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NCHER Private Education Loan and Consumer Finance Committee

NCHER Private Education Loan and Consumer Finance Committee. July 20 , 2017 Eric Reusch, Senior Director. Agenda. UDAAP and Fairness Principles CFPB, UDAAP and You Navigating with Pro-active Compliance Q & A. UDAAP is the Bureau’s Focus.

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NCHER Private Education Loan and Consumer Finance Committee

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  1. NCHER Private Education Loan and Consumer Finance Committee July 20, 2017 Eric Reusch, Senior Director

  2. Agenda • UDAAP and Fairness Principles • CFPB, UDAAP and You • Navigating with Pro-active Compliance • Q & A

  3. UDAAP is the Bureau’s Focus • “Our supervision and enforcement teams are not interested simply in assuring that all the right boxes have been checked, but are asking more fundamental questions about whether consumers are being treated in a fair and honest manner.” Richard Cordray Director CFPB September, 2014

  4. UDAAP creates danger “between the cracks”

  5. Fairness Principles Value Predictability Understanding Appropriateness These principles should be applied to every product and practice within the institution, including third party vendor activities.

  6. The CFPB, UDAAP and Student Lending • Every CFPB enforcement action involving student lending has alleged UDAAP violations • Areas that can present heightened UDAAP risk include: • Debt Collection-Debt collection was also listed on the Fall 2016 Agenda, which stated that debt collection continues to be the single highest source of complaints of any industry • Marketing and Advertising. Allegations of unfair or deceptive marketing practices were recently made in a variety of actions involving overdraft services, payday lending, credit scoring products, auto title lending, and reverse mortgage lending • Sales Practices. Since the CFPB’s September 2016 consent order with Wells Fargo, employee sales practices have been a topic of interest and an area of elevated risk • Information Security. In May 2016, the CFPB entered into a consent order with Dwolla, an online payment platform, for allegedly misrepresenting its consumer data security practices

  7. CFPB’s Fair Lending Agenda • In December 2016, the CFPB flagged student loan servicing as one of four fair lending priorities in 2017, stating “We will determine whether some borrowers who are behind on their mortgage or student loan payments may have more difficulty working out a new solution with the servicer because of their race or ethnicity.” • “In the coming year, we will be shifting our focus from [auto lending and credit cards] in order to increase our focus on [redlining, mortgage and student loan servicing, and small business lending], which also present substantial risk of credit discrimination for consumers.” Patrice Ficklin, CFPB Fair Lending Director

  8. Recent Student Lending Guidance and Data Requests • Bulletin 2016-04 (“Compliance Bulletin – College Credit Card Agreements”) issued in Dec 2016, providing schools and universities with updated guidance on credit card agreement compliance: • Advised use of school websites to publish college-sponsored credit card agreements to in compliance with the CARD Act and Reg Z • Recommended that agreements no longer in effect be posted if the agreement terms have not yet expired, card issuers are still obligated to make payments to the school, or the cards are still marketed or issued to students under terms of the agreement • In February 2017, the CFPB filed a Notice seeking comment on their initiative to collect student loan data from the largest student loan servicers. Information being sought includes: • More complete understanding of the size of the student loan market (public and private) • Number of borrowers seeking IDR plans and the outcome of those efforts • How borrowers at greatest risk of default are assisted by servicers • Private student loan borrowers and the options made available to them “The [CFPB] also announced that we were prioritizing our work to stamp out illegal actions in [the student loan servicing] market, and that we would explore other policies to strengthen this market, including potential rulemaking. Now, we are working closely with our state counterparts to determine how we can partner more effectively in bringing further oversight to this industry.” Dir. Richard Cordray Press Release, Consumer Fin. Prot. Bureau, “Prepared Remarks on Student Loan Servicing Press Call” (July 20, 2016).

  9. How do you navigate? Effective Compliance Management System • Flexible and Resilient Architecture • Understand Your Inherent/Residual Risks AND Controls • Including Active Third Party Risk Management • Complaint Management and Response • Regulatory Control Matrix and Change Processes Synthesize Data Points • Examination Manual and Modules • Supervisory Highlights • Enforcement Actions • Evolving Rulemaking and RFI’s

  10. Four Control Components

  11. Consumer Complaint Management- The 6 “R’s” • Risk Rate Complaints • Escalated • Examples: observed risk, egregious allegations, vulnerable consumers • General • Examples: routine, less egregious allegations

  12. Example of Complaint Management Process in Practice Source: Public Company Filing (March 2017)

  13. treliant.com

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