May 7, 2020
Authored by: Douglas Thompson
Special populations need extra support during the COVID-19 pandemic. The CFPB is committed to providing real time, easily understood consumer education materials as well as clear guidelines for financial services companies. The Bureau stands ready to prosecute bad actors for UDAAP violations in the marketplace through enforcement and referrals of UDAAP violations. These were three themes offered by Director Kathleen Kraninger in public meeting remarks. And not to bury the lead, she noted the Bureau’s on-going monitoring of consumer impacts with the Department of Justice, Treasury, the FTC and state Attorneys’ General.
On Friday, May 1, 2020, the CFPB convened a joint session of its several Advisory Committees, including the Consumer Advisory Board, the Community Bank Advisory Council, the Credit Union Advisory Council and the Academic Research Council. The meeting involved presentations from staff focused on (1) consumer complaint analysis and trends, (2) household and market impacts and (3) special populations concerns. Public questions and comments were entertained relating to each topic. The presentation materials contain useful initial analysis on consumer complaints trends arising during the COVID-19 pandemic.
COVID-19 Consumer Complaint Analysis
Director Kraninger highlighted enhancements to the Bureau’s complaint database analytics tools. Staff essentially walked through how key word searching is being used to target and isolate complaints involving COVID-19 hardships or CARES Act relief programs. The Office of Consumer Response highlighted new map visualizations by state of complaint data. This summer, further analytics augmentation will include additional filtering and temporal search capabilities.
An initial swath of data for March and April 2020 has been analyzed. The Bureau will continue to refine and revisit its search criteria as the pandemic and related economic circumstances evolve. Financial services companies will want to be looking at their own complaint data and seeing what lessons can be gleaned. They may also gauge their performance against peers and industry. It is clear that the Bureau is looking to identify and address early any patterns of deteriorating customer service response from lenders and servicers.
Nature of Complaints
COVID-19 Complaints accelerated to a level of close to 800 per week in mid-April 2020. The Bureau staff compared the COVID-19 complaint topic breakdown against the bulk of year-to date complaints. In the larger group, consumers are most heavily focused on credit reporting and debt collection. Combined those two topics represent between 60-70% of the 2020 YTD complaints. The COVID-19 data, however, is different. The leading two topics for COVID-19 related complaints are mortgage and credit cards, totaling more than 50% of the COVID-19 related complaints. Credit reporting and debt collection run third and fourth, combined at less than 30%. Dramatically, COVID-19 mortgage complaint volume is more than double the general year to date data. Other product-specific pandemic related complaints also are outstripping the general complaint levels including: (a) checking & savings accounts, (b) vehicle loans/ leases, (c) student loans, (d) money transfers/ virtual currency, (e) personal loans, (f) prepaid cards, and (g) payday loans. Most are close to double the volume levels of complaints not specifically mentioning the pandemic or CARES Act. Staff noted that in difficult economic times, consumer complaints about the most immediate financial needs tend to peak, like access to funds, payments, fees and charges.
Within the context of pandemic-related mortgage complaints, not surprisingly, the CFPB identified these two highest volume topics: (a) “struggling to pay mortgage” representing 60% of the mortgage complaints, and (b) “trouble during payment process” representing another 25%. The Division of Research Markets and Regulations presentation leveraged the mid-April MBA Weekly Forbearance and Call Volume Survey to depict the rapid increase in mortgage forbearance across all investors. As of March 8, total forbearance was at a record low, well less than 1%. Within approximately six weeks as the pandemic accelerated, servicing portfolio forbearance jumped to an average of 7%, with Ginnie Mae loans approaching 10%. (See slide 7 of the CFPB Household and Market Impacts presentation/ slide 15 of the combined materials).
CFPB Staff also is monitoring company complaint responses. The Bureau expects and appreciates “timely, accurate and complete” responses according to staff. As of the joint advisory committee meeting, the average company response is in the 21 day range. Staff is concerned about and will be monitoring whether there is deterioration in those turn times. If companies are facing volume and staffing challenges which diminish the ability to respond thoroughly and timely, companies may wish to consider staffing realignments, additional communications talking points and even potentially proactive constructive dialogue with CFPB. As Director Kraninger has remarked previously, the Bureau understands and will consider COVID-19 related challenges lenders and servicers are facing. Staff highlighted potential pitfalls for both servicing and origination operations including:
- Servicing: “high volume of requests, long wait times; operational difficulty of implementing relief; liquidity management”
- Origination: “traditional sales channels closed or have gone virtual; obtaining required loan documentation difficult; adjusting credit standards”
COVID-19 Special Populations Impacts
The Bureau also offered its views on the impact the pandemic has had on special populations. Director Kraninger hopes the Bureau can be a “trusted resource” and asked consumers to be proactive and mindful of scams, especially those tending to prey on the elderly. Staff offered examples of scams including “scams targeting Social Security benefits” and “fake coronavirus-related charity scams” to name just two. The Bureau is similarly concerned about student lending forbearance and repayment issues, as well as benefits challenges faced by our military service members and veterans.
Conclusion & Key Takeaways
The CFPB and its regulatory and enforcement partners are actively monitoring and analyzing challenges consumers are facing as a result of the COVID-19 pandemic. The Bureau believes it is leading the way with direct accessible education materials. Lenders and servicers can proactively monitor their own performance and service levels to mitigate regulatory and litigation risk. Additional training and operations tweaks may be beneficial to address evolving concerns or issues of repeated confusion with consumers. As pandemic circumstances evolve, and even when folks are able to get back to work, careful consideration will be needed in assessing forbearance continuation and repayment plans. Additional focus and increased customer contact touch may help alleviate challenges for special population consumers such as the elderly, students and the military/veterans. As one committee member publicly commented, as we emerge from the pandemic, we will continue to see future impacts, including underwriting considerations for and credit score impact of income interruption due to the pandemic and issues. With its renewed focus on data analytics, the CFPB is sure to be monitoring those developments and requiring prompt and fair action to address them.