Maryland Legal Alert for Financial Services
Maryland Legal Alert - June 2024
In this Issue
CFPB Highlights Customer Complaints Regarding Reward Programs
CFPB Focus on Mortgage Servicing Deficiencies
CFPB Highlights Customer Complaints Regarding Reward Programs
In a recent industry release, the Consumer Financial Protection Bureau (CFPB) compiled and analyzed consumer complaints received in 2023 regarding credit card reward programs. The CFPB release identified four prevalent issues that consumers consistently raised:
- Vague or Hidden Promotional Conditions: Consumers reported discrepancies between promotional materials and the terms and conditions of the reward offers. This has led to consumer frustration concerning alleged "bait and switch" tactics.
- Devalued Rewards: Consumers also complained about the decreased value of rewards caused by factors such as inflation, increased mileage or point requirements, and other changes affecting redemption.
- Customer Service Issues Interfering with Reward Redemption: There were also complaints concerning customer service issues and technical glitches disrupting the redemption process, particularly in collaborative third-party merchant reward programs.
- Unilateral Revocation of Reward Points: Consumers also raised concerns about the inability to receive reward points when closing accounts and the lack of effective communication from credit card issuers regarding the expiration of certain reward programs.
The CFPB has previously taken significant action against credit card issuers for unfair or deceptive practices in administering reward programs, emphasizing that such practices violate the Consumer Financial Protection Act (CFPA). The latest CFPB release highlights the need for credit card issuers to ensure that their reward programs comply with the CFPA.
Practice Pointer: Credit card issuers are urged to thoroughly review their reward program structures, disclosures, and agreements with third-party merchant partners, and to proactively address reward-related complaints to ensure compliance with the CFPA.
For more information, contact Christopher R. Rahl or Tamia J. Morris.
Contact Christopher R. Rahl | 410-576-4222
Contact Tamia J. Morris | 410-576-4021
CFPB Focus on Mortgage Servicing Deficiencies
The Consumer Financial Protection Bureau (CFPB) recently released a second Spring 2024 “Supervisory Highlights” issue. The CFPB’s first Spring 2024 issue highlighted several deficiencies by furnishers of credit data to credit reporting agencies (CRAs), including the failure to comply with provisions of the Fair Credit Reporting Act (FCRA) and its implementation of Regulation V (see our prior Maryland Legal Alert for more information). The CFPB’s second Spring 2024 issue highlights mortgage servicing deficiencies. These deficiencies included: (a) improperly charging property inspection fees for Fannie Mae loans where Fannie Mae guidelines prohibited imposition of such fees; and (b) assessing “unfair” late charges (either in excess of what was provided in the applicable loan documents or where borrowers had entered into loss mitigation agreements). The CFPB also noted instances where mortgage servicers failed to provide adequate descriptions of fees on periodic account statements (e.g., using “service fee” as the only label for a fee, when Regulation Z requires a brief description of applicable fees).
The second Spring 2024 issue also identified situations where mortgage servicers had not made timely disbursements from borrower escrow accounts. The CFPB noted and found fault with situations where mortgage servicers sent escrow disbursements that did not reach the intended payees, but failed to resend the payments promptly after learning of the first failed payment attempt (resulting in third party late fees and other penalties for borrowers).
For more information, contact Christopher R. Rahl.