CFPB roundup: Bureau penalizes SCUSA over credit reporting
It turned out to be an active holiday season at the Consumer Financial Protection Bureau.
Along with naming two new staff members and reaching a consent order with a provider of personal loans, the CFPB also penalized Santander Consumer USA for the second time in three years.
The bureau issued a consent order against Santander to address the regulator’s finding that the finance company violated the Fair Credit Reporting Act (FCRA). Officials explained the consent order was issued in connection with SCUSA providing erroneous consumer loan data to consumer reporting agencies (CRAs).
The CFPB pointed out that Santander furnishes credit information on the auto contract it services by sending monthly data files to CRAs. The bureau said in a news release that it found that the consumer loan data Santander furnished to CRAs between January 2016 and August 2019 contained many systemic errors that, in many instances, could have negatively impacted consumers’ credit scores and access to credit.
The consent order requires Santander to take certain steps to prevent future violations and imposes a $4.75 million civil money penalty.
“The bureau found that Santander furnished consumer loan information to CRAs that it knew or reasonably should have known was inaccurate, including failing to furnish accurate information regarding whether accounts were open or closed and whether consumers were carrying a balance or obligated to make future payments,” the regulator said in that news release.
“The bureau found that Santander failed to promptly update and correct information it furnished to CRAs that it later determined was incomplete and failed to provide the date of first delinquency on certain delinquent or charged-off accounts,” the CFPB continued.
“The bureau further found that Santander failed to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information provided to CRAs,” the regulator went on to say while also noting that it believes Santander’s conduct violated the FCRA and its implementing regulation, Regulation V, as well as constituted violations of the Consumer Financial Protection Act of 2010.
Under the terms of the consent order, the CFPB indicated Santander must correct all inaccuracies and errors that the bureau identified and take certain steps to improve and ensure the accuracy of the consumer information it provides to CRAs. These steps include conducting monthly reviews of account information to assess the accuracy and integrity of information Santander furnishes.
“Santander must also establish and implement reasonable policies and procedures regarding the accuracy and integrity of information it furnishes to CRAs,” officials added.
SCUSA last faced an enforcement action from the CFPB just before Thanksgiving 2018 in connection with a GAP product.
And in May, Santander finalized a voluntary settlement topping $550 million with 33 states and the District of Columbia that alleged that contracts that the finance company funded through certain dealers dating back to 2010 violated consumer protection laws because of the high risk that certain individuals would default.
Lender involved in MLA violation
In other bureau enforcement activities before 2020 closed, the CFPB issued a consent order against Omni Financial of Nevada. The bureau said it found that Omni violated the Military Lending Act (MLA), Electronic Fund Transfer Act (EFTA), and Consumer Financial Protection Act of 2010 (CFPA) in connection with making installment loans.
Omni, which has its principal place of business in Las Vegas, specializes in lending to consumers affiliated with the military, originating tens of thousands of loans each year with individual loans typically ranging from $500 to $10,000.
The consent order requires that Omni pay a $2.175 million civil money penalty and imposes injunctive relief to stop ongoing violations and prevent future violations.
Officials explained the MLA puts in place protections in connection with extensions of consumer credit for active-duty servicemembers and their dependents who are defined as “covered borrowers.” These protections include prohibiting that loans to covered borrowers be required to be repaid by “allotment.”
The CFPB pointed out the Department of Defense runs the allotment system, which allows servicemembers to designate a portion of their paycheck to certain recipients. The bureau found that since October 2016, Omni’s loans to covered borrowers violated the MLA’s prohibition of requiring repayment by allotment.
The bureau added that it also found that Omni violated EFTA and the CFPA.
In addition to lending to active-duty servicemembers and their dependents, the bureau mentioned that Omni lends to civilians and non-covered servicemembers such as military retirees. The CFPB said it found that Omni requires all of its borrowers to provide bank-account information and authorize Omni to withdraw funds from that account on the first business day after each missed payment.
“Omni’s requirement that consumers allow it to withdraw funds from their bank accounts violates EFTA’s prohibition against requiring consumers to preauthorize electronic fund transfers as a condition of receiving credit,” officials said in a news release. “The bureau further found that these EFTA violations constituted CFPA violations.”
In addition to prohibiting future violations, the consent order requires Omni to provide notice of the bureau’s findings to all customers repaying their loans by allotment along with notice that they may change their repayment method.
Officials added that Omni also must provide training to employees and is prohibited from providing any incentives to employees or performance evaluations that consider the number or rate of consumers who choose to repay by allotment.
New staff members
And just before 2020 closed, the CFPB announced the addition of a deputy chief of staff and an assistant director for the office of innovation.
Ann Epstein will serve as the assistant director of the office of innovation. The CFPB said Epstein was most recently a financial technology consultant advising clients on consumer financial wellness and sustainable housing projects.
Before arriving at the bureau, Epstein worked for 18 years at Freddie Mac.
Jocelyn Sutton will serve as the deputy chief of staff for the bureau. Sutton joined the bureau in 2012. She worked in the office of regulations, before transitioning to the office of the director. Since then, she has served in various capacities, most recently as the bureau’s executive secretariat.