Financial Services Enforcement Actions Tracker Q1 2016

Financial Services Enforcement Actions Tracker— Q1 2016

Navigant is pleased to release the Q1 2016 Financial Services Enforcement Actions Tracker.  We have compiled publicly available data on recent industry enforcement actions to demonstrate the types of activities that bank and other consumer finance-focused regulators are currently monitoring.  Our goal in gathering and analyzing this information is to provide our clients with increased awareness of the focus of regulator efforts so that they can be appropriately prepared to address the trends developing in the regulatory environment.

Our internal research team collected information about actions taken over the past five quarters by the following U.S. regulators including:

Regulatory issues include:

Q1 2016 Highlights

The frequency of regulatory enforcement actions decreased from Q4 2015 to Q1 2016, as seen in Figure 1, but remained consistent with rates observed in other prior periods reviewed in this issue.  Approximately half of enforcement actions were issued by four major agencies, with thirteen from the OCC, ten from the CFPB, nine from the FDIC, and four from the FRB (See Figure 2).  The OCC’s focus appeared to be primarily related to improper mortgage lending and governance deficiencies resulting in unsafe or unsound banking practices, while the CFPB’s actions centered around unfair, deceptive, or otherwise improper lending practices in violation of UDAAP, TILA, and the ECOA.  The FDIC and the FRB issued actions for violations of rules and regulations including BSA / AML, RESPA, and the National Flood Insurance Program.  UDAAP-related violations accounted for the highest numbers of actions in Q3 2015, with increased emphasis placed on mortgage-backed securities-related violations and various improper mortgage lending practices.

In March 2016, the CFPB released the tenth issue of their Supervisory Highlights. This report discusses recent findings and enforcement actions related to fair lending across student lending, remittances, originations, debt collection, and reporting, which have led to three public actions resulting in $52.75 million in remediation to consumers and an additional $8.5 million in civil money penalties.[1] The report also details updates made to the agency’s supervisory program and examination guidelines made for credit reporting, debt collection and electronic funds transfers.[2]  Areas for improvement cited include accuracy of consumer information furnished by financial institutions to credit reporting agencies, protecting consumer’s rights related to debt collection methods, enhancement of written policies and procedures required by the loan originator rule, weakness in compliance management systems related to the Electronic Funds Transfer Act (“EFTA”) Remittance Rule, and unfair, deceptive or abusive acts related to student loan servicing.[3]

Another report recently issued by the CFPB in April 2016, Online Payday Loan Payments, focuses on the use of Automated Clearing House (“ACH”) payments by lenders that issue online payday loans.[1]  The CFPB defines a payday loan as “a short-term loan, generally for $500 or less, that is typically due on your next payday” for which the borrower must either grant the lender access to make a direct withdrawal from the their checking account or write a check prior to the due date for the full balance owed.[2]  The study conducted by the CFPB found that half of accounts observed had at least one ACH payment that resulted in an overdraft of the account and that for such failed payments, re-requests have a 70% failure rate, as opposed to a 6% failure rate for payment requests that do not follow a failed payment.[3]  Further, the report identifies “many online lenders submit multiple payment requests on the same day,” which proves problematic given the findings related to repeated payment failure.  On the heels of this report, the CFPB is proposing several new rules to revamp the payday lending industry, including implementation of a “full-payment test” to ensure borrowers can pay off the loan, introduction of rules to decrease refinance or reissuing of payday loans, and increased regulation of penalties and fees.[4]

Currently state law often regulates frequency and associated fees for payday loans or prohibits payday lending altogether.  In the first quarter of 2016, Blue Global, an online vendor involved in selling consumer information to payday lenders, reached a $1 million settlement with the New York Department of Financial Services.  Blue Global violated New York prohibitions of payday lending by marketing payday products to New York consumers and for providing deceptive disclosures to consumers which misrepresented to consumers that personal information submitted through their website was secure when sufficient security measures were not in place.  In addition to the monetary penalty, the company is required to cease generating payday lending leads in New York, disclose to consumers in their advertisements that payday lending is not permitted in New York, and to designate a compliance officer.

Additional commentary on Q1 2016 financial enforcement action, and related charts and graphs, can be found below.


Actions by Regulators (Figures 1-2)

Enforcement Actions Tracker Chart 1

Enforcement Actions Tracker Chart 2


Regulatory Trends by Action/Violation and Enforcement Occurrences (Figures 3-5)


Enforcement Actions Tracker Chart 3


Note: Multiple violations types may be counted as part of one consent order or action taken by federal and state regulators.

Enforcement Actions Tracker Chart 4


Note: Multiple violations types may be counted as part of one consent order or action taken by federal and state regulators.


Enforcement Actions Tracker Chart 5 



Enforcement Tracker Violation Type Definitions

Bank Secrecy Act Violation:  Failure of the financial institution to meet internal controls and monitoring requirements set forth by the Bank Secrecy Act or Anti Money Laundering Act.

Fraudulent Lending to Insiders:  Extension of credit to an insider, as defined by Regulation O and Regulation W, that exceed limits set by Regulation O or Regulation W or provide the insider with any preferential treatment.

Governance Deficiencies:  Failure of a financial institution and/or its Board to fulfill its fiduciary responsibilities in various areas of bank management such as compliance risk management, operational efficiency, or interest rate risk management. (This category includes Directors & Officers Actions; Compliance Risk Management; Management Replacement and Operations; Credit Risk and Interest Risk Management)

Improper Accounting Practices:  Failure to follow GAAP (Generally Accepted Accounting Principles) through means such as fraudulent reporting, omission of assets or liabilities, etc.

Improper Auto Lending Practices:  Violation of law or regulation in the origination or servicing of an auto loan.

Improper Foreign Transactions:  Violation of any law or regulation governing interactions with foreign entities; commonly an OFAC violation.

Improper Mortgage Loan Practices: Violation of a law or regulation in the origination or servicing of a mortgage loan or mortgage-backed securities.

Improper Student Lending Practices:  Violation of law or regulation in the origination or servicing of an education loan.

Improper Consumer Lending Practices:  Violation of law or regulation in the origination or servicing of a consumer loan, other than mortgage, auto or student loans.

Insufficient Capital:  Failure of a financial institution to meet minimum capital requirements set forth by Basel.

National Flood Insurance Program Violation:  Violation of the National Flood Insurance Program requirements or related acts and regulations, such as the National Flood Insurance Act or Flood Disaster Protection Act (Regulation H).

Payday Loans Violation:  Violation of any law or regulations in the issuance or servicing of payday loans.

Securities, Commodities of FX Violation:  Violation of any law or regulation in the distribution, monitoring, or trading or securities, commodities, or forex.

Servicemember Civil Relief Act Violation:  Violation of any law or regulation in the origination of servicing of a line of credit to an active duty member of the US Armed Forces.

Third Party Vendor Management:  Failure by an institution to ensure that third party vendors are operation in compliance with pertinent laws and regulations.

Unfair and Deceptive Practices:  Any unfair or deceptive statement, disclosure, or action which causes material harm to the consumer.









[4] "Payday Loans: CFPB Proposes New Rules." CNNMoney. Cable News Network, 02 June 2016. Web.


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