CFPB Recovers $107 Million in Relief for More Than 238,000 Consumers Through Supervisory Actions

Investor Update
November 3, 2015

Examiners Uncover Illegal Practices in Student Loan Servicing, Mortgage Origination and Servicing, Consumer Reporting, and Debt Collection Markets
 
WASHINGTON, D.C. –
Today the Consumer Financial Protection Bureau (CFPB) released its latest supervision report outlining the illegal practices uncovered by the Bureau’s examiners from May 2015 to August 2015. The Bureau found violations in the student loan servicing, mortgage origination and servicing, consumer reporting, and debt collection markets. The report shows that CFPB supervisory actions resulted in $107 million in relief to more than 238,000 consumers.
 
“Our supervisory activities in the past few months have returned $107 million to hundreds of thousands of harmed consumers,” said CFPB Director Richard Cordray. “Borrowers should not be mistreated when trying to repay their loans. 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.”
 
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the CFPB has authority to supervise banks and credit unions with more than $10 billion in assets and certain nonbanks. Those nonbanks include mortgage companies, private student lenders, payday lenders, as well as nonbanks the Bureau defines through rulemaking as “larger participants.” To date, the Bureau has issued rules to supervise the larger participants in the markets of consumer reporting, debt collection, student loan servicing, international money transfers, and auto finance.
 
Today’s report, which is the ninth edition of Supervisory Highlights, generally covers supervisory activities completed between May 2015 and August 2015. The CFPB often finds problems during supervisory examinations that are resolved without an enforcement action. Recent non-public supervisory actions in areas such as mortgage servicing, mortgage origination, deposits, and credit cards have resulted in $107 million in restitution to more than 238,000 consumers. Among the findings in this supervision report:

  • Student loan servicers allocated payments to maximize fees and failed to give consumers choices about how to apply payments: Typically, servicers handle multiple student loans for each borrower in one combined account. Servicers allow borrowers to make a single payment for all of the loans, and then the servicer allocates the payment among the borrower’s loans to satisfy the monthly payment for each loan. Where the borrower made a payment that was less than the total amount due, CFPB examiners found that one or more servicers allocated the amount proportionally to each loan and all of the borrower’s loans may have been charged late fees and become delinquent. Bureau examiners found that student loan servicers were not telling consumers that they have a choice about how to apply partial payments and did not explain the possible ramifications of the servicer’s allocation methodology. Bureau examiners found this fee-maximizing practice unfairly resulted in higher late fees and harm to borrowers.
  • Student loan servicers’ unfair practices increased fees and interest for borrowers: In cases where borrowers make automatic loan payments on a recurring basis every month, CFPB examiners found on one or more occasions that malfunctions in servicers’ systems caused payments to be triggered earlier than the scheduled date. This can cause unexpected debits and overdraft fees for consumers. Bureau examiners also observed other cases where pre-authorized auto-debit payments fell on dates when banks were closed and the payments were processed on the next business day, but servicers did not reverse any interest accrued due to the closures.
  • Student loan servicers deceive borrowers about student loan late fees: For certain federal student loans, Bureau examiners found that student loan servicers were deceiving consumers about late fees, stating that fees might be charged for federal student loans owned by the Department of Education. The Department of Education does not charge late fees on its loans and it tells servicers not to do so.
  • Mortgage servicers failed to automatically terminate mortgage insurance and reimburse consumers: Examiners found one or more mortgage servicers violated the Homeowners Protection Act by failing to automatically terminate private mortgage insurance for borrowers eligible for automatic termination. For borrowers who are current on their payments, the Act requires servicers to automatically terminate private mortgage insurance when the loan’s principal balance is first scheduled to reach 78 percent of the property’s original value.
  • Furnishers lacked adequate policies for accurately reporting information to consumer reporting agencies and failed to respond to disputes: 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 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. In particular, examiners found that certain furnishers did not notify consumers about the outcome of investigations about disputes over consumer reporting information. In other instances, some furnishers did not notify consumers when they took adverse action against them based on information in their reports.
  • Debt collectors used illegal tactics to contact consumers: Bureau examiners found at least one debt collector’s employees violated federal law by failing to identify that they were debt collectors during phone calls with consumers. Examiners also found instances where one or more debt collectors illegally continued to contact consumers on the phone at work after consumers verbally told them to stop.

Bureau examiners did observe some positive steps taken by various institutions to improve compliance. For example, certain mortgage servicers have made significant improvements to their compliance audits, which led to prompt correction of problems in many instances. Other mortgage servicers conducted information technology reviews and identified inadequacies, leading them to replace outdated systems. Additionally, certain student loan servicers took positive steps in cases where borrowers try to pay off their entire loan or account with a large lump sum but fall short of the total amount. In these instances, examiners observed that some servicers alert borrowers about unpaid balances, which can prevent them from accruing interest, having problems with their credit reports, or facing potential delinquency or default.
 
In this edition of Supervisory Highlights, the CFPB also announced that it has revised its exam appeals process. The revisions reflect experience gained in the appeals process so far, and are aimed at improving efficiency, consistency, transparency, and fairness to supervised institutions.

Where CFPB examiners find violations of law or other significant problems or weaknesses, they alert the institutions to their concerns and outline necessary remedial measures. When appropriate, the CFPB opens investigations for potential enforcement actions. The CFPB expects all entities under its supervision to respond to customer complaints and identify major issues and trends that may pose broader risks to their customers.
 
Today’s edition of Supervisory Highlights is available at:
http://www.consumerfinance.gov/reports/supervisory-highlights-fall-2015/

Source: CFPB

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to Chief Operating Officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur Of The Year® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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Business Development

Carrie Tackett

Business Development Safeguard Properties