(s) to disclose or failure to 
disclose adequately the possible earlier debit date in light of online 
bill-pay service representations created the net impression that 
payments made through the online bill-pay service would be withdrawn no 
earlier than the payment date designated by the consumer. It would be 
reasonable for consumers to understand that the payment date they 
designated would be the earliest date that the payment would be 
withdrawn from their account. Consumers' understanding of when funds 
will be withdrawn is material to consumers' decisions regarding which 
payment date to designate in the first instance and then how to manage 
funds in the accounts on a going-forward basis, to ensure there is a 
sufficient balance to cover the anticipated withdrawals.
    In response to the examination findings, the institution(s) 
undertook a revision of consumer-facing online bill-pay materials to 
disclose paper checks will be mailed before the payment date selected 
by the consumer and that the payment would be debited from the 
consumer's account when the payee presented the check. The 
institution(s) also undertook a plan to remediate consumers charged an 
overdraft fee as a result of a paper check being negotiated before the 
payment date selected by the consumer through the online bill-pay 
system.

2.3 Mortgage Servicing

    The Bureau continues to examine mortgage servicers, including 
servicers of manufactured home loans and reverse mortgage loans, for 
compliance with Federal consumer financial laws. Recent examinations 
identified unfair acts or practices for charging consumers unauthorized 
amounts, deceptive acts or practices for misrepresenting aspects of 
private mortgage insurance cancellation, violation(s) of Regulation X 
loss mitigation requirements, and potentially misleading statements to 
successors-in-interest on reverse mortgages.
2.3.1 Charging Consumers Unauthorized Amounts
    One or more examinations observed that servicers charged consumers 
late fees greater than the amount permitted by mortgage notes. 
Examiners identified several types of affected mortgage notes. For 
example, certain Federal Housing Authority (FHA) mortgage notes permit 
servicers to collect late fees in the amount of 4.00% of the overdue 
principal and interest. However, on large numbers of loans, the 
servicer(s) charged late fees on 4.00% of the overdue principal, 
interest, taxes and insurance, rather than on only the principal and 
interest. Examiners also identified mortgage notes containing 
provisions that limit the late fee amount. For example, certain West 
Virginia mortgage notes permit servicers to collect ``5.00% of that 
portion of the installment of principal and interest that is overdue, 
but not more than U.S. $15.00.'' However, on large numbers of loans, 
the servicer(s) charged a late fee greater than $15.
    Programming errors in the servicing platform and lapses in service 
provider oversight caused the overcharges. The examination(s) found 
that the servicer(s) engaged in an unfair practice. The conduct caused 
a substantial injury to consumers because they paid more in late fees 
than required by their mortgage notes. The conduct of the servicer(s) 
affected thousands of consumers, making the aggregate injury 
substantial. Consumers could not reasonably avoid this injury since the 
servicer(s) automatically imposed the late fees. And since the 
servicer(s) were not contractually permitted to collect the excessive 
late charges, the practice had no countervailing benefits. In response 
to the examination findings, the servicer(s) conducted a review to 
identify and remediate affected borrowers. The servicer(s) also changed 
policies and procedures to assist in charging the late fee amount 
authorized by the mortgage note.

[[Page 9764]]

2.3.2 Misrepresenting Private Mortgage Insurance Cancellation Denial 
Reasons
    In relevant part, the Homeowners Protection Act (HPA) requires 
servicers to cancel private mortgage insurance (PMI) in connection with 
a residential mortgage transaction if certain conditions are met. Among 
other conditions, the consumer must request the cancellation in 
writing, and the principal balance of the mortgage must have: (1) 
Reached 80% of the original value (LTV) of the property based solely on 
actual payments; or (2) reached the date on which it was first 
scheduled to fall to 80% of the original value of the property, based 
solely on the amortization schedule in effect at a particular point in 
time depending on the loan type regardless of the outstanding 
balance.\1\
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    \1\ 12 U.S.C. 4901(2).
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    At one or more servicers, borrowers who verbally requested PMI 
cancellation were informed that they were declined because they had not 
reached 80% LTV. Although the relevant amortization schedules did not 
yet provide for 80% LTV, examiners found that these borrowers had in 
fact reached 80% LTV based on actual payments because they had made 
extra principal payments. Although the borrowers did not satisfy other 
criteria necessary to trigger borrower-initiated cancellation rights 
under the HPA, such as certifying that the property is unencumbered by 
subordinate liens or submitting the requests in writing, the 
servicer(s) did not provide these as reasons to borrowers for denying 
the requests.
    One or more examinations identified servicer representations as 
deceptive because they misrepresented the conditions for PMI 
removal.\2\ The servicer communications would likely mislead consumers 
about whether and when the HPA entitled them to request that the 
servicer cancel PMI, and about the actual reasons the borrowers were 
not eligible for PMI cancellation. It would be reasonable for consumers 
to believe that they were not eligible for PMI cancellation for the 
reasons stated in the letters because most consumers would not have a 
basis to question the misrepresentations. A consumer might think that 
she had miscalculated payments such that she had not yet reached 80% 
LTV, or had misunderstood some other aspect of meeting the LTV 
requirement. Lastly, the servicers' misrepresentations were material 
because they were likely to affect a borrower's choice as to whether to 
continue to request PMI cancellation, including whether to address the 
actual, uncommunicated reasons for ineligibility. For instance, 
borrowers receiving the incorrect denial reason may fail to address 
other eligibility requirements to obtain PMI cancellation. They may 
also be discouraged from requesting PMI cancellation in some 
circumstances in which Federal law or the servicer's policies would 
give them a right to cancel PMI. In response to examiners' findings, 
the servicer(s) changed templates, as well as policies and procedures, 
to ensure that PMI cancellation notices state accurate denial reasons.
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    \2\ The HPA does not require servicers to respond to verbal 
requests to eliminate PMI and therefore the servicer(s) did not 
violate the HPA.
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2.3.3 Failing To Exercise Reasonable Diligence To Complete Loss 
Mitigation Applications
    Regulation X requires servicers to exercise ``reasonable 
diligence'' in obtaining documents and information to complete a loss 
mitigation application.\3\ The actions that would satisfy this 
requirement depend on the facts and circumstances at hand.\4\
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    \3\ 12 CFR 1024.41(b)(1).
    \4\ Comment 41(b)(1)-4.i-iii. For example, reasonable diligence 
might include promptly contacting the applicant to obtain the 
missing information; or, if the servicer has offered a short-term 
payment forbearance program based upon an evaluation of an 
incomplete application, actions like notifying the borrower about 
the option to complete the application to receive a full evaluation 
and, if necessary, contacting the borrower near the end of the 
forbearance period and prior to the end of the forbearance period to 
determine if the borrower wishes to complete the application and 
proceed with a full evaluation.
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    In examination(s) covering 2016 activity, examiners found one or 
more servicers did not meet the Regulation X ``reasonable diligence'' 
requirements. These servicer(s) offered short-term payment forbearance 
programs during collection calls to delinquent borrowers who expressed 
interest in loss mitigation and submitted financial information that 
the servicer would consider in evaluating them for loss mitigation. The 
short-term payment forbearance programs deferred some or all of the 
borrower's past due payments to the end of the loan, thereby extending 
its maturity. However, the servicer(s) did not notify the borrowers 
that such short-term payment forbearance programs were based on an 
incomplete application evaluation. And near the end of the forbearance 
period, the servicer(s) did not contact the borrowers as to whether 
they wished to complete the applications to receive a full loss 
mitigation evaluation. As a result, one or more examinations found that 
the servicer(s) violated 1024.41(b)(1) requirements to exercise 
reasonable diligence in obtaining documents and information to complete 
a loss mitigation application. The examination(s) did not review 
currently applicable 1024.41(c)(2) requirements, as those requirements 
went into effect on October 19, 2017. In response to these findings, 
the servicer(s) used enhanced processes, such as a centralized queue, 
to track borrowers receiving short-term forbearance programs and 
subsequently notify them that additional loss mitigation options may be 
available and that they could apply for such options over the phone or 
in writing.
2.3.4 Representing the Requirements for Foreclosure Timeline Extensions 
in Home Equity Conversion Mortgages
    One or more examinations reviewed servicing of Home Equity 
Conversion Mortgage (HECM) loans, a type of reverse mortgage insured by 
the United States Department of Housing and Urban Development (HUD). 
Under the terms of such mortgages, the death of the borrower on the 
loan constitutes default, and HUD generally requires HECM servicers to 
refer such loans to foreclosure within six months of the death of the 
borrower to be eligible for HUD insurance. HUD also allows servicers to 
request up to two 90-day extensions to enable successors to purchase 
the property or market the property for sale without losing the benefit 
of HUD insurance.
    One or more servicers sent a notice to successors-in-interest after 
the borrower on the loan died. The notice stated that the loan balance 
was due and payable, but that the successor could qualify for an 
extension of time to delay or avoid foreclosure. The notice directed 
the successor to return an enclosed form stating the intentions for the 
property within thirty days. The notice also listed several documents 
that may be applicable to the successor's evaluation, but did not 
direct the successor to submit any of the documents within a certain 
timeframe to be eligible for an extension.
    Examiners found that some successors did not receive a complete 
list of all the documents needed to evaluate them for an extension. 
Some of these successors returned the form indicating their intentions 
to purchase the property or market the property for sale, but did not 
return all the documents that were needed for the evaluation. As a 
result, the servicer(s) did not seek an extension for these successors. 
Instead, the servicer(s) assessed foreclosure fees and in some 
instances foreclosed on the

[[Page 9765]]

property. The examination(s) did not find that this conduct amounted to 
a legal violation but observed that it could pose a risk of a deceptive 
act or practice by giving the net impression that the statement of 
intent was all that was needed, until further notice, to delay 
foreclosure, when in fact that was insufficient to delay foreclosure. 
In response to the examiner observations, the servicer(s) planned to 
improve communications with successors, including specifying the 
documents successors needed for an extension and the relevant 
deadlines.

2.4 Remittances

    The Bureau continues to examine banks and nonbanks under its 
supervisory authority for compliance with Regulation E, Subpart B 
(Remittance Rule).\5\ The Bureau also reviews for any UDAAPs in 
connection with remittance transfers.
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    \5\ See 78 FR 30662 (May 22, 2013) (codified at 12 CFR 1005), 
available at https://www.gpo.gov/fdsys/pkg/FR-2013-05-22/pdf/2013-10604.pdf.
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2.4.1 Failure To Refund Fees and Taxes Upon Delayed Availability of 
Remitted Funds
    Examiners found that one or more supervised entities violated the 
error resolution provisions of the Remittance Rule by failing to refund 
fees and, as allowed by law, taxes, to consumers when remitted funds 
were made available to designated recipients later than the date of 
availability stated in the institution's remittance disclosures and the 
delay was not due to one of the four exceptions specified in the Rule.
    A remittance transfer provider's failure to make funds available to 
a designated recipient by the date of availability stated in the 
disclosures constitutes an error under the Remittance Rule, unless the 
delay was of the result of one of the four exceptions described in 12 
CFR 1005.33(a)(1)(iv).\6\ Upon notice from a consumer of the delayed 
availability of funds, a remittance transfer provider must either 
refund the sender the amount of funds provided by the sender in 
connection with the remittance transfer which was not properly 
transmitted or the amount appropriate to resolve the error, or make 
available to the designated recipient the amount appropriate to resolve 
the error at no additional cost to the sender or the designated 
recipient.\7\ In addition, the remittance transfer provider must refund 
to the sender any fees imposed in connection with the transfer by any 
party, and, to the extent not prohibited by law, any taxes collected on 
the remittance transfer.\8\
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    \6\ The four events are: (A) Extraordinary circumstances outside 
the remittance transfer provider's control that could not have been 
reasonably anticipated; (B) delays related to a necessary 
investigation or other special action by the remittance transfer 
provider or a third party as required by the provider's fraud 
screening procedures or in accordance with the Bank Secrecy Act, 31 
U.S.C. 5311 et seq., Office of Foreign Assets Control requirements, 
or similar laws or requirements; (C) the remittance transfer being 
made with fraudulent intent by the sender or any person acting in 
concert with the sender; and (D) the sender having provided the 
remittance transfer provider an incorrect account number or 
recipient institution identifier for the designated recipient's 
account or institution, provided that the remittance transfer 
provider meets certain other conditions.
    \7\ 12 CFR 1005.33(c)(2)(ii)(A).
    \8\ 12 CFR 1005.33(c)(2)(ii)(B).
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    Examiners observed that one or more entities failed to refund to 
consumers fees and, as allowed by law, taxes, when funds were not made 
available to the designated recipients by the date disclosed by the 
institution due to a mistake on the part of a non-agent foreign payer 
institution. Because the delayed availability of funds did not result 
from one of the exceptions listed in 12 CFR 1005.33(a)(1)(iv), the 
senders were entitled to the remedies described in 12 CFR 
1005.33(c)(2)(ii). Neither the relationship between a remittance 
transfer provider and the institution disbursing the funds to the 
designated recipient, nor the particular entity that is at fault for 
the delayed receipt of funds, is relevant to whether the remittance 
transfer provider must refund fees and taxes to the consumer. In 
response to examination findings, institutions are refunding any fees 
imposed and, to the extent not prohibited by law, taxes collected on 
the remittance transfer to the sender, where applicable.

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 Cash Tyme
    On February 5, 2019, the CFPB announced a settlement with Cash 
Tyme, a payday retail lender with outlets in seven States.\9\ The 
Bureau found that Cash Tyme violated the CFPA by:
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    \9\ See Cash Tyme Consent Order, available at https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-settles-cash-tyme/.
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     Failing to take adequate steps to prevent unauthorized 
charges;
     Failing to promptly monitor, identify, correct, and refund 
overpayments by consumers;
     Making collection calls to third parties named as 
references on borrowers' loan applications that disclosed or risked 
disclosing the debts to those third parties, including to borrowers' 
places of employment as well as to third parties who were themselves 
harassed by such calls;
     Misrepresenting that it collected third-party references 
from borrowers on loan applications for verification purposes, when in 
fact it was using that information to make marketing calls to the 
references; and
     Advertising unavailable services, including check cashing, 
phone reconnections, and home telephone connections, on the 
storefronts' outdoor signage where such advertisements contained 
information that was likely to be deemed important by consumers and 
likely to affect their conduct or decision regarding visiting a Cash 
Tyme store.
    The Bureau also found that Cash Tyme violated the Gramm-Leach-
Bliley Act and Regulation P by failing to provide initial privacy 
notices to borrowers, and, as to customers in Kentucky, violated the 
Truth in Lending Act and Regulation Z when calculating and advertising 
annual percentage rates. Cash Tyme must, among other provisions, pay a 
$100,000 civil money penalty.
3.1.2 Enova International, Inc.
    On January 25, 2019, the Bureau announced a settlement with Enova 
International, Inc., an online lender based in Chicago, Illinois, that 
extends unsecured payday and installment loans, and lines of 
credit.\10\
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    \10\ See Enova International, Inc. Consent Order, available at 
https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-reaches-settlement-enova-international-inc/.
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    The Bureau found that Enova violated the CFPA by debiting 
consumers' bank accounts without authorization. While consumers 
authorized Enova to deduct payments from certain accounts, the company 
in many instances debited different accounts that the consumers had not 
authorized it to use. The Bureau also found that Enova failed to honor 
loan extensions it granted to consumers.
    Under the terms of the consent order, Enova is, among other things, 
barred from making or initiating electronic fund transfers without 
valid authorization and must pay a $3.2 million civil money penalty.
3.1.3 State Farm Bank, FSB
    On December 6, 2018, the Bureau announced a settlement with State 
Farm Bank, FSB, a Federal savings association

[[Page 9766]]

headquartered in Bloomington, Illinois.\11\
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    \11\ See State Farm Bank, FSB Consent Order, available at 
https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-settles-state-farm-bank/.
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    The Bureau found that State Farm Bank violated the Fair Credit 
Reporting Act, Regulation V, and the CFPA by obtaining consumer reports 
without a permissible purpose; furnishing to credit-reporting agencies 
(CRAs) information about consumers' credit that the bank knew or had 
reasonable cause to believe was inaccurate; failing to promptly update 
or correct information furnished to CRAs; furnishing information to 
CRAs without providing notice that the information was disputed by the 
consumer; and failing to establish and implement reasonable written 
policies and procedures regarding the accuracy and integrity of 
information provided to CRAs.
    Under the terms of the consent order, State Farm Bank must not 
violate the Fair Credit Reporting Act or Regulation V and must 
implement and maintain reasonable written policies, procedures, and 
processes to address the practices at issue in the consent order and 
prevent future violations.
3.1.4 Santander Consumer USA, LLC
    On November 20, 2018, the Bureau announced a settlement with 
Santander Consumer USA Inc., a consumer financial services company 
based in Dallas, Texas.\12\
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    \12\ See Santander Consumer USA, LLC Consent Order, available at 
https://www.consumerfinance.gov/policy-compliance/enforcement/actions/santander-consumer-usa-inc/.
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    The Bureau found that Santander violated the CFPA by not properly 
describing the benefits and limitations of its S-GUARD GAP product, 
which it offered as an add-on to its auto loan products. Santander also 
failed to properly disclose the impact on consumers of obtaining a loan 
extension, including by not clearly and prominently disclosing that the 
additional interest accrued during the extension period would be paid 
before any payments to principal when the consumer resumed making 
payments.
    Under the terms of the consent order, Santander must, among other 
provisions, provide approximately $9.29 million in restitution to 
certain consumers who purchased the add-on product, clearly and 
prominently disclose the terms of its loan extensions and the add-on 
product, and pay a $2.5 million civil money penalty.
3.1.5 Cash Express, LLC
    On October 24, 2018, the Bureau announced a settlement with Cash 
Express, LLC, a small-dollar lender based in Cookeville, Tennessee, 
that offers high-cost, short-term loans, such as payday and title 
loans, as well as check-cashing services.\13\
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    \13\ See Cash Express, LLC Consent Order, available at https://www.consumerfinance.gov/policy-compliance/enforcement/actions/cash-express-llc/.
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    As described in the consent order, the Bureau found that Cash 
Express violated the CFPA's prohibition on deceptive acts or practices 
by threatening in collection letters that it would take legal action 
against consumers, even though the debts were past the date for suing 
on legal claims, and it was not Cash Express's practice to file 
lawsuits against these consumers. The Bureau also found that Cash 
Express violated the CFPA by misrepresenting that it might report 
negative credit information to consumer reporting agencies for late or 
missed payments, when the company did not actually report this 
information. The Bureau also found that Cash Express engaged in an 
abusive practice in violation of the CFPA by withholding funds during 
check-cashing transactions to satisfy outstanding amounts on prior 
loans, without disclosing this practice to the consumer during the 
initiation of the transaction.
    The order requires Cash Express to pay approximately $32,000 in 
restitution to consumers, and pay a $200,000 civil money penalty.

4. Supervision Program Developments

4.1 Recent Bureau Rules and Guidance

4.1.1 Bulletin 2018-01: Changes to Types of Supervisory Communications
    On September 25, 2018, the Bureau issued a bulletin \14\ to 
announce changes to how it articulates supervisory expectations to 
institutions in connection with supervisory events. The bulletin notes 
that the Bureau will continue to communicate findings to institutions 
in writing by way of examination reports and supervisory letters. 
However, effective immediately, those reports and letters will include 
two categories of findings that convey supervisory expectations.
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    \14\ The bulletin can be found at: https://www.consumerfinance.gov/documents/6848/bcfp_bulletin-2018-01_changes-to-supervisory-communications.pdf.
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    Matters Requiring Attention (MRAs) will continue to be used by the 
Bureau to communicate to an institution's Board of Directors, senior 
management, or both, specific goals to be accomplished in order to 
correct violations of Federal consumer financial law, remediate harmed 
consumers, and address weaknesses in the compliance management system 
(CMS) that the examiners found are directly related to violations of 
Federal consumer financial law.
    A new findings category--Supervisory Recommendations (SRs)--will be 
used by the Bureau to recommend actions for management to consider 
taking if it chooses to address the Bureau's supervisory concerns 
related to CMS. SRs will be used when the Bureau has not identified a 
violation of Federal consumer financial law, but has observed 
weaknesses in CMS.
    Neither MRAs nor SRs have been or are legally enforceable. The 
Bureau will, however, consider an institution's response in addressing 
identified violations of Federal consumer financial law, weaknesses in 
CMS, or other noted concerns when assessing an institution's compliance 
rating, or otherwise considering the risks that an institution poses to 
consumers and to markets. These risk considerations may be used by the 
Bureau when prioritizing future supervisory work or assessing the need 
for potential enforcement action.
4.1.2 Statement on Supervisory Practices Regarding Financial 
Institutions and Consumers Affected by a Major Disaster or Emergency
    On September 14, 2018, the Bureau issued a statement \15\ 
highlighting the existing laws and regulations that can provide 
supervised entities regulatory flexibility to take certain actions that 
can benefit consumers in communities under stress and hasten recovery 
in light of major disasters or emergencies. In the statement, the 
Bureau also noted that it will consider the impact of major disasters 
or emergencies on supervised entities themselves when conducting 
supervisory activities.
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    \15\ The full statement can be found at: https://www.consumerfinance.gov/documents/6837/bcfp_statement-on-supervisory-practices_disaster-emergency.pdf.
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4.1.3 Interagency Statement on the Role of Supervisory Guidance
    On September 11, 2018, the Bureau, along with the Board of 
Governors of the Federal Reserve System, the Federal Deposit Insurance 
Corporation, the National Credit Union Administration, and the Office 
of the Comptroller of the Currency issued a joint statement \16\ 
explaining the role of supervisory guidance and describing the 
agencies' approach to supervisory guidance.

[[Page 9767]]

Among other things, the joint statement confirms that supervisory 
guidance does not have the force and effect of law, and the agencies do 
not take enforcement actions based on supervisory guidance. The joint 
statement also explains that supervisory guidance outlines the 
agencies' supervisory expectations or priorities and articulates the 
agencies' general views regarding appropriate practices for a given 
subject area.
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    \16\ The Interagency Statement can be found at: https://www.consumerfinance.gov/documents/6830/interagency-statement_role-of-supervisory-guidance.pdf.
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4.1.4 Updates to HMDA Small Entity Compliance Guide
    On October 30, 2018, the Bureau updated the HMDA Small Entity 
Compliance Guide to reflect changes made by section 104(a) of the 
Economic Growth, Regulatory Relief, and Consumer Protection Act (signed 
into law on May 24, 2018) to the Home Mortgage Disclosure Act (HMDA). 
More details, including an executive summary of a recent Bureau HMDA 
rulemaking and other resources for compliance, can be found at: https://www.consumer finance.gov/policy-compliance/guidance/implementation-guidance/hmda-implementation/.\17\
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    \17\ On August 31, 2018, the Bureau issued an interpretive and 
procedural rule to implement and clarify changes made by the Act. 
The full text of the Rule can be found at: https://www.federalregister .gov/documents/2018/09/07/2018-19244/partial-
exemptions-from-the-requirements-of-the-home-mortgage-disclosure-
act-under-the-economic.
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5. Conclusion

    The Bureau will continue to publish Supervisory Highlights 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.

6. Regulatory Requirements

    This Supervisory Highlights summarizes existing requirements under 
the law, summarizes findings made in the course of exercising the 
Bureau's supervisory and enforcement authority, and is a non-binding 
general statement of policy articulating considerations relevant to the 
Bureau's exercise of its supervisory and enforcement authority. It is 
therefore exempt from notice and comment rulemaking requirements under 
the Administrative Procedure Act pursuant to 5 U.S.C. 553(b). Because 
no notice of proposed rulemaking is required, the Regulatory 
Flexibility Act does not require an initial or final regulatory 
flexibility analysis. 5 U.S.C. 603(a), 604(a). The Bureau has 
determined that this Supervisory Highlights does not impose any new or 
revise any existing recordkeeping, reporting, or disclosure 
requirements on covered entities or members of the public that would be 
collections of information requiring OMB approval under the Paperwork 
Reduction Act, 44 U.S.C. 3501, et seq.

    Dated: February 25, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-04987 Filed 3-15-19; 8:45 am]
BILLING CODE 4810-AM-P