Last week’s Supervisory Highlights shares the CFPB’s key findings stemming from these reviews, which are summarized in more detail below. As the Supervisory Highlights makes clear, financial institutions face legal and operational risk not only from the potential wave of defaulted consumer loans, but also from the implementation of programs intended to prevent or mitigate those defaults. While the Prioritized Assessments themselves “were not designed to identify violations of Federal consumer financial law,”1 financial institutions today face a reinvigorated CFPB under the Biden administration. That means, going forward, we anticipate that the CFPB will employ the full measure of its supervisory and enforcement authorities to investigate potential legal violations and corresponding consumer harm stemming from the pandemic.
The following is a snippet from the assessment relating to repossessions:
Auto Loan Servicing
Although not required by the CARES Act, the CFPB reported that in response to the pandemic, many auto loan servicers expanded existing payment assistance programs to help borrowers who were having trouble making payments. Specifically, many market participants waived late fees, permitted non-delinquent as well as delinquent borrower enrollments, and provided longer payment deferrals. According to the CFPB, loan deferments were generally offered on a case-by-case basis with most borrowers receiving a payment deferment of three or more months (with subsequent extension of their loan terms by an equivalent period); interest generally continued to accrue during the period of deferment. Auto loan servicers also generally ceased repossession efforts, though more so due to state-specific stay-at-home orders.
The CFPB observed a number of risks to consumer harm presented by auto loan servicers’ pandemic response efforts, including:
- Failures to provide precise information regarding the effect of interest accrual during deferment periods on the final loan payment amount;
- Continued withdrawal of funds for monthly payments after agreeing to deferments and failure to process payment assistance requests; and
- Warning borrowers of possible repossession even though repossession efforts had been suspended, which may have led to borrowers spending money on auto loan payments they otherwise would not have needed to pay.