CFPB Publishes Supervisory Highlights, Details Potential Issue with Misleading Credit Reporting Statements

The Consumer Financial Protection Bureau has published its latest Supervisory Highlights report, which “shines a light on legal violations” identified during CFPB examinations that were conducted during the first half of 2021 as well as publicizing prior supervisory findings that led to public enforcement actions during that timeframe. By and large, debt collection received less ink and attention than other sectors of the financial services industry, as the CFPB continues to focus its enforcement attention in other areas.

It might be helpful to note the difference between an investigation and an examination. Investigations are usually what happens when the CFPB has found evidence that someone broke a law while examinations occur when certain red flags — like the number of complaints relative to other similarly sized institutions — are raised.

“Today’s report reveals that irresponsible or mismanaged firms harmed Americans during the COVID-19 pandemic,” said CFPB Director Rohit Chopra, in a statement. “We will continue to supervise firms to halt harmful practices before they become widespread.”

This Supervisory Highlights included observations on credit cards, debt collection, deposits, fair lending, mortgage servicing, payday lending, prepaid accounts, and remittance transfers. With respect to debt collection, one problem area was observed — discussing restarting payment plans with consumers while representing that the consumers’ creditworthiness would improve once payments under the plan were completed and the tradeline was deleted.

“Examiners found that such representations could lead the least sophisticated consumer to conclude that deleting derogatory information would result in improved creditworthiness, thereby creating the risk of a false representation or deceptive means to collect or attempt to collect a debt,” which is a violation of the Fair Debt Collection Practices Act, according to the report.

In response to the observations, the collectors updated their policies and procedures as well as their training programs to prevent such deceptive statements from being made with respect to credit reporting and credit scores.

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