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Compliance Management Issues Still Haunt Lenders

compliance-puzzleThe Consumer Financial Protection Bureau (CFPB) recently released its report on supervisory actions in the first four months of the year and found that while mortgage lenders generally are in compliance with federal consumer financial laws, many entities continue to have deficiencies in their compliance management systems.

Violations were relatively small, but significant enough for the CFPB to require corrective action. According to the report, some institutions incorrectly calculated the amount financed on loans with discount credits, and subsequently incorrectly calculated the finance charge on the same loans. Others violated RESPA Section 8 rules prohibiting referrals in exchange for money or business.

The CFPB also found some instances in which lenders did not inform clients proper notice of credit denials on applications, and occasional failure to properly disclose interest on interest-only loans.

The bureau also found that at some institutions, a weak compliance management system allowed violations of Regulations V, X, and Z to occur.

“The Bureau’s supervisors continue to perform more and better oversight of these financial markets, and their report gives the industry an opportunity to reflect on their practices before consumers are made to suffer harm.”

Richard Cordray, CFPB Director

“For example, one or more supervised institutions had weak oversight of automated systems, including inadequate testing of codes that calculate the finance charge and the amount financed when originating residential loans to consumers,” the report stated. “In addition, one or more supervised entities failed to monitor for changes that would require updated disclosures to comply with applicable Federal consumer financial laws.”

The report also noted that its examiners uncovered illegal activities in auto finance and payments that led to approximately $24.5 million in restitution to more than 257,000 consumers.

“This report highlights our ongoing work to address violations of the law and slipshod practices that endanger consumers,” said CFPB Director Richard Cordray. “The Bureau’s supervisors continue to perform more and better oversight of these financial markets, and their report gives the industry an opportunity to reflect on their practices before consumers are made to suffer harm.”

About Author: Scott Morgan

Scott Morgan is a multi-award-winning journalist and editor based out of Texas. During his 11 years as a newspaper journalist, he wrote more than 4,000 published pieces. He's been recognized for his work since 2001, and his creative writing continues to win acclaim from readers and fellow writers alike. He is also a creative writing teacher and the author of several books, from short fiction to written works about writing.
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