CFPB Exams Find Loan Servicing Failures, Illegal Debt Collection Practices, and Issues with Medical Payment Products

WASHINGTON, D.C. - The Consumer Financial Protection Bureau (CFPB) today published an edition of Supervisory Highlights sharing key findings from recent examinations of auto and student loan servicing companies, debt collectors, and other financial services providers. The report also highlights consumer complaints about medical payment products and identifies concerns with providers preventing access to deposit and prepaid account funds.

“Loan servicers and debt collectors harm borrowers when they fail to provide required information, create barriers to customer assistance, or harass people about their debts,” said CFPB Director Rohit Chopra. “The CFPB is working to ensure servicers, debt collectors, and other financial service providers follow the law to protect consumers.”

Failures in student and auto loan servicing

CFPB examiners found multiple instances of unfair, deceptive, or abusive acts or practices at companies servicing auto loan and student loans, including:

• Auto loan servicers mishandled consumers’ final loan payments: CFPB examiners found that servicers did not provide adequate notification that borrowers were required to make their final payments manually, despite the borrowers being enrolled in autopay. The servicers then illegally charged the borrowers late fees for failing to make the final payment on time.
• Student loan servicers created excessive barriers to assistance, provided inaccurate information about benefit forms, and failed to notify consumers about funds transfers: Examiners found certain servicers had excessive phone hold times, their call centers were significantly understaffed, they had problems with their interactive voice response systems, and some consumers were prevented from accessing online account management portals. Additionally, servicers provided inaccurate information about the forms borrowers were required to submit to qualify for loan programs with certain benefits such as forbearance. They also failed to follow requirements about notifying consumers of preauthorized electronic funds transfers that were larger than prior transfers under the same authorization.

Deception and harassment by debt collectors

The CFPB’s recent examinations of debt collectors identified violations of the Fair Debt Collection Practices Act and other violations of consumer protection law, including:

• Debt collectors violated disclosure requirements and misled borrowers: Examiners found that debt collectors, including student loan debt collectors, did not provide validation notices within five days of their initial communication with borrowers, as required. Some student loan debt collectors concealed their true company names in communications, misleading borrowers about their identity.
• Debt collectors harassed borrowers and communicated with them at inconvenient or unusual times or places: Examiners uncovered instances of collectors using aggressive or verbally abusive language, including to consumers unable to pay due to a recent hospitalization. In other cases, debt collectors communicated with consumers at times and places known by the collectors to be inconvenient or unusual; made over 100 calls to consumers despite being asked to stop; and failed to cease contacting consumers by a certain form of communication, such as a text message or specific telephone number, despite being asked to stop by consumers.

Financial institutions’ oversight of medical providers offering payment products

In examining supervised entities, CFPB examiners also reviewed medical payment products, including medical credit cards. These products are typically marketed to consumers at healthcare facilities, including doctors’ offices or hospitals, as a means to pay for medical services or products. Healthcare providers commonly use sales and marketing materials provided by the financial institutions issuing these payment products.

Examiners identified a significant number of consumer complaints regarding how dentists and other healthcare providers promoted, offered, and sold medical credit cards to consumers. Patients complained about health care providers misrepresenting the specifics of “deferred interest” promotions and that they felt pressured by providers to open a credit card while receiving treatment. CFPB examiners will continue to assess financial services companies’ oversight of medical providers and will be monitoring marketing materials and incentives offered to enroll patients.

Practices preventing access to funds or account information for deposit and prepaid accounts

Financial institutions regularly review deposit and prepaid account activity to identify fraud or other suspicious activity, sometimes freezing funds as a preventive measure. However, CFPB examiners found unfair practices in how some institutions communicated with consumers about these account freezes. For example, some institutions failed to affirmatively notify consumers when their accounts were frozen. In other instances, institutions failed to provide clear guidance to affected consumers, and customer service representatives were often inaccessible to those with frozen accounts.

The CFPB also assessed industry compliance with Section 1034(c) of the Consumer Financial Protection Act. This law prohibits large banks and credit unions from creating unreasonable barriers, such as excessive fees, for customers seeking basic account information. The CFPB issued information requests to select entities regarding their deposit and credit card-related services, and the responses identified some changes in industry practices. Some institutions have eliminated fees for obtaining account information, including charges for printed check images and statements. Others now offer free balance inquiries at third party ATMs. The CFPB will continue to gather information about compliance across various financial product types.

Read this edition of Supervisory Highlights.

Consumers can submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).