Financial Violations Rife as Consumers Struggled with Pandemic

Financial Violations Rife as Consumers Struggled with Pandemic

Improper mortgage fees, fair lending violations and payday lender malpractice were among the illegal conduct found by federal examiners during the first half of 2021, according to a report issued today by the Consumer Financial Protection Bureau (CFPB).

“Today’s report reveals that irresponsible or mismanaged firms harmed Americans during the COVID-19 pandemic,” said CFPB Director Rohit Chopra. “We will continue to supervise firms to halt harmful practices before they become widespread.”

Mortgage services charged improper fees

CFPB examiners found that mortgage services charged borrowers late fees and default fees even though they had applied for forbearance under the CARES Act, intended to protect consumers whose finances were damaged by the pandemic.

In August 2021, the CFPB published a report detailing 16 large mortgage servicers’ response to the COVID-19 pandemic. CFPB and other agencies, including the Federal Deposit Insurance Agency, have issued clarified definitions to financial institutions to ensure their compliance.

Fair lending violations

Examiners also found several violations of the Equal Credit Opportunity Act (ECOA) by mortgage lenders. Mortgage lenders discriminated against African American and female borrowers in the granting of pricing exceptions, compared to non-Hispanic white and male borrowers, the examiners said.

CFPB examiners also found that lenders improperly considered small business applicants’ religion in their credit decisions. For religious institutions applying for small business loans, some lenders improperly utilized a questionnaire that contained explicit inquiries about an applicant’s religion.

Payday lenders wrongly debited bank accounts

Examiners also found that lenders improperly debited consumers’ bank accounts.

In some instances where consumers called to authorize a loan payment by debit card, lenders’ systems erroneously indicated the transactions did not process, resulting in the improper debiting of additional, identical amounts or unauthorized attempts.

“These violations demonstrate the ongoing risk that irresponsible payday lending practices pose to American consumers. The CFPB will continue to exercise and enforce its authority in the payday lending market to protect vulnerable consumers and their economic dignity,” the CFPB report said.

The full text of the report is available here.