CFPB Issues Supervisory Highlights Volume 19

Question of the Week: What should a credit union do when an account owner passes away and a minor is named as beneficiary?

9/24/2019

The Consumer Financial Protection Bureau (CFPB) released Supervisory Highlights Issue 19, which contains findings that came out of the CFPB’s supervisory work. The findings in the report cover examinations in the areas of automobile loan origination, credit card account management, debt collections, furnishing of information to consumer reporting agencies, and mortgage origination.

The automobile origination finding focused on the sell of add-on GAP products on loans with low LTVs.  Since the product would serve no benefit to the consumer, it was considered an abusive act or practice.

Credit card account management findings include issues related to triggered disclosures for online credit card advertisements, issues related to offset of credit card debt, deceptive threats of repossession or foreclosure in credit card collections, and deceptive marketing regarding secured credit card accounts.

Debt collection issues focused on debt collectors and issues with false representation of the amount or legal status of the debt.

A number of issues were brought up regarding the furnishing of information to consumer reporting companies for inclusion in consumer reports. Finding issues included not completing dispute investigations in a timely manner, failing to report updates or corrections of information that resulted from the dispute investigation to CRCs, and other issues related to reporting deposit account activity.

Mortgage origination findings focused on inaccurate APR and TALC disclosures in reverse mortgage transactions.

Question of the Week

Q. What happens when an account owner dies, and a minor is named as beneficiary?

A. When a credit union finds itself indebted to a minor, such as when the minor is named as a POD beneficiary on an account of a deceased account holder, it really shouldn’t make the payment to the minor directly. The minor’s receipt of the funds would not bind the minor, and it could be voided when the minor reaches the age of majority (18). This could mean the credit union would have to make the payment a second time. Instead, the credit union should make the payment to the minor’s parent or legal financial guardian. One of the suggested ways to make the check payable would be, “Momma Doe as guardian for Baby Doe.”

Legal Briefs

National Credit Union Administration (NCUA)

NCUA released Supervisory Letter SL NO 19-01 and Letter to Credit Unions 19-CU-02, which provide information on LICUs ability to offer secondary capital and establishes a consistent framework for the analysis and approval or denial of plans submitted to the NCUA.

NCUA approved final rule for Supervisory Committee Audits and Verifications

NCUA approved final rule amending Federal Credit Union Bylaws

NCUA approved final rule Payday Alternative Loans II

Consumer Financial Protection Bureau (CFPB)

CFPB and FTC to host a public workshop on Dec. 10, 2019 to discuss issues affecting the accuracy of both traditional credit reports and employment and tenant background screening reports.

CFPB announced that it will continue the publication of consumer complaints.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of Sept. 20, 2019. The last update prior to this was Sept. 17, 2019.

Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].