Lenders are expected to put systems in place to affirmatively detect and remedy deficiencies before consumers are harmed. The Consumer Financial Protection Bureau made these expectations explicit in their exam guide in 2012. At first, the agency's enforcement was sporadic and limited to the largest banks and alleged affirmative misconduct. However, the CFPB's recent actions demonstrate it intends to now enforce the principles set forth in the exam guide.
In just the past few weeks, the CFPB has levied substantial fines against major institutions for the actions of isolated groups of loan officers. In doing so, it was acknowledged that the loan officers were acting unilaterally. Yet, because the banks either knew of or should have known of the activities and did not take remedial measures, the CFPB undertook enforcement, obtaining millions of dollars from the institutions. Moreover, in the press release, the CFPB contrasted the affected banks with an unnamed lender that self-corrected the misconduct and fired loan officers that had engaged in similar activities.
In other cases, the CFPB has recently taken enforcement actions based upon the mere fact that the appearance of certain letters is likely to create confusion, even if there were not actual misrepresentations contained in the materials.
The CFPB continues to demonstrate little patience with activities that circumvent the law. For instance, a loan officer was recently banned from the industry for 2 years for allegedly funneling kickbacks through his then-girlfriend. Moreover, lenders who have developed indirect relationships involving impermissible referral payments have similarly felt the CFPB's wrath.
The agency clearly meant what it said in the exam guide and apparently intends to enforce its expectations to the fullest. The concept that lenders need to have systems in place to affirmatively detect and redress problems before consumers are affected is very real and lenders should ensure their systems are up to the task.