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CFPB Summer 2021 Supervisory Highlights looks at auto servicing, consumer reporting, debt collection, deposits, fair lending, mortgage origination and servicing, private student loans, payday lending, and student loan servicing | Ballard Spahr LLP

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The CFPB has released the Summer 2021 edition of its Supervisory Highlights.  The report, which contains 48 pages of supervisory observations, discusses the Bureau’s examinations in the areas of auto servicing, consumer reporting, debt collection, deposits, fair lending, mortgage origination and servicing, private student loans, payday lending, and student loan servicing that were completed between January 1, 2020 and December 31, 2020 (which was the last full year of Kathleen Kraniger’s tenure as CFPB Director).

Key findings by CFPB examiners are described below. 

Auto servicing.

Servicers were found to have engaged in unfair practices in violation of the CFPA UDAAP prohibition by:

  • Adding and maintaining charges for collateral protection insurance (CPI) premiums as a result of deficient processes when consumers had adequate insurance in place, with some servicers causing additional injury by applying refunds of CPI charges to principal instead of returning the amounts directly to consumers.
  • Collecting or attempting to collect CPI premiums after repossession, even though no actual insurance protection was provided for those periods.
  • Posting payments to the wrong account or posting certain payments as principal-only payments instead of periodic installment payments, resulting in late fees and additional interest.
  • Accepting loan payoff amounts that included overcharges for optional products (as a result of the method used to calculate refunds), after telling consumers that they owed the larger amount.

Servicers were found to have engaged in deceptive practices in violation of the CFPA UDAAP prohibition by representing on their websites that payments would be applied in a specified order (as between principal, interest and fees) and subsequently applying payments in a different order.

Consumer reporting.

Consumer reporting companies (CRCs) were found to have violated the FCRA by:

  • Not complying with the FCRA requirement to follow reasonable procedures to assure maximum accuracy of information in consumer report as a result of continuing to include information that was provided by unreliable furnishers (i.e. furnishers who had responded to disputes in ways that suggested they were no longer sources of reliable, verifiable information about consumers).  In particular, the CFPB stated that the furnishers’ failure to respond to disputes, or deleting all disputed tradelines, or validating all disputes, should have alerted the CRCs that the furnishers’ information was unreliable.
  • Not complying with the FCRA 3-business day requirement for placing a security freeze on a consumer’s credit report after receiving the consumer’s freeze request.
  • Not complying with the FCRA 4-business day requirement to block the reporting of information that the consumer identifies as information resulting from an alleged identity theft.

Auto loan furnishers were found to have violated the FCRA requirement to promptly notify CRCs of furnished information determined to be inaccurate or incomplete by failing to send updated or corrected information to CRCs after making a determination that furnished information was no longer accurate.

Mortgage furnishers were found to have violated the Regulation V requirement to conduct reasonable investigations of direct disputes as a result of maintaining procedures that instructed employees to (1) verify that consumers’ signatures matched the signature on file and, (2) if they did not match, to send a letter to the borrower stating that the information provided in the dispute did not match the furnishers’ records and take no further steps to investigate the dispute.  Interestingly, however, the discussion of how the furnishers resolved this issue included the statement that the furnishers adopted policies and procedures to reasonably identify disputes that were “frivolous or irrelevant” because they originated from a credit repair organization.

Debt collection.  Debt collectors were found to have violated the FDCPA by:

  • Communicating with consumers at their places of employment during work hours when the collector knew or should have known that calls during work hours were inconvenient to the consumers.
  • Communicating with third parties other than those permitted by the FDCPA and, when communicating with third parties for the purpose of acquiring location information, disclosing the name of the debt collector to third parties who had not expressly requested the collector’s name.
  • Continuing to attempt to collect a debt from the consumer after receiving a written request from the consumer to cease further communications.
  • Harassing consumers by emphasizing multiple times to consumers who had stated they were unable to make or complete payment arrangements that the collector would place a note in the account system stating that the consumer was refusing to make a payment.
  • Threatening to report to CRCs that consumers owed debts that the collectors knew or should have known were disputed, resulted from identity theft, and were not owed by the consumers and reporting such debts to CRCs without reporting that the debts were disputed.
  • Falsely representing to consumers the impact on their credit files  of paying off their debts, such as telling the consumer the debt would no longer impact their credit profile once paid.
  • Entering inaccurate information regarding state interest rate caps in an automated system, resulting in overcharges to consumers.
  • Sending wage garnishment orders to consumers’ employers by mistake, despite having received completed applications from the consumers to consolidate their debts which should have stopped the garnishment process based on standard procedures.
  • Sending validation notices that did not include required information.

Deposits.

Financial institutions were found to have violated Regulation E by:

  • Failing to comply with provisional credit requirements for disputed transactions.
  • Failing to complete investigations of disputes and make a determination within the applicable time periods.
  • Failing to conduct reasonable investigations of disputes by denying claims solely because the consumers had previously conducted business with the merchant.
  • Failing to refund associated fees and credit interest when resolving disputes in the consumer’s favor.
  • Failing to comply with overdraft opt-in requirements, including by failing to advise consumers of their right to revoke an opt-in to overdraft services as part of their opt-in confirmation and failing to retain evidence of having obtained affirmative consent to opt into overdraft services.

Financial institutions were found to have violated Regulation DD by disclosing to consumers, through automated systems available account balance amount that included potential discretionary overdraft credit and by failing to correctly disclosed on periodic statements the amount of overdraft fees incurred by the consumer during the statement cycle.

Fair lending.

  • HMDA.  CFPB examiners found widespread errors within 2018 HMDA loan application registers of several financial institutions.  In several examinations that identified such errors, the root causes were deficiencies in the institutions’ compliance management systems.
  • Redlining. CFPB examiners found that a lender violated the ECOA and Regulation B by engaging in acts or practices directed at prospective applicants that would have discouraged reasonable people in minority neighborhoods in Metropolitan Statistical Areas (MSAs) from applying for credit.  The lender was prioritized for a redlining examination because an initial analysis of HMDA and U.S. census data showed that the lender received significantly fewer applications from majority-minority and high-minority neighborhoods relative to other peer lenders in the MSA. These differences relative to the lender’s peer lenders were confirmed by examiners in subsequent, in-depth analyses.  Evidence of communications that would have discouraged reasonable people on a prohibited basis from applying to the lender for a mortgage loan included: (1) direct marketing materials that only featured models appearing to be non-Hispanic white, (2)open house marketing materials that only included headshots of mortgage professionals appearing to be non-Hispanic white, and (3) locating nearly all offices in majority non-Hispanic white areas.

Mortgage origination.

Lenders were found to have violated Regulation Z by:

  • Compensating loan originators differently based on product type, specifically lower compensation for bond program loans subject to state Housing Finance Agency requirements, and higher compensation for construction loans.
  • For a simultaneous purchase of lender and owner title insurance policies, disclosing the lender’ title insurance premium at the discounted rate and the owner’s title insurance at the full premium on the Loan Estimate.

Lenders were found to have engaged in deceptive practices in violation of the CFPA UDAAP prohibition by using:

  • A waiver provision in a rider to a security deed that provided that borrowers who signed the agreement waived all of their rights to notice or judicial hearing before the lender exercised its right to nonjudicially foreclose on the property.  This practice was deemed deceptive because a reasonable consumer could understand the provision to waive the consumer’s right under Regulation X to sue over a loss mitigation notice violation in the nonjudicial foreclosure context.
  • A security agreement for cooperative units that required borrowers to agree to a waiver, in the event of default, of any equity or right of redemption. This practice was deemed deceptive in light of the Regulation Z provision prohibiting the interpretation of dwelling-secured contracts to bar federal claims because the waiver language would likely mislead a consumer into believing that by signing the agreement they waived their right to bring any claim in court, including federal claims.

Mortgage servicing.

Servicers were found to have violated Regulation X by:

  • Failing to apply foreclosure protections on the date that outstanding loss mitigation application information was received, which rendered the application “facially-complete.”  Instead of applying the foreclosure hold on the date the information was received, the servicer only did so after an internal analysis of that information, which caused a delay of more than a day, during which a foreclosure filing occurred.
  • Making the first notice or filing for foreclosure before fully evaluating borrowers’ appeals.
  • Having a process in place for directing foreclosure counsel to stop all legal filings only after the servicer had sent borrowers the notice acknowledging receipt of a complete loss mitigation application.  Such a process violates Regulation X because the notice of complete application can be sent up to five days after receipt of the application, whereas the foreclosure protections apply on the date that a complete loss mitigation application is received.
  • Including in the estimated disbursements for an annual escrow analysis a full year of private mortgage insurance (PMI) disbursements despite knowing that PMI would be charged for only part of the year.

Servicers were found to have engaged in a deceptive practice in violation of the CFPA UDAAP prohibition by representing to borrowers, who had submitted a repeat loss mitigation application, that they would not initiate a foreclosure until a specified date.  However, because repeat loss mitigation applications are excluded from coverage under the loss mitigation procedures and foreclosure protections of Regulation X, foreclosures were initiated prior to the date provided in the communications

Payday lending. Lenders were found to have engaged in deceptive practices in violation of the CFPA UDAAP prohibition by:

  • Sending collection letters to delinquent borrowers stating an intent to sue if the consumer did not repay the loan when the lenders, in fact, had not decided prior to sending the letters that they would sue if borrowers did not pay, and in most cases did not sue borrowers who did not pay.
  • Falsely representing on storefronts and in photos on proprietary websites that they would not check a consumer’s credit history when, in fact, the lenders used consumer reports in determining whether to extend credit.
  • Presenting fee-based refinance options to struggling borrowers while withholding information about contractually available no-cost repayment plan options.

Private student loan origination.   Entities were found to have engaged in deceptive practices in violation of the CFPA UDAAP prohibition as a result of the net impression created by marketing materials that advertised rates “as low as” X%, disclosed certain conditions to obtain that rate, and omitted that a borrower’s rate would depend on creditworthiness.

Student loan servicing. Servicers were found to have engaged in deceptive practices in violation of the CFPA UDAAP prohibition by providing Federal Family Education Loan Program (FFELP) borrowers inaccurate information about eligibility for the Public Service Loan Forgiveness (PSLF) program.  Such practices included:

  • Representing to FFELE borrowers that they could submit their employer certification forms (ECF) to receive a determination on whether their employers are eligible for PSLF when under PSLF program guidelines, FFELP borrowers who submit an ECF before consolidating into a Direct Loan will be rejected without any determination about employer eligibility.
  • Advising FFELP borrowers that their loans could not become eligible for PSLF.
  • Informing borrowers interested in the PSLF program that they were only eligible if their employer was a non-profit.
  • For consumers whose accounts were automatically placed into a natural disaster forbearance, failing to unenroll consumers from forbearances upon their request and failing to reenroll consumers in auto-debit programs when forbearances ended.
  • Failing to waive or refund overcharges assessed following loan transfers that resulted in income-based repayment plans not being honored.
  • Failing to follow borrowers’ explicit standing instructions on payment allocation.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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