Pub. 16 2019 Issue 3

Issue 3 • 2019 13 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S rule. Not only were some disclosures multiple clicks away, but some were not properly labeled at all or were not conspicuous. I’ll note that these issues often come up in Compliance Alli- ance’s document reviews, so it would be worthwhile to do a double-check of your credit card ads before they’re published. This wasn’t the end of the credit card issues, either. In general, 12 CFR 1026.12(d) prohibits credit card issuers from offsetting credit card debt with a consumer’s deposit account. However, there’s an exception for a security interest in a deposit account if the consumer affirmatively agrees in the account-opening disclosures. The hang-up is that the security interest cannot be effectively the same as the right of offset, so an institution that just routinely includes a security interest provision in the cardholder agreement would generally not qualify for the exemption. The Bureau highlighted that the consumer must be aware that granting a security interest is a condition for the credit card (or for more favorable terms on the account), and they must specifically intend to grant a security interest in the account. Some indicators of the consumer awareness and intent mentioned were: (1) separate signature or initial lines on the agreement indicating that a security interest is being given; (2) placement of the security agreement on a separate page from any other disclosures; and (3) referencing a specific amount of deposited funds or a specific deposit account number. Debt Collection Practices The Fair Debt Collection Practices Act (FDCPA), of course, prohibits using any false, deceptive, or misleading representa - tion or means in the process of collecting any debt. Specifically, Section 807(2)(A) of the FDCPA prohibits falsely representing the character, amount, or legal status of any debt. Examiners found that certain debt collectors claimed that interest was owed on debts when, in fact, it was not authorized by the under - lying contracts between the debt collectors and the creditors. In doing so, the debt collectors falsely represented to consumers the amount due and ultimately had to provide remediation. As a side note, a “debt collector” for FDCPA purposes generally does not include a bank that collects its debts in its name, but we’ve talked to many Compliance Alliance members who follow the FDCPA rules as guidelines, even though they technically do not apply as a matter of law. FCRA Information Furnishing The Fair Credit Reporting Act (FCRA) requires that, when a bank that is acting as an information “furnisher” receives a notice of a dispute from a consumer reporting agency (CRA), it completes its investigation, generally within 30 days. Not only did some institutions miss this deadline, but others failed to conduct an investigation or respond at all. Also, if a furnish - er determines that previously furnished information is not complete or accurate, the furnisher must promptly let the CRA know and provide any corrections or additional information to make the reporting complete and accurate. Some failed to provide these corrections or updates, while others did so, but subsequently continued reporting inaccurate information after the correction. Another issue cropped up with accounts that were paid-in- full or settled-in-full. Certain institutions had a practice of The Fair Debt Collection Practices Act (FDCPA), of course, prohibits using any false, deceptive, or misleading representation or means in the process of collecting any debt. Specifically, Section 807(2)(A) of the FDCPA prohibits falsely representing the character, amount, or legal status of any debt. Examiners found that certain debt collectors claimed that interest was owed on debts when, in fact, it was not authorized by the underlying contracts between the debt collectors and the creditors. deleting the identification number when an account was paid in full, and this practice changed the search key that the furnish - ers used for matching when making account updates. As a result, the CFPB found that almost 2,000 accounts were not up - dated to reflect the correct paid-in-full or settled-in-full status. Finally, the Bureau found that when some institutions received consumer disputes, they continued furnishing infor - mation about the disputed accounts for several months with - out providing the CRA with notice that the information was disputed, in clear violation of the FCRA. In response to these findings, the CFPB required them to set up enhanced monitor - ing activities, as well as policies and procedures on compliance with furnisher-specific requirements of the FCRA, in addition to providing evidence of corrective actions. Mortgage Loan Origination The focus of this section was on the inaccurate disclosure of annual percentage rates and total annual loan costs in reverse mortgage transactions. While most of our members do not orig- inate reverse mortgages, this is still a sobering reminder of how pervasive a failure to properly calculate the APR can be, and the very high cost of consumer restitution. So this covers the key takeaways that are most likely to affect our community bank members, but if you’re interested in re - viewing the review in its entirety, you can access it at: https://files.consumerfinance.gov/f/documents/cfpb_supervi - sory-highlights_issue-19_092019.pdf n