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All in UDAAP
In this Compliance Clip (video), Adam explains the basics of an abusive act or practice. The abusive standard has been a moving target over the last decade or so, but the CFPB has finally given us guidance to help us understand the topic a bit better.
On October 17, 2023, the CFPB took action against Chime Inc. for deceiving consumers about the speed and cost of remittance transfers through its mobile app, Sendwave. According to the CFPB’s press release, Chime also illegally forced consumers to waive their legal rights, failed to provide consumers with legally required disclosures and receipts, and failed to properly investigate consumer disputes and errors.
On September 8, 2023, the United States District Court for the Eastern District of Texas issued a summary judgment vacating the CFPB’s March 2022 update to the UDAAP Chapter of the CFPB’s Supervision and Examination Manual - for members of the plaintiffs. This is after the plaintiffs - the ABA, the Texas Bankers Association, the U.S. Chamber of Commerce and several others - challenged the CFPB’s March 2022 interpretation in its Consumer Compliance Examination Manual of its authority to include discrimination as an unfair act or practice under its Consumer Financial Protection Act (CFPA) UDAAP authority. This ruling applies to members of the plaintiffs.
On July 11, 2023, the CFPB ordered Bank of America to pay more than $100 million to customers for systematically double-dipping on fees imposed on customers with insufficient funds in their account, withholding reward bonuses explicitly promised to credit card customers, and misappropriating sensitive personal information to open accounts without customer knowledge or authorization. Bank of America will pay a total of $90 million in penalties to the CFPB and $60 million in penalties to the OCC, which also found that the bank’s double-dipping on fees was illegal.
On May 31, 2023, the CFPB has ordered installment lender OneMain Financial to pay $20 million in redress and penalties for failing to refund interest charged to 25,000 customers who cancelled purchases within a purported “full refund period,” and for deceiving borrowers about needing to purchase add-on products to receive a loan. According to the CFPB, OneMain pushed its employees to hit sales targets and illegally withheld funds.
On December 1, 2022, the CFPB took action against Loan Doctor to resolve the CFPB’s claims that the company and its founder, Edgar Radjabli, broke the law by deceiving consumers into thinking they were depositing funds into a guaranteed return savings product within a commercial bank. The CFPB alleges that Loan Doctor and Radjabli falsely represented that deposited funds would be used to originate loans for healthcare professionals, would be held in insured accounts or backed by cash alternatives, and would yield interest rates between 5% and 6.25%.
In this Compliance Clip (video), Adam discusses new discrimination risk on deposit accounts. While discrimination has typically been linked to loans, that is no longer the case as the regulators are now specifically looking for discrimination on the deposit side of the bank.
On July 14, 2022, the OCC assessed a $125 million civil money penalty against Bank of America, N.A., for violations of law and unsafe or unsound practices relating to the bank’s administration of a prepaid card program to distribute unemployment insurance and other public benefit payments. The OCC also ordered the bank to provide remediation to consumers harmed by the bank’s practices and violations of law.
On July 14, 2022, the CFPB fined Bank of America $100 million for botching the disbursement of state unemployment benefits at the height of the pandemic. According to the CFPB’s press release, Bank of America automatically and unlawfully froze people’s accounts with a faulty fraud detection program, and then gave them little recourse when there was, in fact, no fraud. The Office of the Comptroller of the Currency (OCC) is also fining the bank $125 million in a separate order.
In this Compliance Clip (video), Adam talks about the CFPB’s new focus on unfair discrimination. Specifically, the CFPB recently announced changes to its supervisory operations to better protect families and communities from illegal discrimination, including in situations where fair lending laws may not apply. A transcript of this video is now available.
