The CFPB announced today that is rescinding its January 24, 2020 policy statement, “Statement of Policy Regarding Prohibition on Abusive Acts or Practices.”
As reported by the NJ MBA, “Going forward, the CFPB intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress. The CFPB has made these changes to better protect consumers and the marketplace from abusive acts or practices, and to enforce the law as Congress wrote it.”
Congress defined abusive acts or practices in section 1031(d) of the Dodd-Frank Act. Paraphrasing Congress, that standard prohibits companies from:
- Materially interfering with someone’s ability to understand a product or service;
- Taking unreasonable advantage of someone’s lack of understanding;
- Taking unreasonable advantage of someone who cannot protect themselves; and
- Taking unreasonable advantage of someone who reasonably relies on a company to act in their interests.
The change in policy is an affirmative warning to the mortgage industry that the CFPB will not be limiting fines and penalties for suspected abusive practices but will be once again taking an aggressive approach to enforcement to ensure that borrowers are not “abused” whether intentionally or negligently by lenders who fail to incorporate the appropriate steps in their business practices to protect consumers from financial harm.
One of the key areas where harm can take place is in third party service provider relationships. When lenders source out functions to others, they must supervise these vendors and adjust relationships that fail to meet reasonable risk standards before harm occurs.
For the past ten years Secure Insight has focused on settlement agent risk as we feel these professionals, who are attorneys, title agents, escrow officers and even notaries, may cause significant harm to consumers. The settlement agent has access to borrower non-public information, critical loan and property ownership documents, as well as mortgage proceeds. Lenders must know before they wire whether the settlement agent at the closing is trustworthy, that is identity verified, trust account verified, license and insurance verified, and civil and criminal background clean. These are the bare minimums that must comprise an effective risk management program for mortgage lending.
Regulations and regulators are heating up. What are you doing to protect your firm, your assets, and your clients?
See more here: