In the closing weeks of the Biden administration, the Consumer Financial Protection Bureau (CFPB) churned out a string of enforcement actions targeting participants in the auto industry and the student loan marketplace.
Although activities affecting these industries may not directly impact real estate finance professionals, they hold insight about the bureau’s focus with respect to fair lending issues, access to credit, debt collection and other elements that generally apply to the majority of loan originators.
Read about some specific examples from the past six weeks in this regulatory roundup:
CFPB orders Honda to pay $12.8 million for reporting inaccurate credit data
The CFPB ordered the American Honda Finance Corp. to pay $12.8 million for reporting inaccurate information, impacting approximately 300,000 consumer credit reports belonging to individuals who drive Honda and Acura vehicles. The bureau explained that, during the pandemic, Honda Finance deferred certain vehicle loan payments but told credit reporting companies that borrowers were delinquent when they should have been reported as current. The bureau’s enforcement action also indicated shortcomings in the company’s processes for investigating reported inaccuracies. Read more about this matter here.
CFPB attempts to resolve claims against National Collegiate Student Loan Trusts
The CFPB took action to resolve its case against the National Collegiate Student Loan Trusts for allegedly filing defective debt collection lawsuits to collect on private student loan debt. The bureau and the Trusts filed a proposed stipulated judgment that, if entered by the court, would require the Trusts to pay $2.25 million in redress to harmed student borrowers. The action followed a March 2024 ruling by the U.S. Third Circuit Court of Appeals that the Trusts are covered persons under the Consumer Financial Protection Act, despite the Trusts’ claim to the contrary. The Supreme Court declined to hear the Trusts’ appeal request in December last year. Learn more about this case here.
CFPB uncovers illegal practices related to student loan refinancing, servicing, debt collection
A special edition of the CFPB’s Supervisory Highlights released in December described various illegal practices employed by lenders in the student loan marketplace, including those related to student loan refinancing, private lending and servicing, debt collection, and federal loan servicing. Student loans represent the second-largest form of U.S. consumer debt at more than $1.7 trillion in total outstanding balances, according to the bureau. Within the past year, many student borrowers faced challenges, including 28 million federal student loan borrowers who resumed repayment following the end of the payment pause implemented during pandemic. The report details how CFPB examiners identified instances of companies engaging in illegal practices across student loan markets. Access the report here.
CFPB takes action against student loan debt collector
Accusing the student loan debt collector of defrauding borrowers, the CFPB ordered Performant Recovery, Inc. to pay $700,000 in penalties and banned it from servicing or collecting on student loan debts. The bureau found Performant delayed borrowers’ loan rehabilitation processes, generating fees for itself and costing individual borrowers thousands of dollars. Read more about this enforcement action here.
CFPB fines student lender for deceiving borrowers about vocational opportunities
The CFPB filed a proposed order against student lender Climb Credit and its investors, including 1/0, in an effort to force the companies to stop running misleading advertising about the quality of the training programs at their partner schools and hiring rates among graduates. The CFPB sued Climb Credit for offering loans for educational programs that often were not vetted for quality and job placement success or that failed the vetting process, despite Climb Credit making claims to the contrary. If entered by the court, the order would require the defendants to stop making certain representations about their educational offerings in their advertising and pay a $950,000 civil money penalty into the CFPB’s victims relief fund. Learn more here.