The CFPB's Latest Supervision Report Highlights Compliance Deficits in the Collection Industry

On Tuesday the Consumer Financial Protection Bureau (CFPB) released its eighth, and latest, supervision report  outlining the illegal practices uncovered by the Bureau’s examiners in the first four months of 2015.

The report covers supervisory activities for all industries and businesses subject to CFPB review, including, among others, credit bureau reporting, mortgage servicing, debt collection, and student loan servicing.

Among the findings highlighted in the report:

• Continuing accuracy problems at consumer reporting agencies: CFPB Examiners continue to find accuracy problems at one or more of the credit reporting agencies, stemming from issues with information collection and quality control. Examiners found that at least one consumer reporting agency did not conduct regular monitoring of its furnishers to make sure they were following requirements. Examiners also found no quality controls in place to test existing consumer reports for accuracy. CFPB Supervision directed one or more credit reporting agencies to develop a plan to implement such quality controls.
• Weaknesses in compliance management systems (CMS) at Collection Agencies: The CFPB expects a collection agency under its supervision to maintain an adequate compliance management system (CMS) tailored to its operations. Examinations of one or more companies identified various CMS weaknesses that created a risk of consumer harm. The identified weaknesses included poor board of director involvement, poor initial training and follow-up training, and poor audit programs.
• Debt collection complaints disregarded: Bureau examiners found at least one debt collector did not record, categorize, or process complaints and inquires. At other collectors, these complaints and inquiries remained in an electronic queue that never got reviewed or resolved. Debt collectors also failed to conduct investigations of disputes.

Specific supervisory activity is not made public. Where CFPB examiners find violations of law or other significant problems or weaknesses during a supervisory examination, they alert the examined entity to their concerns and outline necessary remedial measures. When appropriate, the CFPB may also open investigations for potential enforcement actions. However, the CFPB often finds problems during supervisory examinations that are resolved without an enforcement action.

The report indicates that the non-public supervisory actions and self-reported violations at banks and nonbanks during the period in question resulted in $11.6 million in remediation to more than 80,000 consumers.

insideARM Perspective

It is not terribly surprising that the CFPB is still identifying weaknesses in compliance management systems at debt collectors. Most larger market participants have made tremendous strides in the past two years to create robust policies and procedures.  However, documenting those policies and procedures is incredibly time consuming. Based on this report, there is still work to be done.

insideARM remains committed to providing tools and resources to assist the ARM industry’s compliance efforts.  Through initiatives such as the annual Larger Market Participant Summit and the Compliance Professionals Forum industry executives and compliance professionals have the ability to learn from others and ultimately enhance their compliance management systems.