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CFPB Finds Evidence Of Redlining And Deceptive Acts In 2020

Katie Jensen
Jun 29, 2021

Enforcement actions resulted in more than $124 million in consumer remediation and civil money penalties in 2020

The Consumer Financial Protection Bureau (CFPB) issued a report highlighting supervisory findings that led to public enforcement actions in 2020, resulting in more than $124 million in consumer remediation and civil money penalties. 

The CFPB has the authority to supervise large banks, thrifts, credit unions with assets over $10 billion, and nonbanks for compliance under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Bureau-supervised non-banks include mortgage companies, private student lenders, and payday lenders. 

CFPB Acting Director Dave Uejio, said, “Today’s release of Supervisory Highlights reinforces the importance of the Bureau’s supervisory work, including during the COVID-19 pandemic, to find and correct systemic problems that hurt consumers. The actions we took in 2020 mitigated some of that harm, but consumers are still struggling, and we will stay vigilant.”

CFPB examiners found that consumer reporting companies are accepting unreliable information from other companies that furnish consumer data. Although there were ample signs that these furnishers were unreliable, the companies persisted. This violates the Fair Credit Reporting Act, and the CFPB will remain vigilant where there are indications of unreliability. 

Examiners also found evidence of redlining. People in minority neighborhoods were discouraged from applying for credit by locating offices in majority-white neighborhoods, only using pictures of white people in direct mail marketing campaigns, and publishing loan officer headshots of exclusively white people. The evidence demonstrates how these practices lowered the number of applications from minority neighborhoods relative to comparable lenders. 

The CFPB previously took action on a redlining case by filing a complaint against Townstone Financial Inc., a brokerage that made racially charged comments during their weekly radio show. The CFPB vows to combat redlining in all its forms throughout the 21st century. 

Additionally, CFPB examiners have found several violations concerning foreclosure procedures. In some instances, servicers made the first notice or filing for foreclosure when it was prohibited. Some servicers even filed for foreclosure before evaluating the borrower’s appeals, and some servicers failed to notify their foreclosure counsel to stop all legal filings once they received a completed loss mitigation application.  

Examiners also found that some servicers engaged in deceptive acts, promising borrowers they would not initiate foreclosure action until a specified date, but nevertheless, initiated prior to that date. 

On Monday, the CFPB issued a final rule that gives borrowers meaningful opportunity to pursue loss mitigation options and help prevent avoidable foreclosures. 

Student loan servicers also misled consumers about the Public Service Student Loan Forgiveness (PSLF) program. The program is expected to forgive the balance of certain student federal loans after 10 years of payments on a qualifying repayment plan while working certain public service jobs. Servicers neglected to mention additional requirements needed to access the program, leading many consumers to frequently request information from servicers about their eligibility.

For example, servicers misled consumers to believe they could not access PSLF if they had older loans under the Federal Family Education Loan Program, which was incorrect. Student loan servicers spread misinformation amongst an unknown number of borrowers, resulting in thousands of dollars lost per consumer. 

In all cases where CFPB examiners find problems, they alert the company to their concerns and, in many instances, outline recommended remedial measures. When appropriate, the CFPB opens investigations for potential enforcement actions. For more information on the 2020 supervisory findings, read the full report
 

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