The Consumer Financial Protection Bureau’s (CFPB) most recent enforcement action underscores major regulatory points of emphasis: holding institutions for compliance problems arising from technical operation glitches; enforcement of fair lending laws as a top regulatory priority; and the broad powers of the CFPB to say what the law is and enforce that view.
On October 9, 2013, the CFPB fined Mortgage Master, Inc. $425,000 and Washington Federal, Inc. $34,000 for reporting inaccurate information about home mortgage loans in violation of the Home Mortgage Disclosure Act (HMDA). The CFPB claimed that it found data errors in 21,015 mortgage loan applications reported by Mortgage Master in 2011. In Washington Federal’s case, the CFPB allegedly uncovered 5,785 errors in its mortgage loan application during the same time period.
Along with the fines, both companies are required to resubmit corrected, 2011 data and implement an effective HMDA compliance management system.
This new enforcement action confirms the long-held belief that the CFPB intends to hold companies responsible for what one Washington Federal representative termed a “traffic ticket” – that is, technical glitches that upset a company’s compliance mechanism.
Moreover, in conjunction with the action, CFPB Director Cordray stated, “When financial institutions report inaccurate information, it obstructs the purpose of the [HMDA] and makes it more difficult for the CFPB to discover and stop discriminatory lending. Today, we are sending a strong signal that no mortgage lending institution – whether bank or nonbank – should be able to mislead the public with erroneous data.” The CFPB has made clear that it intends to enforce fair lending laws vigorously.
Finally, the fact that the CFPB has exercised its enforcement powers broadly on such a narrow, technical compliance issue once again cements the notion that the state of consumer financial laws in this country is “what the CFPB says it is.”
Financial Services Litigation Practice Group
Troutman Sanders is an accomplished and experienced leader in providing litigation and regulatory advice to a broad spectrum of financial services institutions. Troutman Sanders’ CFPB Team monitors the development and activities of the CFPB on its CFPB Report blog and also advises clients on CFPB and Dodd-Frank issues. Additionally, Troutman Sanders’ Financial Services Litigation practice group has successfully litigated a wide variety of individual and class action litigation, as well as other federal and state consumer protection laws now under the umbrella of the CFPB.
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