CFPB Supervisory Highlights: Servicing and Collection of Consumer Debt

CONSUMER FINANCIA L PROTE CTION BU REAU | JU LY 2024 S upervis ory Highlights: Servic ing and C ollect ion of Consumer Debt Issue 34, S umm er 20 24

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 1 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MM ER 2024 Table of c ont ents Table of contents......................................................................................................... 1 1. Introduction........................................................................................................... 2 2. Supervi sory Ob serva tions................................................................................... 3 2.1 Auto Loan Servicing................................................................................. 3 2.2 Student Loan Servic ing............................................................................ 4 2.3 Debt Collect ion......................................................................................... 7 2.4 Cr edit C ard Accou nt M anagem ent - Medi cal Pa yment Produ cts............ 12 2.5 Deposit and Pr epaid A ccoun ts............................................................... 13 3. Supervi sory De velop ments............................................................................... 16 3.1 Recent CFP B Supervisi on Dev elopment s.............................................. 16 4. Remedial Actio ns................................................................................................ 18 4.1 Public Enf orcement A ction s................................................................... 18

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 2 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MMER 2024 1. Introd uct ion This edition of Supervisory High lights fo cuse s o n the Co nsumer Fi nancial Protect ion Bureau’ s (CFPB ’s) work in c onnectio n with debt co llection. The collect ion of debt is an important and necess ary part of the consume r financ ial marketplace, whether th rough serv icing of c ur rent loans or the col lection of deli nquen t debt. B ut serv icing a nd col lections a lso presen t risk of harm to consu mers if handle d impr operl y, particularly where there are vio lations of applic able law. This edition highl ight s violations of law and cons umer harm in the areas of auto and student loan se rvicing and debt collection, includi ng cr edit card de bt collecti ons. This edition a lso present s findings in dep osi ts and prep aid accou nts as well as credit card accou nt management with a focus on medical c redit car ds. The findings in this edition of Superv isory Hig hlights c over sel ect exam inati ons tha t were g eneral ly com pleted fr om Ap ril 1, 2023, to D ec embe r 31, 2 023. Additio nally, this edition summa ri zes sup ervis ory acti vity rela ted to s ect ion 10 34(c) of th e Consu mer Financial Pr otection Ac t of 2010 (CFPA). 1 Secti on 1034(c) re quires lar ge banks and credit u nions to compl y with con sum er requ ests for in forma tion c oncerni ng th eir acco unts for consume r financial produc ts and/or services in a t imely manner, subjec t to limi ted excep tions. 2 The superviso ry acti vity indicate s that som e entiti es hav e ceased chargin g consu mers f ees to obtain ac count inf ormation and items such as printed copies of c heck images and account statem ents. Some enti ties are al so offe ring fr ee bal ance inqui ry informati on a t third par ty ATM s. The CFPB is co nt inu ing to gather in formati on an d asse ss indu stry co mplia nce with s ect ion 1034 (c) across prod ucts, in cluding m ortgag e, deposit, and cr edit card a ccoun ts. To mainta in t he anony mity of the su pervis ed ins tituti ons discu ssed in Supervisory H ighlights, refere nces to i nstitutions ge nerally are in the plural and the related findings may p ertain to one or more in stitu tions. 3 We invit e read ers wit h quest ions or c ommen ts abo ut Supervisory Highligh ts to c ontac t us a t CFPBSupervision@cfpb.gov. 1 12 U.S.C. 55 34(c); CFPB, Consu mer Infor mation Req uests to Large Ba nks and Cred it Unio ns, 88 Fed. R eg. 71279 (Oct. 16, 2023), availabl e at ht tps://fi les.co nsumer finance.go v/f/docu ments/c fpb - 10 34c - ad visory - op ini on - 202310.pdf. 2 Id. 3 If a supervi sory matter i s referred to the Office of Enfor cement, Enf orcement may ci te addi tional violat ions base d on these facts or uncover additional in formation that cou ld impact the concl usion as to what violatio ns may exist.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 3 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MMER 2024 2. Supervi sory Obser vatio ns 2.1 Au to Loan Servic ing The CFPB contin ues to exa mine auto l oan se rvici ng activi ties, prima rily to assess s ervicer s ’ complianc e with th e CF P A’s pr ohibiti on on un fair, decepti ve or a busiv e acts or pra ctic es (UD AAP) 4. Recent auto loan se rvicing examinations i dentif ied unfair ac ts or pr actices re lated to collect ing the f inal payment for auto lo ans. 2.1.1 Failing t o auto - debit the fi nal p ayment wi thout adequate notific ation that the b orrowers m ust make the final pay me nt manuall y Exami ners foun d tha t serv ice rs engaged in unfa ir ac ts or practi ces by failin g to debit c onsu mers’ final payment v ia thei r autopa y syst em wit hout a dequat e notifica tion to borrow ers enrol led in autopay t hat they need to make the final paym ent manually. An act or prac tice is un fair w hen: (1) it ca uses or is l ikel y to cause substan tial in jury to consu mers; (2) th e injury is not r easona bly avoida ble by c onsum ers; a nd (3) the in jury i s not outweigh ed by c ounter vail ing ben efits t o consume rs or t o compe tition. 5 Service rs offer ed preauth orize d recurring ele ctron ic fund tran sfer enrol lmen t for consumers to make auto matic payment s on the ir loans. The servic ers’ a utopay sy stems d id not d ebit consumer s’ final paym ent s when the y were a dif ferent amou nt fro m their re gular monthly payme nts. Servi c ers fail ed to adequat ely com mun icate to c onsume rs that they m ust re mit the final paym ent manu ally, despite being enro lled in autopay. Servic ers t hen charg ed cons umers late f ees for fail ing to make the fi nal payment on tim e. This pra ctice cau sed su bstan tial in jury to t he con sumers in the f orm of la te fee s assess ed when the fi nal payme nt was not made. Consumer s could not reasonably avoid the inj ury becau se they had no co ntro l ove r the aut opa y sys tem the se rvi cers cho se to use. Furth er, consum ers did no t rea sonably anti cipate that a se rvicer’s autopay syste m would no t make the final 4 12 U.S.C. §§ 5531, 55 36. 5 Id.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 4 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MMER 2024 payme nt. Consumers could not re asonably fore see incurr ing a late c harge as a re sult. T he injury was not outweig hed by a ny coun terva iling b enefit s to cons umers or com petiti on. In respons e to thes e find ings, s ervic ers ar e revisin g their polici es and p roce dures to ensure t hat they e ither inclu de the final payme nt in aut opay withdr awals or adeq uately noti fy consume rs enrolle d in autopay i f and whe n a payment i s required to be submit te d manually. 2.2 Student L oan S ervicing The CFPB continu es to e xamin e studen t loan se rvicing activiti es. T his work includes assess ing whet her en tities have en gaged i n an y viola tions o f the CF P A ’s prohi bition against UDAAP s, 6 the Electron ic Fun d Tran sfer Act a nd its im plementin g R egulat ion E, 7 and the Fair Debt Collection Act (FDCP A) and i ts im plemen ting R eg ulation F. 8 Examiner s identi fied unf air a nd abusi ve acts or pra ctices by studen t loan s ervic ers rela ted to failin g to provi de ad equate a venu es for com munic ation d ue to exc essiv e hol d times. Ex amin ers also id entified decepti ve acts o r practi ces r elated t o misre present ing w hich forms c onsume rs should u se to en roll in c ertain progra ms. An d exa miners fo und t hat servi cers fa iled to no tify consume rs of p reaut horized f unds transf ers tha t exceed ed the pr eviou s tran sfer amoun t. 2.2.1 Excessive barri ers to assi stanc e Consum ers fre quently co ntact thei r servi cer by p hone t o make paymen ts, acce ss ben efits, an d resolv e disput es. Exam iner s found c ert ain servi cers ha d exces sive hol d tim es when consum ers contac ted the m, with av erage hold tim e s of 4 0 minute s over a six - mon th peri od. As a r esult of the se long hold times al most half of con sum ers dro pped th eir cal ls befor e speaki ng with a n agent. Durin g the six - mo nth per iod the s ervi cers sign ifican t ly und erst aff ed thei r cal l cent er s. The serv icers a lso disa bled c onsum ers’ access to th eir online ac count m anagement portals wh ere consumer s could make payments afte r a relati vely short am ount of ti me an d had problems with their int eracti ve voi ce res ponse sy stems, limitin g con sumer s’ abil ity to pay or obtain ass istance accessin g benefi ts without speaking to an agent. Exami ners foun d tha t studen t loan se rvicers eng aged in unf air a nd abus ive acts or pra ctices by failing t o provide, for an ext ended per iod, an adequate avenue for consumers to timely re solve 6 12 U.S.C. §§ 5531, 553 6. 7 15 U.S.C. § 169 3, et seq: 12 C.F.R. Pa rt 1005, et s eq. 8 1 5 U.S.C. § 1692, et se q: 12 CF R P art 1006 et seq.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 5 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MMER 2024 disput es or inquirie s by phone or submit ph one pay ments, w hen the y offer ed the o ption of paying and reso lving disputes or inquiries by phone. An abusi ve act or pract ice: (1) materia lly i nterf eres wit h the a bility o f a consu mer to un dersta nd a term or conditi on of a c onsum er fina ncial product o r ser vice; or (2) t akes unreaso nable advantag e of: a lac k of underst anding on the part of th e consumer of the mater ial risks, costs or conditi ons of t he prod uct or s ervic e; the abil ity of t he cons umer t o prote ct the in terest of the consumer in select ing or using a financial product or s ervic e; o r th e rea son able r elia nc e by t he consume r on a c overed person to act in the in tere st of the c onsume r. 9 Exami ners foun d tha t service rs enga ged in a busive a cts or pra ctices becau se ser vicers to ok unreaso nable adv antage of cons umers’ ina bility to protect their in terest s. The service rs gain ed an advantag e by under staffing the ir call ce nters be cause they re duced the ir salary e xpenses. T he advantag e gained by servicers was unreaso nable because resolving d isputes or i nquires and rece iving pay ments are essen tial function s of a l oan ser vicer. Consum ers wer e una ble to pro tect th eir own in terest s, inclu ding t heir int er est in “li mitin g the amount of tim e or effort necessa ry” to rem edy problem s, 10 as well a s their in terest in makin g payme nts on the ir loans or a ccessin g ben efit prog rams. Typically, c onsumers ar e unable to choose t heir l oan servi cer an d so are un able t o switc h to a new s ervic er when th ey enco unter problem s reachi ng th eir se rvicer. Becaus e consu mers w ere unabl e to swi tch ser vicers, t hey wer e unable to limit the amou nt of time spent r esolving pr oblems, make payments, or access be nefit pro gr ams. Consum ers m ay ordinaril y have a ltern atives t o call ing thei r servi cer, suc h as mak ing payme nts online o r through an interacti ve voic e response sy stem, but ma ny consum ers w ere unable to access th ese alter natives becau se of pro blem s wi th th e in tera ctiv e vo ice r espon se system and the servi cers’ dis abling of m any consumers’ on li ne acco unts. As a resul t, consu mers often ha d no ot her recou rs e than to con tact th eir servi cers by phon e. Ther efore, t he servi cers engag ed in abu sive ac ts or pra ctices. Examiner s also found that the se rvicers’ co nduct was unf air. The l ong hold tim es wer e lik ely to cause su bstant ial in jury to con sumers. First, some consum ers we re una ble to mak e tim ely payments b ecaus e of long hol d times, wh ich likely resulted i n additio nal late fees. Second, s ome consumer s called to obtain info rmation abo ut how to enro ll in forbe arance or def erment progr ams and were th erefore unab le to enter th ese pro grams, w hich c ould re sult in a ddition al unnec essary pa yments or la te fees. T hird, s ervi cers inju red c onsumer s by forcing t hem to sp end conside rabl e amoun ts of tim e resol ving is sues or maki ng paymen ts. Consumer s could n ot 9 12 USC § 55 35(a)(1)(B). See also CFPB Policy on Abusive A cts or Practic es, April 3, 2023, available at: https://www.consumerfi nance.gov/c omplianc e/supervisory - guidance/policy - statement - on - ab usivene ss/#1 10 See CFPB Policy on Abusive Acts or Practices at p.14.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 6 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MMER 2024 reasonab ly avoid th e inju ry becau se th ey could n ot swi tch serv icers an d the y have n o contr ol over c all hold t imes. Some cons umers were also unable to make payments thro ugh alternat ive means becau se of pro blem s with intera ctive voi ce respons e syste ms or online ac counts. Fi nal ly, the injury to c onsum ers wa s not outweig hed by counter vailin g benefits to consu mers or competit ion. C onsum ers do n ot bene fit from exces sive h old time s, and adequat e staffing is inhere nt to being a functioning student lo an service r. In resp onse to th ese fin din gs, servi cers d evelo ped pla ns to re duce hold tim es and dro p rates. 2.2.2 Providing inacc urate inf ormatio n about benefit forms Exami ners foun d tha t service rs enga ged in d ecept ive acts or prac tices by provi ding ina ccurat e information r egarding which form s consumer s should subm it in order t o qualify for certain loan progr ams. Student loans often inc lude cert ain benefits wh ich consu mers are e ntitled to ac ces s, such as fo rbeara nce. To acce ss thes e progra ms con sumers often mu st sub mit sp ecific f orms. A repre sentation, omission, a ct, or pra ctic e is dec eptive w hen: (1) the re presen tation, omis sion, act or pra ctice mi slead s or is li kely t o mislea d the c onsum er; (2) the consu mer ’s inte rpre ta tion of the re presenta tion, omissi on, act or prac tice i s reasona ble und er the ci rcum stanc es; and (3) the misl eading repres enta tion, omis sion, a ct or p ractic e is mat erial. 11 Exami ners foun d tha t some con sume rs contac ted their se rvicers t o det ermi ne the a ppropria te forms t o submi t in orde r to ap ply for a specif ic ben efit. The s ervic ers misrep rese nted to co nsum er s wh ich form to s ub mit and, when th e consum e rs su bmitt ed the sp ecifie d forms, their reques ts were d enied. C on sumers had a r eason a ble bel ief the f orm s wer e cor rec t wh en sp ecif ied by the se rvice rs and were acting reas onably whe n they followed the ir instru ctions. An d the misre presenta tions w ere m aterial becaus e they a ffect ed the c onsume rs’ dec ision t o fill ou t the incorr ect forms, which d elayed cons umers ’ ability to succes sfully apply for th e benefit. I n respons e to thes e fin dings, s ervic ers imp roved training and monitor ing. 2.2.3 Failing t o notify consume rs of l arger p reauth orized electroni c funds transfe rs Regul ati on E, 12 CF R 1005.10 (d)(1), r equir es t he d esign at ed pay ee of a pr eau thori zed elect ronic fund tran sfer fr om a c onsum er’s acc ount to p rovide t he con sumer with writ ten n oti ce of t he amount and date of th e transfer at least 10 days before t he scheduled transfe r date if th e amount will va ry from t he pre vious tran sfer u nder t he sam e authori zation or from the preauthori zed 11 12 U.S.C. § 5531.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 7 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MMER 2024 amount. Examiners fou nd that servi cers viola ted this pr ovision wh en they did not pro vide written n o tices to cons umers b efor e withdra wing an a mount tha t exce eded th e previ ous tran sfer under t he same autho rization. I n response to these fi ndings, service rs are r emediatin g consume rs. 2.3 Deb t Collec tion The CFPB has su perviso ry a uthority t o exa mine ce rtain in stituti ons tha t en gage in c onsume r debt col lecti on activ ities, includin g very la rge d eposit ory in stituti ons, n onban ks that ar e larg er partici pants in the cons umer de bt collecti on mark et, including nonbanks that collect s tudent loan deb t, and non banks that ar e servic e provi ders to certa in cove red per sons. R ecent examin ation s of larg er parti cipan t debt c ollecto rs identi fied vi olati ons of Regulat ion F, 12 whic h implements the FDCP A. E xaminers also identified unfair p ractices rela ted to incor rect document ation r elated to the statu te of l imita tions in credit ca rd coll ectio ns. 2.3.1 Failure t o provi de debt v alidati on n otice to c onsumers Secti on 10 06.34(a) of Regula tion F r equires that within fiv e days after the init ial commu nication with the con sumer in con nection wit h the coll ection of any debt, a debt col lector must send a written or electr onic validation noti ce unless t he validation info rmation is co ntained, o r provided orally, in the initial commun ication or the cons umer has pai d the deb t bef ore t he valida tion inf ormati on is requi red to b e provid ed. 13 A writt en or elect ronic v alidatio n notice must be sen t in a manner that is rea sonabl y expe cted to p rovid e actual n otic e to the con sume r. 14 The Officia l In terpr etatio n of Regul ation F state s that a debt coll ector who sends t he requi site validation disclosure in writing or el ectroni c ally but re ceiv es notic e that t he discl osure wa s not deliver ed to the consumer has not sent the disclo sure in a m anner that is reasonab ly expected to provide actual not ice. 15 Exami ners foun d tha t debt coll ectors fa iled t o provi de the re quisit e valida tion infor mation either orall y in, or in writ ing within five day s of, the initia l oral co mmunicatio n with cons umers. This hap pen ed whe n t he initia l communicati on occur red via telep hone, but a fter the debt collecto r had r eceiv ed noti ce that i ts prior writt en discl osu re was no t delive red to the consume r. 12 12 C.F.R. Part 1006 et seq. 13 12 C.F.R. 100 6.34(a). 14 12 C.F.R. 100 6.42(a). 15 12 C.F.R. pt. 10 06, Supp. I, Comment 42(a)(1) –2.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 8 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MMER 2024 In resp onse to th ese fin din gs, debt c ollec tors ar e revisin g their proc edures and enha ncing monit oring and traini ng wit h respe ct to pro vidin g debt va lida tion no tices i n these circums tances. Examiner s also found that st udent loan debt col lecto rs fail ed to pro vide val idation notic es as require d where the init ial com muni cation with th e consum er oc curred i n writin g. In respon se to these fin dings, the d ebt coll ectors wil l upda te the ir wri tten co mmuni cation s with b orrow ers to provide the valid ation infor mation. 2.3.2 Using fal se, dec eptive or mi slea ding rep resenta tions Exami ners found tha t student l oan debt coll ector s vi olate d Regu lation F ’s prohibition on the use of false or misl eading rep resenta tions, s ecti on 1006. 18 (c)(4) & (e)(1) - (2). As a resul t of thes e violati ons, th e borr owers m ay have rea sonably bel ieved that the FDC PA di d not appl y and m ay have be en misle d about their ri ghts under th e FDCPA, s uch a s their ri ght t o dispu te the d ebt. First, ex amin ers foun d that d ebt c ollecto rs used f alse, decepti ve, or m isleadi ng rep resenta tion s or means in connecti on with co llection of a d ebt when t hey used a b usiness, company, or organi zation name o ther than th e true name of the debt c ollecto rs’ business, company, or organi zation. 16 In writ ten communicatio ns and telep hone calls r eviewed by examiner s, the debt collectors u sed dif ferent names an d failed t o disclos e their true company name s. In res ponse to these fin dings, the d ebt coll ectors wil l cea se usin g incorr ect nam e s and update all c all scripts and w ritt en corre spo ndenc e to use thei r true company name s. Second, examin e rs foun d that d ebt c ollecto rs als o used false, deceptive, or misleading repres entation s or means in connec tion with collection of a debt whe n they faile d to provi de key initial disclosu res in com municati ons wi th borr owers. R egula tion F r equire s debt coll ector s to disclos e, in ini tial c ommun ication s with c onsume rs, that t he deb t coll ectors a r e att empt ing to collect a debt a nd that an y information obtain ed w ill be us ed for tha t purp ose. 17 If the d ebt collecto rs’ in itial co mmun ication w ith th e consu mer is o ral, the d ebt col lecto rs must ma ke the disclosure again in their i nitial written c ommunic a tion w ith the consu mer. And in all subsequ ent com munica tions wi th th e consum er, t he debt col lect ors mus t disclo se that the commun icati on is fro m a debt c ollec tor. 18 Exam iners o bserve d that the d ebt col lecto rs fail ed to provide these di sclosu res in writt en communications and teleph one calls w ith borrowe rs. In 16 12 C.F.R § 100 6.18(c)(4). 17 12 C.F.R. § 10 06.18(e)(1). 18 12 C.F.R. § 1006. 18(e)(2).

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 9 SUPER VISOR Y HIGH LIG HTS, ISSU E 34 SU MMER 2024 respons e to thes e fin dings, t he debt c ollect ors wil l updat e their writt en commun icati ons and ca ll script s to pro vide the requir ed discl osure s. 2.3.3 Communic ating with co nsumers at inco nvenie nt or unusual t imes or places Section 1 006.6(b)(1) of R egulation F prohi bits commun icatin g or attemp ting to c ommunica te, including electron ically, with a con sum er at a time or pl ace the de bt colle ctor kno ws or shoul d know to be inconvenie nt or u nusual, with commu nication s befor e 8 a.m. o r after 9 p.m. in th e consumer ’s time zone presumed t o be inconveni ent in the absence of any knowled ge of circums tance s to the c ontra ry. 19 Exam iners foun d tha t debt c ollecto rs comm unica ted wi th consume rs at ti mes an d place s kn own by the collecto r s to be inconveni ent or unusu al. For exam ple, debt colle ctor s sent pay ment r emind er ema ils to th e consum er be fore 8 a.m. in the consume r’s tim e zone. E xam iners i dentifi ed mult iple phon e ca lls w her e th e con sumer dir ect ly informed the col lecto rs ’ ag ent that it was an incon venient ti me or place f or the c onsume r, but the agents con tinued th e conversa tions bey ond pe rmissi ble f ollow - u p questi ons. For ex ampl e, examin ers iden tifie d multi ple insta nces where c onsum ers told debt collec tors ’ agents that it was an inconveni e nt tim e to talk, either becau se they we re at work or driving, but th e agent s conti nued the conve rsation. Examine rs also ident ified instance s in wh ic h a consu mer info rmed a debt c ollecto r’s agen t that it wa s a “bad time” t o discu ss the d ebt in qu esti on becau se they were at churc h with out a wall et, but t he agent n evertheless contin ued to disc uss the de bt. I n respo nse to these fin dings, t he debt coll ector s are enhancing t heir polic ies and procedu res and tr aining to ensure that th ey do not commun icat e with c onsumer s at inc onven ient or unusual times or places. 2.3.4 H ar assing, opp ress ive, or abus i ve cond uct in connectio n with the collec tion of debt Sect ion 1006.14(a) of R egula tion F prohibi ts debt collec tors, in conn ection with the c ollec tion of any deb t, from engag ing in any cond uct the natural conseq uences of which would be to harass, oppres s, or ab use any person. 20 Exam iners foun d that debt c ollecto rs enga ged in ha rassin g, oppressiv e, or abusi ve con duct in conn ection wi th the coll e ction o f debt. Fo r example, in phone call s, consumer s ex plain ed to the debt collectors ’ agent s that they w ere unable to make payme nts according to a prior settleme nt agreement b ecaus e of a recen t hospi tal sta y. In respons e to consum ers ’ explanation s of the medical difficulties that l eft them without enough 19 12 C.F.R. 100 6. 6(b)(1). 20 12 C.F.R. 100 6. 14(a).

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 10 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 mon ey to pay the deb t in quest ion, th e ag ent s took an aggressi ve tone and w ere verb ally abusive towards th e consume r s. At other debt colle ctor s, consumer s reques ted tha t the de bt collec tor s stop con tactin g them. D espite this r equest, the de bt collec tor s s ubse quen tl y pla ced ove r 10 0 telepho ne calls to the consumer s. Alth ough t he freq uency of calls to the co nsumer was wit hin the li mits establ ish ed by Sec tion 1006.14(b)(2)(i), and so the colle ctor s w ere e ntit led to a presump tion t hat their cond uct was n o t hara ssing, ex amin ers foun d tha t the coll ector s placing ove r 100 cal ls to the c onsu mer after bein g spec ifica lly a sked to stop o verca me that p resum ption and had th e effec t of harassi ng the consume r. In re spo nse to the se f indi ngs, d ebt coll ecto rs are enhanc ing their tr aining and o versight to prevent har assing comm unications. 2.3.5 Failure t o cease communi cating through a s peci fic medium aft er a consume r reque st Sect ion 1006.1 4(h) o f Re gulation F provi des t hat if a consume r has re quest ed that t he deb t collect or not use a medium of communicatio n to communicate with the c onsumer, the debt collect or must not u se that me dium to co mmu nicate or a tte mpt to com munic ate with the co nsum er in connecti on with the collection o f any debt, wi th cer tai n exce ptio ns. 21 For example, Regula tion F ex plains t hat if a consu mer req uests that a d ebt col lector “s top cal ling ” the consume r, th e debt coll ector is prohi bited f rom com muni cating or attem pting to commun ica te with the con sumer thro ugh tele pho ne ca lls. 22 The reg ula tio n als o sta tes that, with in a medi um of commun icati on, a per son ma y reque st that a d ebt coll ector no t use a s peci fic add ress or teleph one numb er. 23 Exami ners foun d tha t debt coll ectors communic ate d or at temp ted to co mmuni cat e w ith co nsum er s through a m edium o f commun icati on, such as a text me ssage, a nd/or t hrou gh a speci fic t elephon e nu mb er tha t th e con sum er s ha d requested the debt coll ector s not use to communic ate with the consumer s. In re sp onse to the se f ind ings, debt col lectors a re rev ising their proc edur es and enhancing mo nitoring and training t o prevent communicatio ns, or attempts t o communi cat e, through s pecifie d medium s following a consu mer’s r equest. 21 12 C.F.R. 100 6.14(h). 22 12 C.F.R. pt. 10 06, Supp. I, Comment 14(h)(1) –3. 23 12 C.F.R. pt. 10 06, Supp. I, Comment 14(h)(1) –2.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 11 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 2.3.6 Failure t o discl ose in s ubseque nt comm unicati ons that communicati on is from a d ebt col lector Secti on 10 06.18(e) of Re gulation F re quires t hat a de bt collec tor di sclose, i n each communic ation subseq uent to the initial c ommunicatio n with the co nsumer, that the commun icati on is fro m a debt c ollec tor. Exa miner s foun d that de bt coll ectors f ailed to discl ose in subse quent c ommun icati ons that t hose c ommun ications wer e from a d ebt col lector. E xamin ers found that th e debt coll e ctors ’ s ervic e provide rs, when comm un icating abou t the debt with consum er s on t he tel ephone or vi a tex t mes sag e on b eha lf of t he coll ecto r s, failed to disclos e that the com mun ication wa s from a d ebt collecto r. E xa mi ne rs also fo und that when consume rs requ ested an elec tronic paymen t confi rmation, ser vice pro vider s responsi b le for produci ng thos e co nfirmations on be half o f de bt colle ctor s failed to includ e the requir ed disclosu re that the com munic ation was from a debt col lector. In re sponse t o these fin dings, the debt col lectors a re en hanci ng thei r servic e provid er ov ersight. 2.3.7 Incorrect docum entati on relat ed to the s tatut e of limitati ons in c redit ca rd collec tions Exami ners foun d tha t credit ca rd issu er s engaged in an unfair ac t or practice when t hey failed to properly calc ulate an d docum e nt the debt coll ecti on statut e of li mitati ons fo r a parti cular s tate and th en sold th e credit c ard d ebt to debt colle ctors. Th e statu te of li mitati ons for credit ca rd debt is th e amoun t of tim e — set by each stat e — that lender s and colle ction agenc ies have to file a lawsuit a gains t consum ers for n on paym ent. Exam iner s det ermi ned tha t the en tit ies sold thousan ds of credit card de bts to debt collec tors misr epresen ting the stat e’s statu te of limitati o ns for c redit ca rd de bt as ten y ears rather tha n five yea rs, includin g some a ccoun ts on which th e statu t e of limit ations had alrea dy expire d. The entit ies ’ pra ctice s create d the risk of subst antial injury to consumer s because third partie s may rely on the e ntit ie s ’ statute of limitation s da ta when deter mining th eir ability to file a collecti ons lawsuit. The injury w as no t reasonab ly avoid able because co nsumers co uld n either anticipate nor control h ow the ent i tie s coded accounts i n thei r syste m s and were not li kely to rec ognize the entit ies ’ erro r s. Finally, the injury cause d by the misc oding of acc ounts for sale was not outwe ighed by co untervai ling benefi ts to con sumer s or com petit ion. To r emedy t he issu e, the entit ies cont acted their deb t buyers to ensu re that th ey used the cor rect sta tute of limitat ions p eriod f or debts a lready sold. Also, the enti ties upd a ted t heir systems a nd pro cedu res to sta te th e correc t statute of limi tation s period fo r curr ent and fu ture debts.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 12 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 2.4 Credit Card Account Management - Medical Payment Products In asse ssing the operations of supervised e ntities for compliance with Federal consume r financial laws, ex aminers r eviewe d med ical payment products issued by supervised entit i es. Consumers may apply for medical payment products, such as a medical credit card—often at the point of sale, such as a doctor’s office or hospital. Consumers then use these products to pay for healthcar e - rel ated produc ts or services. When offering a medical payment product to consumers, healthcare providers commonly use sales and marketing materials provided by the issuer of the medical payment product. 2.4.1 S ervice provider oversight in offerin g medi cal pay ment products At one en tity, examine rs identified a sig nificant number of consumer complaints regarding how dentists and other healthcare providers promoted, offered, and sold medical credit cards to consumers. For example, where credit card is suers o ffer “deferred interest” promotions— cred it terms under which interest accrues, but consumers are not obligated to pay if the balances are paid in full by a specific date—consumers frequently complained of healthcare providers misrepresenting the specifics of these promotions. Consumers also complained that it was u nclear whether th eir monthly payments would be allocated to their pr omotional or non- promotional balances. Other consumers complained that they felt pressur ed by healthcar e providers to open a credit card while receiving treatment. Supervision expects supe rvised en titi es to hav e eff ective pro cess es for managing the risks of service provider relationships, including relation ships with medical providers who direc tly communicate with consumers about medical payment products. In examining entities that offer medical payment products, examiner s revi ew e d mat erials r ela ted to oversight of medical providers that directly communicate with consumers about the entit ies’ medical payme nt products. These materials did not provide enough information for examiners to assess the program’s adequacy, and Supervision plans to continue to assess entities’ oversight of medical providers, including whether the oversight is commensurate to the risks in the pro duct offering. Additionally, Supervision intends to monitor the incentives e ntities offer to enr oll patients in specific products and marketing materials about the products.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 13 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 2.5 Deposit and Prepaid A ccounts In reviewin g depo sits and pr epaid acc ount pra ctices, ex ami ner s have fo cus ed on pra ctice s that prevent c onsu mers fro m acce ssing th eir fun ds or im portant a ccou nt info rmation, and have assess ed whet her en tities ha ve compli ed with the C FPA’s prohibiti on again st e ng ag ing in UDAA Ps. 24 In cert ain instance s, examiner s found that e ntities engaged in u nfair acts or pr actice s wi th re spe ct to acco unt f ree zes. Exam iner s also obs erv ed probl ems r elated to the failure to provide per iodi c statem ents for a llo tmen t accoun ts. Add itiona lly, in reviewing bank pra ctic es in pr ovidin g con sumers a ccess t o accou nt infor mation, exam iner s have o bserv ed a numbe r of changes i n how supervi sed en tities i mpose f ees wh en custo mer s seek t o obtain basic accou nt informatio n. M any entiti es elimina ted fe es for respon ding to requ est s for a ccoun t information. 2.5.1 Account f re ezes As part o f admini sterin g depo sit ac counts an d pr epaid acc ount s, insti tuti ons regu larly review accoun t activi ty to id entify fraud an d othe r suspi cious ac tivity and t hen fre eze fund s to pre vent such activi ty. Exami ners found that institutio ns engaged i n unfair prac tices in co nnection w ith how the y handle co nsumer communic ations rel ated to these account f reezes. For exa mple, s ome insti tuti ons fai led to aff irmati vely n otify c onsum ers aft er block ing th eir accoun ts. In ot her insta nces, insti tutions provi ded n otices but fa iled t o pr ovide cl ear gui dance to consume rs, suc h as dir ectin g them to write in by ma il for mor e inf ormatio n without spec ifying the inf ormation the consumer nee ded to unfreeze their ac co unt s. Insti tutio ns som etimes ex acerbated these prac tices by fru strat ing c onsumer s’ abili ty to con tact t he institu tion. For exam ple, c erta in insti tuti ons dro pped or blocked most cal ls from n umbe rs assoc iated wi th th e frozen a ccoun ts so tha t consum ers c ould no t conne ct wi th a custom er ser vice represe ntat ive to ask questi ons or chal leng e the freez es. In o ther in stan ces, insti tutions auto ma tically forwarded calls from thes e numb ers to a pre - recor ded messa ge that di d not prov ide meaningful information a bo ut t he consu mer’s a ccount. These p ractice s cause d or we re likel y to caus e sub stantial injury t o consu mer s as thos e consume rs we re unabl e to acc ess froz en funds f or week s or m onths. In these ins tance s, th is injury was not reaso nably avoid able as cons umers would no t have reaso n to be lieve their account a ctivity w ould tr igger a free ze. Addit ionally, institution s dep rived consu mers of the informa tion n eeded to a ddress the ac count su spen sions. Th e inju ry was n ot outw eighed by 24 12 U.S.C. §§ 5531, 55 36.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 14 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 counte rvailin g ben efits to con sumers or co mpetit ion as con sumers need t o be abl e to add ress holds o n their acco unts in a time ly manner so the y may ac cess t heir own mo ney. In resp onse to th ese fin din gs, th e instituti ons pl anned t o enhan ce their process es to pr ovid e automat ic noti ce of a ccount fr eezes a nd desc ribe in these n otices t he proc ess for con sumers to unfreeze th eir accounts. In stituti on s also chang ed their proces ses to all ow consume rs to communic ate directl y with c ustom er servi ce repr esentati ves an d challen ge accou nt freezes ov er the tele phone, among other p rocess im pro vemen ts. 2.5.2 Failure t o provi de perio dic s tatements for all otment savi ng accounts Supervi sion examine d instit utions h olding a llo tment sa vings a ccoun ts for servicem emb ers and other Federal e mploye es. Military and othe r f eder al em ploy ee payroll deductions — called allotme nts — are one way that comp anies can co llect first - in - line payments on c ontracts f or exp ens ive it ems such as i nsurance or r ent. Wit hout a dequat e oversi ght of t hese all otmen t accoun ts, servi ceme mbers a nd othe r federa l empl oyees ma y hav e had ac counts o pened w ithout their kno wledg e, or ke pt open, resul ting in excess fees and o ther ha rm. In its rec ent ex am work, Supe rvision obse rv ed that insti tuti ons did n ot send periodi c statem ents to consu mers wi th dorm ant allotment a ccoun ts for an extend ed time period. T he institution s charged fe es on thou sands of dorman t account s, incl uding wh ere consum ers wer e not pro vided time ly not ice of the ir ac count info rmation. In respo nse to examine rs’ obse rvation s, the institu tions c orrect ed sys tem issu e s and committ ed to remedia ting aff ecte d servic emem bers and other federal emplo yees. 2.5.3 Consumer Req uests fo r Inform ation Secti on 1034 (c) requi res la rge bank s an d credi t union s to com ply wi th consu mer re quests fo r infor mation concerning their acco unts for consu mer financ ial product s and/or se rvices in a tim ely manne r, su bjec t to limi ted exce ptio ns. 25 In a rece nt Advisory Opini on, the CFPB noted that res ponding to c onsumer reques ts for in forma tion is vital t o ensurin g high l evels of custo mer service a nd ena bling c onsum e rs to re solve i ssues wi th thei r accoun ts w hen they en count er probl ems. 26 A large bank o r credit union would not comply with s ection 103 4(c) if it impo sed conditi ons or req uirements on co nsumer infor mation reques ts that unre asonably im pede a 25 Id. 26 Id.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 15 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 consumer’s a bility to re quest and r eceive account information. 27 Charg ing fees t o consum ers t o request ac count i nformation c an impede c onsum ers’ ab ility t o exerci se thei r right s under 1034 (c). 28 To assess in dustry prac tices an d com plia nce with section 1034(c), the C FPB is sued information r equests t o select en tities regardin g their depo sit and credit car d - relat ed se rvice s and fees a ssocia ted wit h consu mer r equest s for in formation. Examiner s fo u nd th at some res ponding entiti es cea sed cha rging c onsum ers fee s to obta in accou nt informatio n. This has resulted i n several change s, includ ing consumers being able to request and obtain pr inted copi es of che ck images and ac count sta tement s with out c harge. Some respond ing entities have ce ased the prac tice of char ging cons umers fees relat ed to b ank account rese arch and analys is when co nsumers have questions about the ir accounts. S om e entiti es are no longe r impo sing fe es for ba lance inqu iries at third pa rty ATM s. Final ly, so me responding entities are ful filling req uests to confir m a consu mer’s deposit act ivity ‒ often called “verifi cation s of dep osit” ‒ at no ch arge. In line w ith elimi nating thes e charges, so me entities have tak en steps to up date poli cies an d procedu res an d provid e their e mploy ees wit h tailo red inst ruction s and train ing. Th ese chan ges will ensu re that f rontl ine empl o yees a re awa re of a nd able t o implem ent t he fe e cha ng es. Some e ntitie s have al so upda ted appli cabl e fee sch edule s to refl ect “No C harge” for s ervices cover ed by section 10 34(c) and are including updated fee schedu les in consumer correspond ence. Concu rrently, the se en ti ties a ls o hav e mad e rel evant system c hang es to en sure tha t any applic able system - genera ted fees ar e no lon ger as sess ed. The st eps tak en also r eflect t he abili ty and willing ness o f th ese sup ervi sed en tit ies to ensu re they co mpl y with federal consum er financial law. The C FPB estim ates that t hese adju stmen ts in fe e schedul e s will result in milli ons of dollar s in sav ings on an annual bas is fo r custome rs seeking b asic account i nformati on from thes e en titi es. 27 Id. 28 Id.

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 16 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 3. S upervisor y Devel opm ents 3.1 Recent CFPB Supervi sion Developments Set f orth be low are select super vision p rogram devel opment s inclu ding circulars and rule s that have be en issued sinc e the la st regula r e diti on of Supervisory Highlig hts. 3.1.1 CFPB cre ates r egistry t o detect corpor ate rep eat offende rs On Ju ne 3, 2024, the C FPB finalize d a rul e to establish a r egist ry to de tect a nd deter co rporat e offend ers that have brok e n con sumer la ws and a re su bject to f edera l, stat e, or lo cal go vernm ent or court o rder s. 29 The regi stry will also help th e CFPB to identi fy rep eat offe nders a nd recidi vism tren ds. 3.1.2 CFPB is sues int erpretive rule r egardi ng Buy No w, Pay Later On May 22, 20 24, the CFPB issued an interpre tive rule th at confirms that Buy Now, Pay Later lenders a re cre dit card issu ers. 30 Accordin gly, Buy Now, Pay Later len ders must provide consume rs som e key l egal pro tecti ons and ri ghts t hat appl y to conv ention al credit ca rds. Th ese includ e a right to dispute ch arges and d emand a refu nd from the lender afte r returni ng a product pur chased with a Buy No w, Pay Later loan. 29 The fin al rule is avail able at: cfpbnonb ank - registrat ion - ord ersfina l - rule.pd f (consum erfina nce.gov) 30 The interpr etive rule is a vailable a t: cfpbbnpl - interpretive - rule2024 - 05.pdf (con sumerfinanc e.gov)

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 17 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 3.1.3 CFPB is sues rul e on proc edures for supe rvisory designati on proc eedings On Apri l 23, 2024, the CFPB updated i ts proce dures for des ignating no nbank covere d persons for supe rvision to conform to a recent or ganizational ch ange and to further ens ure that proceedings a re fair, eff ective, and efficie nt for all part ies. 31 3.1.4 Consumer finan cial prot ection c ircular 2024 - 02 on remittance tr ansfers On Marc h 27, 202 4, th e CFPB issued a c ircul ar re garding d ecepti ve mark eting p racti ces about the speed or cos t of sen ding a remittan ce tran sfer. 32 The cir cular s tates t hat remit tance transf er provide rs may be liabl e under the CFP A for d ecept ive mark eting a bout th e speed or cost o f sendin g a remitta nce t ran sfer. Pr oviders m ay be l iable un der th e CF PA fo r dec eptive ma rketing practic es rega rdless of wheth er the provide r follo ws the dis closu re requ iremen ts of th e Remittan ce Rul e. For ex ampl e, amon g othe r thing s, it may be dec eptive to: mark et remit tance transf ers as b eing deli ver ed withi n a certa in tim e frame when transfer s actually tak e long er to be made av ailable to recipi ents; m arketin g remittanc e trans fers as “n o fee” w hen in fact th e provide r charg es fe es; ma rket pr omotion al fees o r prom otiona l excha nge r ates for remittan ce transfers wit hout suffic ie ntly c larifyi ng when a n offe r is tem porary o r limit ed; mark et remittan ce tra nsfers a s “f ree” if th ey are n ot in fac t free. 31 The fin al rule is avail able at: https://www.fed eralregist er.gov/docume nts/2024 /04/23/20 24 - 08430/ procedures - for - super visor y -designation- proceeding s 32 The circu lar is avail able at: https://www.consumerfinance.g ov/compliance/circulars/cons umer - financial - protection - circular - 2024 -02/

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 18 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 4. Remedi al A ctions 4.1 Public Enforcement Ac tions The CFPB ’s su perviso ry a ctivitie s resul ted in a nd suppo rted th e below en forcem ent ac t io ns. 4.1.1 Pennsylv ania Hi gher Ed ucation As sistance A gency (PHEAA) On May 31, 2024, the C FPB sued st udent l oan ser vicer PHE AA, which d oes busin ess as Americ an Education Se rvices, for illeg ally collec ting on st udent loans that have bee n discharg ed in bankru ptcy and se nding false informat ion about co nsumers to cre dit report ing companies. 33 The CFPB ’s law suit ask s the c ourt to order PH EA A to stop i ts illegal condu ct, pr ovide re dress to borrowe rs it has h armed, and pay a c ivil pe nalty. 4.1.2 Chime, Inc. d/b/a S endwav e O n Octobe r 17, 2023, the CFP B issue d an order agains t Chime, Inc. doi ng business as Sendwave, a nonbank r emittance transfer provider. Se ndwave offers and provides consumers internatio nal money tran sfer servi ces, kn own as remitta nce tran sfers, in 50 stat es a nd the District of Columbia thr ough its mo bile application, the Sendwa ve App. 34 The a pp en abl es u ser s to sen d money t o recipi ents in severa l countri e s prima rily in Africa and A sia. T he CFPB found th at Send wav e vio lat ed th e CFP A ’s pr ohibiti on on d eceptiv e acts a nd pra ctices by mis repres entin g to consume rs th e speed an d cost of i ts remi ttanc e tran sfers. T he CFPB also f oun d that S endwave violated th e Electronic F und Transfer Ac t (EFTA) and its implem enting Re gulation E, in cluding Subpar t B, kno wn as th e Remitta nce T ransf er Rul e, by: (1) wrong ly req uirin g custom ers to wa ive their rig hts; (2) failing t o provide required disclo sures, inclu ding th e date of fund avai lability and exch ange rate; (3) failing t o provide timely disclo sures; and (4) faili ng to investi gate erro rs proper ly and maint ain required po licies and procedures for error re solu tion. Th e viola tions of EFTA an d Regul ation E a lso constitut e viola tions of the CF PA. Th e order requir es Sen dwave t o 33 The com plaint is avail able at: https://www.con sumerfina nce.gov/enf orcement/act ions/p ennsylvania - hi gher - education - assist ance - ag enc y- ph eaa - dba - america n - education - services - or - a es/ 34 The Consent Ord er is ava ilable at: cfpb -0012- chime - inc - dba - sendwav e - conse nt - order20 23 - 10.pdf (consumerfinanc e.gov) <a href="https://files.consumerfinance.gov/f/documents/cfpb-0012-chime-inc-dba-sendwave-consent-order2023-10.pdf">

SU PERV ISORY HIG HLIG HTS, IS SUE 34 (SUMMER 20 24) 19 SUPER VISORY HIGH LIGH TS, ISSUE 3 4 SU MMER 2024 provide a p proxim ately $1.5 m illion i n red ress to c onsum ers and t o pay a $ 1.5 mill ion civi l money penalty. Send wave must als o take meas ures to ensure future co mplia nce.