CFPB Changes Policy on Appeals Process

WASHINGTON — The Consumer Financial Protection Bureau announced Tuesday that it had revised the process by which companies can appeal a supervisory action.

As part of the revisions, the CFPB expanded the number of agency staff who can participate on the appeals committee and extended the timeframe to issue a written decision from 45 to 60 days. The CFPB has also limited oral presentations only to issues raised in a written appeal and said it will no longer allow companies to appeal adverse findings on a pending matter until that action has been resolved.

"The revisions reflect experience gained in the appeals process so far, and are aimed at improving efficiency, consistency, transparency, and fairness to supervised institutions," the CFPB said in a press release.

The revisions apply to appeals that were made on exams emailed on or after Sept. 21.

The policy changes were mentioned as part of the agency's latest Supervisory Highlights report, which focused on exam concerns in the servicing of student loans and mortgages as well as debt collection and credit reporting problems.

Overall, the CFPB said student loan servicers are maximizing fees by applying payments unfairly when a borrower makes a partial payment and has multiple loans. In such cases, the servicer is often not telling borrowers that they could choose which loans to pay down or that they could face late fees, the CFPB said.

"Bureau examiners found this fee-maximizing practice unfairly resulted in higher late fees and harm to borrowers," the agency said in a press release.

In other exams, the agency "found on one or more occasions" where servicers had malfunctions with their systems that triggered an automatic payment earlier than scheduled which can create an overdraft or debit fee.

Though the CFPB said some mortgage servicers have made "significant improvements to their compliance audits" examiners are still finding problems, specifically with private mortgage insurance. The agency said examiners found "one or more" servicers failed to automatically terminate private mortgage insurance, which is required by law for borrowers who meet certain eligibility requirements.

In a recent exam, the CFPB also found that at least one debt collector violated the law because its employees did not identify themselves as collectors when on the phone with consumers. And "one or more debt collectors" continued to illegally call consumers when they were told not to by the consumer.

The report also noted ongoing concerns with companies that are not reporting accurate data about consumers to the credit reporting agencies.

"Examiners continue to find a lack of reasonable written policies and procedures for accurately reporting deposit account, debt collection, and student lending information to the consumer reporting agencies," the agency said. "The CFPB found that many furnishers did not have systems in place to properly receive, evaluate, and respond to consumer disputes regarding the information provided to consumer reporting agencies."

During the latest supervision period, the CFPB said it has ordered $107 million in restitution to more than 238,000 companies through non-public supervisory actions.

"Borrowers should not be mistreated when trying to repay their loans," said CFPB Director Richard Cordray, in a press release. "We will continue to shine light on the problems we observe in areas such as servicing, consumer reporting, and debt collection, and hold companies accountable when they do not treat borrowers fairly."