Supervisory Highlights, Issue 37 (Winter 2024)
Published Date: 1/6/2025
Notice
Summary
The CFPB checked banks and lenders from January to October 2024 and found some are still charging unfair fees on deposits and overdrafts. They also spotted problems with how companies report credit info and handle short-term loans. Big refunds are happening now—over $119 million returned to mortgage customers—and more fixes are on the way to protect your money and credit.
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Analyzed Economic Effects
16 provisions identified: 12 benefits, 4 costs, 0 mixed.
$250M Refunded for Unfair Bank Fees
The CFPB says banks and service providers agreed to refund nearly $250 million to consumers for unfair overdraft and re-presentment NSF fees. This $250 million includes about $184 million for unanticipated overdraft fees and about $66 million for re-presentment NSF fees.
Mortgage Originator and Servicer Refunds
Mortgage originators reported issuing $115,605,024 in refunds for 134,912 affected loans, and mortgage servicers reported issuing $4,251,815 in refunds for 91,931 affected loans. Together these refunds total $119,856,839 related to unlawful fees and charges.
Widespread Furnisher Reporting Errors
Examiners found furnishers lacked written policies to ensure accuracy and integrity of information sent to consumer reporting companies, leading to errors such as reporting discharged bankruptcy accounts, wrong loan terms, and mismatched personal information for thousands of consumers. Furnishers are implementing or enhancing written policies.
Overdraft Rule for Very Large Banks
On December 12, 2024, the CFPB issued a final rule updating overdraft protections for financial institutions with more than $10 billion in assets. Overdraft extensions at these institutions will follow consumer credit protections unless the fee is $5 or less or only recovers estimated costs and losses.
Core Processors' Default Fee Settings
The CFPB found core processors configured platforms to assess APSN overdraft and re-presentment NSF fees by default, causing fees unless banks took action. The core processors enhanced platforms so clients would not assess these fees by default.
ODFIs Failed To Stop Improper Re-Presentments
The CFPB found some originating banks (ODFIs) processed re-presented ACH transactions as new transactions, which led to avoidable NSF fees or unauthorized debits. Those institutions implemented monitoring and auditing to prevent improperly formatted re-presentments.
Debit Networks Failed Stop-Payment Requests
Examiners found some debit card networks processed preauthorized debit card payments even when consumers submitted valid stop-payment requests, causing consumers to lose access to funds until disputes resolved. Those network operators revised processes to stop processing such payments.
Furnishers Ignored Identity Theft Block Notices
Examiners found some furnishers (like installment loan providers) had no procedures to respond to identity-theft block request notifications from consumer reporting companies and repeatedly refurnished information consumers said resulted from identity theft. Furnishers are now implementing procedures to respond to these notifications.
Furnishers Failed to Investigate Indirect Disputes
The CFPB found furnishers, including debt collectors, used automated systems or failed to review client records and therefore did not conduct reasonable investigations of indirect disputes sent by consumer reporting companies. Examiners found instances where inaccurate information was wrongly verified or tradelines deleted without proper investigation.
BNPL Lenders Delayed Dispute Resolutions
Buy Now, Pay Later lenders failed to timely resolve consumer disputes about non-delivered goods or refunds, leaving hundreds of consumers without funds for months. Lenders refunded the amounts at issue and implemented monitoring to prevent delays.
Blocking Account Closure / Continued Debits
Examiners found some paycheck advance lenders blocked consumers from closing accounts and continued debiting deposit accounts despite representations that accounts could be closed anytime and no collection would occur. Examiners found this conduct deceptive and abusive.
Tech Failures Blocked Consumers' Transfers
Examiners found technology failures in some paycheck advance products blocked transfers from consumers' linked deposit accounts, denying timely access to funds. Consumers could not access their money and spent time and effort trying to resolve the issue.
CFPB Supervision for Big Payment Apps
The CFPB issued a final rule on November 21, 2024, defining larger participants in the market for general-use digital consumer payment apps; the rule takes effect January 9, 2025. Firms that facilitate more than 50 million U.S. dollar consumer payment transactions per year can be supervised by the CFPB.
BNPL Misleading Loan Cost Advertisements
Examiners found some Buy Now, Pay Later merchant websites advertised incorrect loan costs or terms, and the associated lenders exercised control over those ads. Lenders contacted merchants, ensured websites were fixed, and refunded overcharges to customers.
Denied Credit Over Balances Under $1
Some Buy Now, Pay Later lenders' systems prevented consumers with balances below $1 from making payments, then denied new loans based on those tiny balances. Examiners directed lenders to allow payoff or automatic removal of balances under $1 and to stop denying loans for those balances.
Paycheck Advance Tip Misrepresentations
Examiners found paycheck advance lenders represented that customer tips would help specific other borrowers, but in reality tips were added to general revenue. Examiners concluded these statements were deceptive and abusive because they misled customers about how tips were used.
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