The Consumer Financial Protection Bureau released its first Supervisory Highlights report yesterday, describing the problems and risky practices that its investigators found during their supervision process.
The CFPB can supervise a number of financial institutions including banks with over $10 billion in assets and nonbanks of all sizes that offer mortgages, payday loans and private education loans. When CFPB examiners find violations or compliance deficiencies, institutions are expected to take corrective action.
"Through our supervision process, we are bringing heightened oversight to the consumer financial markets," said CFPB Director Richard Cordray. "This report underscores our work to address practices that are risky to consumers, as well as our continued commitment to making sure that institutions are following the law."
The report was a summary of work completed between July 21, 2011 and September 30, 2012. The Bureau found the following problems:
- Regarding credit cards, examiners found cases where the credit limit of a customer who was under 21--but linked to a consumer 21 or older--was raised without consent of the co-applicant. This happened when an institution did not have the proper procedures in place to send the co-applicant the request for the credit line increase.
- In the area of reporting to credit bureaus, the investigation found that some employees at observed institutions did not have the necessary training to comply with fair credit reporting requirements. This lack of training sometimes resulted in inaccurate information being reported to credit bureaus. Errors on a credit report may cause a consumer to have a lower credit score, causing the customer to pay more for a loan or be denied the loan altogether.
- Concerning mortgages, examiners found some financial institutions were not giving borrowers clear and timely disclosures about the cost of the real estate settlement process. They also found some institutions did not give accurate disclosures of interest rates, payment and payment schedules.
After supervisory actions, the Bureau may take public enforcement actions to get compliance with the law.
Three credit card issuers--American Express, Capital One and Discover--have already received major fines from the CFPB and other agencies. These actions have resulted in approximately $425 million in refunds to 5.7 million consumers.