The Consumer Financial Protection Bureau has published its latest Supervisory Highlights detailing consumer issues the bureau has found through its supervisory work. The current report (Issue 15) addresses consumer issues with student loan and mortgage servicing. CFPB examiners have discovered that some student loan and mortgage servicers are violating consumer compliance laws by failing to provide struggling borrowers with legal protections, according to the bureau. The CFPB also reported that non-supervisory bureau actions have led to the recovery of approximately $6.1 million for 16,000 consumers harmed by auto loan originators. Finally, the bureau released its monthly complaint snapshot for the April 2017, with the focus again on student loan servicing.
Referring to the Supervisory Highlights report, CFPB Director Richard Cordray said that the "slipshod practices" of some student loan and mortgage servicers "are putting borrowers at risk of financial failure and we will hold them accountable."
Student loan servicers. The CFPB noted that it is "a Bureau priority to end illegal practices in student loan servicing." The bureau reported that examiners found that student loan servicers:
- routinely acted on incorrect information about whether the borrower was enrolled in school; and
- failed to reverse certain charges, including improper late fees, even after they knew they had wrongly ended a deferment.
Mortgage servicers. CFPB supervision continues to see serious issues for consumers seeking alternatives to foreclosure, or loss mitigation, at certain servicers, according to the report. CFPB examiners found problems with foreclosure protections, premature foreclosure filings, mishandling of escrow accounts, and incomplete periodic statements. Further, examiners found that one or more mortgage servicers:
- failed to identify the additional documents and information borrowers needed to submit to complete a loss mitigation application to avoid foreclosure, then denied the applications for not including those documents.
- launched the foreclosure process prematurely after receiving loss mitigation applications from borrowers;
- used funds from escrow accounts to pay insurance premiums on unrelated loans, creating shortages in the escrow accounts and higher monthly payments for consumers; and
- issued incomplete periodic statements that used vague language such as "miscellaneous expenses" or just "service charge."
Additional highlights. Key highlights of the report also include:
- how CFPB examiners assess compliance with the Ability-to-Repay rule, including requirements on how a lender verifies a consumer’s ability to repay a mortgage loan;
- alerts sent by examiners to one or more companies that consumer complaints have spiked, prompting remedies;
- the bureau’s development and implementation of a program to examine key service providers to help reduce risks to consumers when a company outsources activities to those providers;
- recent enforcement actions resulting from supervisory actions; and
- information the industry can use to comply with federal consumer compliance laws.
The CFPB noted in the report that when examiners find problems, they alert the company and outline necessary remedial measures, such as paying refunds or restitution or taking actions to stop illegal practices, such as new policies or improved training or monitoring. If appropriate, the CFPB will open investigations for potential enforcement actions.
Complaint snapshot. Both private and federal student loan borrowers continue to report servicing breakdowns hindering repayment, according to the monthly complaint snapshot. The April 2017 snapshot also highlights trends seen in complaints coming from Nevada and the Las Vegas metro area.
"Student loan servicers play an important role in helping millions of people manage the loans they take out to pursue an education," said CFPB Director Richard Cordray. "Unfortunately, borrowers continue to report difficulties and setbacks as they try to work with their servicers to manage their loan debt."
Currently at $1.4 trillion, student loan debt represents the second largest U.S. debt market after mortgages, the bureau reported. As of April 1, 2017, the CFPB had handled approximately 1,163,200 consumer complaints across all products. Approximately 44,400 of those complaints were about student loans. Specifically, consumers complain about:
- poor information from and "sloppy" practices by loan servicers;
- difficulty enrolling and staying in income-driven repayment plans; and
- confusion over the Public Service Loan Forgiveness and other loan forgiveness programs.
The three companies that the CFPB has received the most average monthly student loan complaints about are Navient Solutions, LLC, Fedloan Servicing/AES, and Nelnet.
National overview. The snapshot includes statistics about complaints submitted to the CFPB from across the United States. These statistics include the following:
- Student loan complaints showed the greatest increase of any product or service in a year-to-year comparison examining the three-month time period of January to March.
- Debt collection was the most-complained-about financial product or service.
- The second and third most-complained-about products or services were credit reporting and mortgages.
- Montana, Georgia, and Wyoming experienced the greatest year-to-year complaint volume increases from January to March 2017, versus the same time period 12 months before.
- The top three companies that received the most complaints from November 2016 through January 2017 were Navient Solutions, LLC, Equifax, and Experian.
Nevada spotlight. As of April 1, 2017, consumers in Nevada have submitted 14,600 of the 1,163,200 complaints the CFPB has handled. Of those complaints, 10,800 came from consumers in the Las Vegas metro area. Findings from the Nevada complaints submitted to the CFPB include:
- Complaints related to debt collection accounted for 29 percent of all complaints submitted by consumers from Nevada, slightly higher than the national rate.
- Complaints related to mortgages accounted for 23 percent of all complaints from Nevada, a rate that is identical to the national rate of mortgage complaints.
- Wells Fargo, Experian, and Equifax were the most-complained-about companies from consumers in Nevada.