CFPB Uncovers Remittance Transfer Violations

The Consumer Financial Protection Bureau said on Tuesday (March 8) that it has released its latest supervision report, and its review of both banks and nonbanks gave rise to $14.3 million in restitution to about 228,000 customers, due to several areas of violations, including remittances.

The examinations, which found illegal automatic defaults by student loan servicers and illegal garnishment threats from debt collectors collecting on Department of Education loans, were conducted in the final few months of last year.

In addition, CFPB examinations found that several international money transfer companies had violated new remittance rules put in place by the CFPB and had also offered up inaccurate information to credit reporting agencies about consumers. The inaccurate report centered on checking accounts.

Among activities expanded upon in the announcement as having been illegal: Several student loan servicers automatically defaulted on certain private student loans; some debt collectors used “false, deceptive or misleading” representations against borrowers not eligible to be garnished, including false information as to when garnishment may actually begin. Other providers did not report timely or accurate information on consumers to the credit reporting agencies. For example, not reporting that some accounts with financial institutions had been “paid in full” could have had a negative impact on consumers, who then subsequently attempted to open other checking accounts.

In a statement that accompanied the release, CFPB Director Richard Cordray stated: “It is deeply concerning that our examiners found private student loan borrowers being hit with automatic defaults when their co-borrower goes bankrupt. The problems plaguing the student loan market can have a domino effect on borrowers’ financial futures. The CFPB has made it a priority to police this market so that borrowers are not treated unfairly or illegally dead-ended into default.”