FDIC Consumer Compliance Supervisory Highlights
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Consumer Compliance Supervisory
HIGHLIGHTS
Federal Deposit Insurance Corporation
March 2022
Contents
Introduction ........................................................................................................................ 1
Summary of Overall Consumer Compliance Performance in 2021.................................... 2
Most Frequently Cited Violations ...................................................................................... 3
Consumer Compliance Examination Observations............................................................ 5
Regulation E – Liability Protections for a Consumer Deceived into Giving Authorization
Credentials .............................................................................................................................................5
Automated Overdraft Programs: Conversion from Static Limit to Dynamic Limit..................6
Re-presentment of Unpaid Transactions: Heightened Risk for Section 5 Violations .............8
Fair Lending ............................................................................................................................................9
Regulatory and Other Developments................................................................................... 11
Community Reinvestment Act Rulemaking ......................................................................................11
Conducting Due Diligence on Financial Technology Companies..................................................11
Financial Institutions’ Use of Artifcial Intelligence, including Machine Learning ...............11
Proposed Interagency Guidance on Third-Party Relationships: Risk Management ..............12
Rule on the Role of Supervisory Guidance .......................................................................................12
National Flood Insurance Program – Risk Rating 2.0.....................................................................12
Notice of Proposed
hine Learning ...............11
Proposed Interagency Guidance on Third-Party Relationships: Risk Management ..............12
Rule on the Role of Supervisory Guidance .......................................................................................12
National Flood Insurance Program – Risk Rating 2.0.....................................................................12
Notice of Proposed Rulemaking on False Advertising, Misrepresentation of Insured Status,
and Misuse of the FDIC’s Name or Logo ............................................................................................13
Simplifcation of Deposit Insurance Rules for Trust and Mortgage Servicing Accounts.........13
Transitioning from the London Interbank Ofered Rate (LIBOR) ..............................................14
FDIC Risk Assessments Relating to the CARES Act and Mortgage Servicing .............................14
Resources for Financial Institutions................................................................................... 16
Banker Resource Center ........................................................................................................................16
An Overview of Consumer Complaint Trends..................................................................... 17
i | Consumer Compliance Supervisory Highlights
Introduction
The global COVID-19 pandemic continues to impact fnancial institutions, consumers, and communities.
This unique, challenging, and evolving situation resulted in fnancial institutions continuing to make
adjustments to their operations to ensure consumers have access to the essential products and services they
rely on. Similarly, the FDIC continued to conduct its consumer compliance examinations entirely ofsite.
Remote examinations leveraged technology and fle-sharing tools to allow us to conduct our examinations in
a virtual environment
ion resulted in fnancial institutions continuing to make
adjustments to their operations to ensure consumers have access to the essential products and services they
rely on. Similarly, the FDIC continued to conduct its consumer compliance examinations entirely ofsite.
Remote examinations leveraged technology and fle-sharing tools to allow us to conduct our examinations in
a virtual environment. The FDIC maintains appropriate resources to assist fnancial institutions, customers,
and communities afected by COVID-19. Information about the FDIC’s response to the pandemic and
guidance for bankers and consumers is available on the FDIC’s Coronavirus website.
This publication provides an overview of the consumer compliance activities and issues identifed through
the FDIC’s supervision of state non-member banks and thrifts in 2021.
This issue of the FDIC Consumer Compliance Supervisory Highlights includes:
•
A summary of the FDIC’s overall consumer compliance performance in 2021;
•
A description of the most frequently cited violations and other consumer compliance examination
observations;1
•
Information on regulatory developments;
•
A summary of consumer compliance resources and information available to fnancial institutions; and
•
An overview of trends in consumer complaints that were processed by the FDIC in 2021.
1 The legal violations discussed in this issue of the FDIC Consumer Compliance Supervisory Highlights are based on the particular facts and circum
stances observed by the FDIC in the course of its examinations. A conclusion that a legal violation exists may not lead to such a finding under different
facts and circumstances. The finding of a violation requires an analysis of both the applicable law, and the particular facts and circumstances of the act or
practice found at a particular institution.
1 | Consumer Compliance Supervisory Highlights
s observed by the FDIC in the course of its examinations. A conclusion that a legal violation exists may not lead to such a finding under different
facts and circumstances. The finding of a violation requires an analysis of both the applicable law, and the particular facts and circumstances of the act or
practice found at a particular institution.
1 | Consumer Compliance Supervisory Highlights
Summary of Overall Consumer Compliance Performance
in 2021
The FDIC supervises approximately 3,200 state-chartered banks and thrifts that are not members of the
Federal Reserve System (supervised institutions). Most of these institutions are community banks that
provide credit and services locally. The FDIC is responsible for evaluating supervised institutions for
compliance with consumer protection, anti-discrimination, and community reinvestment laws.
The FDIC’s consumer compliance examination program focuses on identifying, addressing, and mitigating
the greatest potential risks to consumers, based on the business model and products ofered by a particular
institution. The FDIC conducts periodic risk-based examinations of supervised institutions for compliance
with over 30 Federal consumer protection laws and regulations. In 2021, the FDIC conducted approximately
1,000 consumer compliance examinations. Overall, supervised institutions demonstrated efective
management of their consumer compliance responsibilities.
The FDIC uses the Federal Financial Institutions Examination Council’s (FFIEC) Uniform Interagency
Consumer Compliance Rating System to evaluate supervised institutions’ adherence to consumer protection
laws and regulations. As of December 31, 2021, 99 percent of all FDIC-supervised institutions were rated
satisfactory or better for consumer compliance (i.e., ratings of “1” or “2”), as well as for the Community
Reinvestment Act (CRA) (i.e., CRA ratings of “Outstanding” or “Satisfactory”)
cy
Consumer Compliance Rating System to evaluate supervised institutions’ adherence to consumer protection
laws and regulations. As of December 31, 2021, 99 percent of all FDIC-supervised institutions were rated
satisfactory or better for consumer compliance (i.e., ratings of “1” or “2”), as well as for the Community
Reinvestment Act (CRA) (i.e., CRA ratings of “Outstanding” or “Satisfactory”).
Institutions rated less than satisfactory for consumer compliance (i.e., ratings of “3,” “4,” or “5”) had
overall compliance management system (CMS) weaknesses, which often resulted in violations of law and
the risk of consumer harm. Institutions rated “needs to improve” or “substantial noncompliance” for CRA
represent a weak performance under the lending, investment and service tests, the community development
test, the small bank performance standards, or an approved strategic plan, as applicable.
2 | Consumer Compliance Supervisory Highlights
Most Frequently Cited Violations
During 2021, FDIC consumer compliance examiners identifed regulatory violations that ranged in severity
from highest to lowest level of concern (i.e., Levels 3, 2 and 1, with Level 1 representing the lowest level of
concern).2 This publication focuses on the fve most frequently cited instances of Level 3 or Level 2 violations.
The most frequently cited violations (representing approximately 78 percent of the total violations cited in
2021) remain the same as 2020 and involve the Truth in Lending Act (TILA), Flood Disaster Protection Act
(FDPA), Electronic Fund Transfers Act (EFTA), Truth in Savings Act (TISA), and the Real Estate Settlement
Procedures Act (RESPA).
Because the FDIC conducts consumer compliance examinations using a risk-focused methodology, the most
frequently cited violations generally involve regulations that represent the greatest potential for consumer harm
Lending Act (TILA), Flood Disaster Protection Act
(FDPA), Electronic Fund Transfers Act (EFTA), Truth in Savings Act (TISA), and the Real Estate Settlement
Procedures Act (RESPA).
Because the FDIC conducts consumer compliance examinations using a risk-focused methodology, the most
frequently cited violations generally involve regulations that represent the greatest potential for consumer harm.
For example, TILA requires disclosures about mortgage costs and calculation errors could result in reimbursements to
consumers. Moreover, the food insurance provisions included in the FDPA could result in penalties if the supervised
institution does not take appropriate steps to ensure compliance. Given the heightened risk for potential consumer
harm, these fve areas of the law generally represent a center of focus for consumer compliance examiners.
Of the top regulatory areas cited for violations, the following list describes the most frequently cited violation
in each area:
•
TILA: Section 1026.19(e) of Regulation Z, which implements TILA, requires the lender to provide a
loan estimate with the information required under section 1026.37. This section provides for timing
requirements of the loan estimate and requirements for the disclosure of certain settlement providers.
This section also includes requirements for pre-disclosure activity, the good faith determination for
estimates of closing costs, and the provision and receipt of revised disclosure.
•
FDPA: Section 339.3(a) of Part 339 of the FDIC Rules and Regulations, which implements the FDPA, requires
adequate food insurance be in place at the time a covered loan is made, increased, extended, or renewed.
•
EFTA: Section 1005.11(c) of Regulation E, which implements the EFTA, requires a fnancial institution to
investigate allegations of electronic fund transfer errors, determine whether an error occurred, report
the results to the consumer, and correct the error within certain timeframes
quires
adequate food insurance be in place at the time a covered loan is made, increased, extended, or renewed.
•
EFTA: Section 1005.11(c) of Regulation E, which implements the EFTA, requires a fnancial institution to
investigate allegations of electronic fund transfer errors, determine whether an error occurred, report
the results to the consumer, and correct the error within certain timeframes.
•
RESPA: Section 1024.37(c) of Regulation X, which implements RESPA, prohibits a loan servicer from
assessing the borrower any premium charge or fee related to force-placed hazard insurance until certain
disclosure requirements have been met. The disclosures must comply with formatting requirements set
forth in this section.
•
TISA: Sections 1030.4(a) and (b) of Regulation DD, which implements TISA, set forth timing and content
requirements for deposit account disclosures.
In 2021, the FDIC initiated 20 formal enforcement actions and 24 informal enforcement actions to address
consumer compliance examination fndings. During this period, the FDIC issued Civil Money Penalty (CMP)
orders against institutions to address violations of the FDPA and Section 5 of the Federal Trade Commission
Act (FTC Act)3, totaling $2.7 million. Voluntary restitution payments to more than 49,000 consumers for
violations of various laws and regulations totaled approximately $4.5 million.
2 See FDIC Consumer Compliance Examination Manual, Section II-6.1 (Communicating Findings).
3 Violations of Section 5 of the FTC Act prohibits unfair and deceptive acts or practices. While these violations are cited infrequently, they often give rise
to formal or informal enforcement actions.
3 | Consumer Compliance Supervisory Highlights
ws and regulations totaled approximately $4.5 million.
2 See FDIC Consumer Compliance Examination Manual, Section II-6.1 (Communicating Findings).
3 Violations of Section 5 of the FTC Act prohibits unfair and deceptive acts or practices. While these violations are cited infrequently, they often give rise
to formal or informal enforcement actions.
3 | Consumer Compliance Supervisory Highlights
MOST FREQUENTLY CITED STATUTES AND REGULATIONS IN 2021
Statute/Regulation
Level 3 Violations
Level 2 Violations
Total Violations4
#
%
#
%
#
%
TILA
15
1%
573
37%
588
38%
FDPA
7
<1%
281
18%
288
19%
EFTA
2
<1%
126
8%
128
8%
RESPA
2
<1%
97
6%
99
7%
TISA
1
<1%
95
6%
96
6%
Total 5 Most Commonly Cited
Statutes
27
2%
1172
76%
1199
78%
All Cited Statutes in 2021
36
2%
1504
98%
1540
100%
4 Level 1 violations are isolated or sporadic in nature or systemic violations that are unlikely to impact consumers or the underlying purposes of the
regulation or statute. Thus, Level 1 violations are not included in this table.
4 | Consumer Compliance Supervisory Highlights
Consumer Compliance Examination Observations
The following describes some of the more signifcant consumer compliance issues identifed by FDIC
examiners during the consumer compliance examinations conducted in 2021. The issues include matters
involving liability protections, automated overdraft programs, re-presentment of unpaid transactions, and
fair lending compliance.
Regulation E – Liability Protections for a Consumer Deceived into Giving
Authorization Credentials
Background
Regulation E implements EFTA, which gives consumers certain rights when engaging in electronic fund
transfers (EFTs). EFTs include transfers through automated teller machines, point of sale terminals, and
automated clearinghouse systems
aid transactions, and
fair lending compliance.
Regulation E – Liability Protections for a Consumer Deceived into Giving
Authorization Credentials
Background
Regulation E implements EFTA, which gives consumers certain rights when engaging in electronic fund
transfers (EFTs). EFTs include transfers through automated teller machines, point of sale terminals, and
automated clearinghouse systems. Regulation E outlines procedures fnancial institutions must follow for
investigating and resolving EFT errors alleged by consumers. Regulation E limits consumer liability for
unauthorized transfers that are reported within regulatory timeframes, and outlines procedures for resolving
errors that are reported within regulatory timeframes.
Findings
In 2021, the FDIC noted issues involving consumers being targeted for fraud. In one instance, a third-party
service provider (TPSP) managed a fnancial institution’s deposit accounts. The consumers stated someone
posing as a representative of the fnancial institution’s fraud department contacted them seeking account
verifcation codes. Believing they were communicating with the TPSP (working on behalf of the fnancial
institution) about unauthorized activity, the consumers provided the two-factor authentication code, and
it turned out the person to whom they gave the code was a scammer. The scammer then used the account
credentials to steal money from the consumers’ accounts.
In an attempt to limit its liability, the fnancial institution disclosed in the account agreements that neither
the institution nor the TPSP would ever request the two-factor authentication code. However, the FDIC
concluded that Regulation E’s liability protections for unauthorized transfers apply even if a consumer is
deceived into giving someone their authorization credentials. Consumer account disclosures cannot limit the
protections provided for in the regulation
the account agreements that neither
the institution nor the TPSP would ever request the two-factor authentication code. However, the FDIC
concluded that Regulation E’s liability protections for unauthorized transfers apply even if a consumer is
deceived into giving someone their authorization credentials. Consumer account disclosures cannot limit the
protections provided for in the regulation.
The regulation’s Ofcial Interpretations expressly state that an unauthorized EFT includes a transfer
initiated by a person who obtained the access device from the consumer through fraud or robbery, and that
consumer negligence cannot be used as the basis for imposing greater liability than is permitted under
Regulation E. On June 4, 2021, the Consumer Financial Protection Bureau (CFPB) Frequently Asked Questions
issued (FAQs) on Unauthorized Electronic Fund Transfers and Error Resolution under Regulation E. The
FAQs reference issues involving fraudulent account access and explain that when a consumer is fraudulently
induced into sharing account access information with a third party, and a third party uses that information
to make an EFT from the consumer’s account, the transfer is an unauthorized EFT under Regulation E.
The FAQs further explain that consumer behavior that may constitute negligence under state law does not
afect the consumer’s liability for unauthorized transfers under Regulation E. Further, the FAQs indicate
subsequent transfers initiated with the fraudulently obtained account information (the access code) would
also be considered unauthorized transfers and subject to Regulation E liability protections.
The FDIC also noted instances where deceived consumers provided their account credentials for fraudulent
EFTs conducted through a money payment platform (MPP) such as Cash App, Zelle, or Venmo. When an MPP
5 | Consumer Compliance Supervisory Highlights
ained account information (the access code) would
also be considered unauthorized transfers and subject to Regulation E liability protections.
The FDIC also noted instances where deceived consumers provided their account credentials for fraudulent
EFTs conducted through a money payment platform (MPP) such as Cash App, Zelle, or Venmo. When an MPP
5 | Consumer Compliance Supervisory Highlights
entered into an agreement with a consumer, that agreement extended to the fnancial institution holding the
consumer’s account. The fnancial institution, as the account holding institution, was held responsible under
Regulation E. In addition, the MPP, through whose platform the EFT was made, was also held responsible, as
it was considered a “fnancial institution” under Regulation E. Both the fnancial institution and MPP have
investigative and error resolution obligations under Regulation E and must comply with those obligations
provided the consumer gives timely notice of an alleged error under section 1005.11(b).
Regulation E also applies to peer-to-peer or “P2P” payments made through MPPs, even when the MPP has
no specifc agreement regarding the MPP with the fnancial institution holding the consumer’s account,
provided the transmitter issues an “access device” and agrees with the consumer to provide EFT services
that enable the consumer to access the account. A consumer’s mobile phone and an MPP EFT application
fall under Regulation E’s defnition of “access device.” Consequently, an MPP must comply with Regulation
E for transactions connected to a consumer’s debit card or account. Both the fnancial institution and
MPP are obligated under Regulation E to investigate EFT disputes and to limit consumer liability if, after
investigation, the consumer’s allegations are confrmed
and an MPP EFT application
fall under Regulation E’s defnition of “access device.” Consequently, an MPP must comply with Regulation
E for transactions connected to a consumer’s debit card or account. Both the fnancial institution and
MPP are obligated under Regulation E to investigate EFT disputes and to limit consumer liability if, after
investigation, the consumer’s allegations are confrmed.
Mitigating Risk
Through our examination and supervisory experience, we have observed that fnancial institutions, including
MPPs, can take a number of steps to mitigate the risk of not complying with Regulation E. These include:
•
Reviewing account agreements and disclosures (including those with MPPs) to ensure they do not
attempt to diminish or limit consumers’ rights under Regulation E.
•
Conducting thorough investigations of any fraud-related EFT disputes and documenting the fndings.
Under section 1005.11(d)(1), consumers have a right to request the documents the fnancial institution
relied upon in making its determination.
•
Educating consumers about scams and providing tips on avoiding scams.
•
Reminding consumers to notify their fnancial institution if they fall victim to a scam. Prompt
notifcation (and fnancial institution response) can expedite the recovery of funds.
•
Implementing efective fraud detection and prevention measures, such as monitoring geographic data,
spending patterns, merchant data, and IP addresses, to help detect potential fraudulent activity.5
•
Training staf on Regulation E’s requirements and assisting consumers alleging unauthorized
transactions.
Automated Overdraf Programs: Conversion from Static Limit to Dynamic Limit
Background
Automated overdraft programs authorize or decline transactions presented against insufcient funds
through a computerized process. The limits used by these automated overdraft programs are either static or
dynamic.6 Static limits are typically determined at account opening and seldom change
zed
transactions.
Automated Overdraf Programs: Conversion from Static Limit to Dynamic Limit
Background
Automated overdraft programs authorize or decline transactions presented against insufcient funds
through a computerized process. The limits used by these automated overdraft programs are either static or
dynamic.6 Static limits are typically determined at account opening and seldom change. Some institutions
employ fxed amounts that may range from $100 to over $1,000 and vary based on the type of account,
while others assign the same amount to all customers. Institutions may communicate the static overdraft
limit to customers at account opening, in subsequent disclosures, or through other communications,
5 The Red Flags Rule requires many businesses and organizations to implement a written Identity Thef Prevention Program designed to detect the
warning signs – or red flags – of identity thef in their day-to-day operations.
6 In 2013, the CFPB issued a publication “CFPB Study of Overdraf Programs: A white paper of initial data findings” a publication that explains how
automated overdraf programs work and how institutions generally set overdraf coverage limits.
6 | Consumer Compliance Supervisory Highlights
including online or mobile banking systems. Dynamic limits, in contrast, vary for each customer and may
change periodically (e.g., daily, weekly, monthly) as a customer’s usage or relationship with the institution
changes. For instance, a customer’s assigned overdraft limit may be $500 one day and reduced to zero (i.e.,
no assigned overdraft limit) a few days later. The dynamic limits are typically based on algorithms, or a set
of rules, that weigh numerous variables and customer behaviors in an attempt to manage risk
.g., daily, weekly, monthly) as a customer’s usage or relationship with the institution
changes. For instance, a customer’s assigned overdraft limit may be $500 one day and reduced to zero (i.e.,
no assigned overdraft limit) a few days later. The dynamic limits are typically based on algorithms, or a set
of rules, that weigh numerous variables and customer behaviors in an attempt to manage risk. For example,
some common variables used to calculate the dynamic limit might include the age of the account, average
balance, overdraft history, deposit amounts, deposit frequency, and other relationships the customer may
have with the institution. Financial institutions will periodically evaluate and adjust the algorithms based on
changes in policy, market conditions, customer behavior, and other factors. Institutions that use dynamic
limits do not always communicate these limits to customers.
Overdraft programs must comply with all applicable Federal law and regulations, including Section 5 of the
FTC Act, which prohibits unfair or deceptive acts or practices. An act or practice is unfair if it causes or is
likely to cause substantial injury to consumers that is not reasonably avoidable by consumers themselves and
not outweighed by countervailing benefts to consumers or to competition. An act or practice is deceptive if,
in general, it is a representation, omission, or practice that is likely to mislead a consumer acting reasonably
under the circumstances, and the representation, omission, or practice is material.
Findings
FDIC consumer compliance examinations conducted during 2021 identifed several fnancial institutions
that converted their programs from a static limit to a dynamic limit. In some instances, examiners identifed
concerns with how these conversions were implemented and cited violations of Section 5 of the FTC Act for
deceptive acts or practices. The institutions failed to disclose sufcient information about the change from a
static limit to a dynamic limit
identifed several fnancial institutions
that converted their programs from a static limit to a dynamic limit. In some instances, examiners identifed
concerns with how these conversions were implemented and cited violations of Section 5 of the FTC Act for
deceptive acts or practices. The institutions failed to disclose sufcient information about the change from a
static limit to a dynamic limit. In fact, some institutions did not provide any information to customers about
the change. Specifcally, institutions failed to disclose key changes such as:
•
Replacement of the fxed amount with an overdraft limit that may change and could change as frequently
as daily.
•
Use of a new overdraft limit that may be lower or higher, at times, than the fxed amount to which the
customer had become accustomed.
•
Suspension of the overdraft limit when it falls to zero and how such a change may result in transactions
being returned unpaid to merchants/third parties due to insufcient funds.
The FDIC deemed the above omissions material. The fnancial institutions’ disclosures omitted necessary
information that customers needed to make an informed decision about how the new dynamic limit overdraft
program operated. The customers did not have sufcient information about the new program to understand
how to avoid fees associated with an overdraft or for transactions declined for payment. Changes in overdraft
coverage without adequate disclosure resulted in consumer harm.
Mitigating Risk
The FDIC has observed certain risk-mitigating activities institutions may consider to mitigate the risk when
implementing automated overdraft programs with a dynamic limit. These include:
•
Providing clear and conspicuous information to existing customers so they have advance notice of how
the change from a fxed overdraft limit to a dynamic limit will afect them. This is especially important
when the bank previously disclosed the amount of the fxed overdraft limit to customers.
7 | Consumer Compliance Supervisory Highlights
rdraft programs with a dynamic limit. These include:
•
Providing clear and conspicuous information to existing customers so they have advance notice of how
the change from a fxed overdraft limit to a dynamic limit will afect them. This is especially important
when the bank previously disclosed the amount of the fxed overdraft limit to customers.
7 | Consumer Compliance Supervisory Highlights
•
Disclosing changes to overdraft limits in real time to consumers, as these vary, with the opportunity for
consumers to adjust their behavior.
•
Reviewing and revising account opening disclosures or other communications used to inform new
customers about the automated overdraft program to avoid engaging in deceptive practices.
•
Explaining that the dynamic limit is established based on algorithms, or a set of rules, that weigh
numerous variables and customer behaviors, how the limit may change (including the frequency of
change), and how the limit may be suspended or reduced to zero when eligibility criteria are no longer met.
•
Training customer service and complaint processing staf to explain the features and terms of the
automated overdraft program’s dynamic features. This training should be provided to staf who work
with new customers as well as those who work with existing customers.
Re-presentment of Unpaid Transactions: Heightened Risk for Section 5 Violations
Background
Financial institutions commonly charge a non-sufcient funds (NSF) fee when a charge is presented
for payment but cannot be covered by the balance in the account. Some fnancial institutions charged
additional NSF fees for the same transaction when a merchant re-presented an automated clearinghouse
(ACH) payment or check on more than one occasion after the transaction was declined. Disclosure and fee
practices for re-presentments may result in heightened risk of violations of Section 5 of the FTC Act, which
covers both business and consumer accounts
unt. Some fnancial institutions charged
additional NSF fees for the same transaction when a merchant re-presented an automated clearinghouse
(ACH) payment or check on more than one occasion after the transaction was declined. Disclosure and fee
practices for re-presentments may result in heightened risk of violations of Section 5 of the FTC Act, which
covers both business and consumer accounts. Re-presentment practices have recently been spotlighted
in public statements by other Federal and state regulators, and announcements by fnancial institutions
including those regulated by the FDIC. Re-presented transactions have also been the subject of a number of
recent class action lawsuits involving fnancial institutions, including some supervised by the FDIC. These
lawsuits generally allege breach of contract due to the omission of key terms related to the assessment of
representment fees. Lawsuit settlements have resulted in customer restitution and legal fee reimbursements.
Findings
During 2021, the FDIC identifed consumer harm when fnancial institutions charged multiple NSF fees
for the re-presentment of unpaid transactions. Some disclosures and account agreements explained that
one NSF fee would be charged “per item” or “per transaction.” These terms were not clearly defned and
disclosure forms did not explain that the same transaction might result in multiple NSF fees if re-presented.
While case-specifc facts would determine whether a practice is in violation of a law or regulation, the failure
to disclose material information to customers about re-presentment practices and fees may be deceptive.
This practice may also be unfair if there is the likelihood of substantial injury for customers, if the injury is
not reasonably avoidable, and if there is no countervailing beneft to customers or competition
uld determine whether a practice is in violation of a law or regulation, the failure
to disclose material information to customers about re-presentment practices and fees may be deceptive.
This practice may also be unfair if there is the likelihood of substantial injury for customers, if the injury is
not reasonably avoidable, and if there is no countervailing beneft to customers or competition. For example,
there is risk of unfairness if multiple fees are assessed for the same transaction in a short period of time
without sufcient notice or opportunity for consumers to bring their account to a positive balance.
Additionally, although class action settlements may result in banks providing some restitution to its
customers, the FDIC has determined that, in some instances, the restitution provided did not fully redress the
harm caused by the practice. As such, the FDIC required such institution to provide additional restitution.
8 | Consumer Compliance Supervisory Highlights
Mitigating Risk
The FDIC has observed various risk-mitigating activities that fnancial institutions have taken to reduce
potential risk of consumer harm and avoid potential violations of Section 5 of the FTC Act. These include:
•
Eliminating NSF fees.
•
Declining to charge more than one NSF fee for the same transaction, regardless of whether the item is
represented.
•
Disclosing the amount of NSF fees and how such fees will be imposed, including:
•
Information on whether multiple fees may be assessed in connection with a single transaction;
•
The frequency with which such fees can be assessed; and
•
The maximum number of fees that can be assessed in connection with a single transaction.
•
Reviewing customer notifcation practices related to NSF transactions and the timing of fees to provide
the customer with an ability to avoid multiple fees for re-presented items
le fees may be assessed in connection with a single transaction;
•
The frequency with which such fees can be assessed; and
•
The maximum number of fees that can be assessed in connection with a single transaction.
•
Reviewing customer notifcation practices related to NSF transactions and the timing of fees to provide
the customer with an ability to avoid multiple fees for re-presented items.
•
Conducting a comprehensive review of policies, practices, and disclosures related to re-presentments to
ensure the manner in which NSF fees are charged is communicated clearly and consistently.
•
Working with service providers to retain comprehensive records so that re-presented items can be
identifed.
Fair Lending
Background
The FDIC conducts a fair lending review as part of every consumer compliance examination. The fair lending
review evaluates a supervised institution’s compliance with the anti-discrimination laws and regulations,
including the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA). While the vast majority
of supervised institutions maintain efective compliance programs, the FDIC does occasionally identify
violations. In the rare instance when the FDIC has reason to believe a creditor is engaged in a pattern or
practice of discrimination in violation of ECOA, the FDIC is required, by law, to refer the matter to the
Department of Justice (DOJ). In 2021, the FDIC referred two fair lending matters to the DOJ.
Findings
For one fair lending matter referred to the DOJ in 2021, the institution had a policy of using the Cohort
Default Rate (CDR) to determine who could apply for private student loan debt consolidation and refnance
loans. In general, the CDR is published by the U.S. Department of Education to show the percentage of
a school’s borrowers who default on certain loans. In addition to other criteria, the institution used the
CDR as an eligibility threshold to determine which students could apply for credit
Default Rate (CDR) to determine who could apply for private student loan debt consolidation and refnance
loans. In general, the CDR is published by the U.S. Department of Education to show the percentage of
a school’s borrowers who default on certain loans. In addition to other criteria, the institution used the
CDR as an eligibility threshold to determine which students could apply for credit. In general, the CDR
cutofs resulted in the disproportionate exclusion of people who attended Historically Black Colleges and
Universities (HBCUs) from applying for credit, as certain HBCUs had CDRs that exceeded the cutof chosen by
the institution. While the institution’s use of the CDR to determine school-specifc eligibility requirements
constituted a neutral policy, the policy had a disparate impact on the prohibited basis of race, given that the
graduates of HBCUs were disproportionately Black.
9 | Consumer Compliance Supervisory Highlights
For the other fair lending matter referred to the DOJ in 2021, the FDIC concluded there was reason to believe
that an institution engaged in a pattern or practice of illegal credit discrimination on the prohibited basis
of race by redlining in certain markets in the institution’s lending area. Specifcally, the FDIC evaluated
the institution’s reported Home Mortgage Disclosure Act data and lending activity in majority-Black
census tracts. The FDIC also analyzed the institution’s branching, as well as its marketing and outreach in
those areas. As a result, the FDIC concluded that the institution was not making credit available to certain
geographic areas based on the racial composition of those areas.
Mitigating Risks
A strong compliance management system helps ensure fnancial institutions treat consumers fairly by
operating in compliance with fair lending laws. The FDIC’s Banker Resource Center provides information to
help support fair lending compliance
ncluded that the institution was not making credit available to certain
geographic areas based on the racial composition of those areas.
Mitigating Risks
A strong compliance management system helps ensure fnancial institutions treat consumers fairly by
operating in compliance with fair lending laws. The FDIC’s Banker Resource Center provides information to
help support fair lending compliance. In addition, banks may consider the following to mitigate fair lending
risks:
•
Maintaining written policies and procedures that include information for lending staf to reference when
applying credit decision criteria and determining whether borrowers are creditworthy.
•
Reviewing any requirements or other criteria used to screen potential applicants to ensure there is no
discriminatory impact.
•
Understanding the bank’s reasonably expected market area, and the demographics of the geographies
within that area.
•
Evaluating the methods by which the bank obtains loan applications, including any marketing or
outreach eforts and branches.
•
Assessing the bank’s lending performance within its reasonably expected market area.
10 | Consumer Compliance Supervisory Highlights
Regulatory and Other Developments
The following provides information on matters relevant to consumer compliance laws and regulations that
were issued or fnalized in 2021 or scheduled to become efective in 2022. Additionally, this section includes
information on eforts to modernize CRA.
Community Reinvestment Act Rulemaking
On July 20, 2021, the FDIC announced its commitment to working with the Board of Governors of the Federal
Reserve System (Federal Reserve Board) and the Ofce of the Comptroller of the Currency (OCC) to jointly
strengthen and modernize the regulations implementing the CRA
in 2022. Additionally, this section includes
information on eforts to modernize CRA.
Community Reinvestment Act Rulemaking
On July 20, 2021, the FDIC announced its commitment to working with the Board of Governors of the Federal
Reserve System (Federal Reserve Board) and the Ofce of the Comptroller of the Currency (OCC) to jointly
strengthen and modernize the regulations implementing the CRA. Since this announcement, the agencies
have continued to work together to develop a joint notice of proposed rulemaking building on the Federal
Reserve Board’s September 2020 Advance Notice of Proposed Rulemaking. The FDIC is committed to
working toward a uniform application of the CRA framework to ensure banks meet the credit needs of their
communities while clarifying the types of activities for which banks can obtain credit under the CRA, the
locations for which banks can obtain such credit, and the amount of credit banks will receive.
Conducting Due Diligence on Financial Technology Companies
On August 27, 2021, the FDIC, the Federal Reserve Board, and the OCC issued the Conducting Due Diligence
on Financial Technology Companies: A Guide for Community Banks (Guide), which is intended to help
community banks conduct due diligence when considering relationships with fnancial technology (fntech)
companies. While the Guide is written from a community bank perspective, the fundamental concepts may
be useful for banks of varying sizes and for other third-party relationships. Community banks can tailor how
to use the Guide depending on their specifc circumstances, the risks posed by each third-party relationship,
and the related product, service, or activity ofered by the fntech company.
The Guide focuses on six key due diligence topics, including relevant considerations, potential sources
of information and illustrative examples. Banks should consider, as appropriate, other risk factors,
considerations, and sources of information, depending on the unique relationship and the role of the fntech
company
and the related product, service, or activity ofered by the fntech company.
The Guide focuses on six key due diligence topics, including relevant considerations, potential sources
of information and illustrative examples. Banks should consider, as appropriate, other risk factors,
considerations, and sources of information, depending on the unique relationship and the role of the fntech
company. Use of the Guide is voluntary and does not anticipate every type of third-party relationship and risk.
Financial Institutions’ Use of Artificial Intelligence, including Machine Learning
On March 29, 2021, the FDIC, the Federal Reserve Board, the OCC, the CFPB, and the National Credit Union
Administration (the agencies) issued a Request for Information (FDIC Financial Institution Letter (FIL)
20-2021) seeking information and comments on the use of artifcial intelligence (AI), including machine
learning, by fnancial institutions. The agencies support responsible innovation by fnancial institutions
and recognize AI has the potential to ofer improved efciency, enhanced performance, and cost reduction
for fnancial institutions, as well as benefts to consumers and businesses. Likewise, as with any activity or
process in which a bank engages, identifying and managing risks are key. The request sought information
on fnancial institutions’ risk management practices related to the use of AI; challenges facing fnancial
institutions when developing, adopting, and managing AI and its risks; and benefts to fnancial institutions
and their customers from the use of AI. The request also sought views on the use of AI in fnancial services,
which will help the agencies determine whether any clarifcation would be helpful for fnancial institutions’
11 | Consumer Compliance Supervisory Highlights
lenges facing fnancial
institutions when developing, adopting, and managing AI and its risks; and benefts to fnancial institutions
and their customers from the use of AI. The request also sought views on the use of AI in fnancial services,
which will help the agencies determine whether any clarifcation would be helpful for fnancial institutions’
11 | Consumer Compliance Supervisory Highlights
use of AI in a safe and sound manner and in compliance with applicable laws and regulations, including those
related to consumer protection. The comment period ended on July 1, 2021, and the agencies are considering
the comments received. Refer to FDIC FIL-20-2021 for additional details.
Proposed Interagency Guidance on Third-Party Relationships: Risk Management
On July 13, 2021, FIL-50-2021 announced that the FDIC, along with other Federal banking agencies, sought
comment on proposed guidance on managing risks associated with third-party relationships. The proposed
guidance ofers a framework of sound risk management principles to assist banking organizations in
managing third-party relationships, and promotes compliance with all applicable laws and regulations,
including those related to consumer protection. The proposed guidance takes into account the level of risk,
complexity, and size of the banking organization and the nature of the third-party relationship. If fnalized,
the proposed guidance would replace each agency’s existing guidance on this topic. A copy of the proposed
guidance is on the FDIC’s website. The comment period ended on October 18, 2021, and the agencies are
considering the comments received.
Rule on the Role of Supervisory Guidance
On January 19, 2021, the FDIC issued FIL 03-2021 to announce that the FDIC Board of Directors adopted a
fnal rule to clarify and codify the role of supervisory guidance
g guidance on this topic. A copy of the proposed
guidance is on the FDIC’s website. The comment period ended on October 18, 2021, and the agencies are
considering the comments received.
Rule on the Role of Supervisory Guidance
On January 19, 2021, the FDIC issued FIL 03-2021 to announce that the FDIC Board of Directors adopted a
fnal rule to clarify and codify the role of supervisory guidance. The FDIC, OCC, the Federal Reserve Board,
CFPB, and the National Credit Union Administration had previously published a joint proposed rule to codify
the Interagency Statement on the Role of Supervisory Guidance (FIL-49-2018), with clarifying changes,
as an appendix to proposed rule text. On January 19, 2021, the FDIC adopted the proposed rule without
substantive change. In general, the fnal rule reiterates the distinction between regulation and supervisory
guidance and clarifes the FDIC’s policies and practices to:
•
Limit the use of numerical thresholds in guidance;
•
Reiterate that examiners will not base supervisory criticisms on a “violation” of or “non-compliance”
with supervisory guidance;
•
Reduce the issuance of multiple supervisory guidance on the same topic;
•
Make the role of supervisory guidance clear in communications to examiners and supervised fnancial
institutions; and
•
Encourage supervised institutions to discuss questions about supervisory guidance with their
appropriate agency contact.
National Flood Insurance Program – Risk Rating 2.0
On October 1, 2021, the Federal Emergency Management Agency (FEMA) began implementing its new
pricing methodology, called Risk Rating 2.0, to calculate food insurance premiums. This new methodology
moves away from a reliance on food zone mapping to leverage industry best practices and technology, thus
enabling FEMA to deliver rates that are actuarially sound, equitable, easier to understand, and more refective
of a property’s food risk. Risk Rating 2.0 does not afect the mandatory purchase requirements
ogy, called Risk Rating 2.0, to calculate food insurance premiums. This new methodology
moves away from a reliance on food zone mapping to leverage industry best practices and technology, thus
enabling FEMA to deliver rates that are actuarially sound, equitable, easier to understand, and more refective
of a property’s food risk. Risk Rating 2.0 does not afect the mandatory purchase requirements.
FEMA is implementing Risk Rating 2.0 in two phases: 1) as of October 1, 2021, new policies are subject to the
new methodology; and 2) all the remaining policies renewing on or after April 1, 2022, will be subject to the
new rating methodology.
12 | Consumer Compliance Supervisory Highlights
Although food zones on a Flood Insurance Rate Map (FIRM) will not be used to calculate a property’s
food insurance premium, food zones will still be used for foodplain management purposes (i.e., all new
construction and substantial improvements to buildings in Zone V must be elevated on pilings, posts, piers,
or columns). Further, lenders will continue to use FIRMs to determine if a building is located within a special
food hazard area (SFHA) and must continue to complete the Standard Flood Hazard Determination (SFHD)
form for each covered loan as required by 12 C.F.R. 339.6(a). If a building securing a covered loan is located
in an SHFA, the lender must require the borrower to obtain the appropriate amount of food insurance
coverage in accordance with the mandatory purchase requirements as defned under 42 U.S.C. § 4012a(b), as
implemented by 12 C.F.R. 339.3(a).
If there is a discrepancy regarding whether a property is located in a SFHA, the borrower may use FEMA’s
Letter of Map Amendment process to review the determination. Pricing for food insurance policies issued by
a private food insurer and National Flood Insurance Program (NFIP) policies that have not yet been issued
under Risk Rating 2.0 may still include the food zone on a declarations page
.
If there is a discrepancy regarding whether a property is located in a SFHA, the borrower may use FEMA’s
Letter of Map Amendment process to review the determination. Pricing for food insurance policies issued by
a private food insurer and National Flood Insurance Program (NFIP) policies that have not yet been issued
under Risk Rating 2.0 may still include the food zone on a declarations page. In these cases, lenders need not
reconcile a food zone discrepancy.
Notice of Proposed Rulemaking on False Advertising, Misrepresentation of Insured
Status, and Misuse of the FDIC’s Name or Logo
The FDIC observed an increasing number of instances where fnancial service providers or other entities or
individuals misused the FDIC’s name or logo, or made false or misleading representations that would suggest
to the public that these providers’ products are FDIC-insured.
On May 10, 2021, the FDIC issued a notice of proposed rulemaking under its statutory authority under the
Federal Deposit Insurance Act section 18(a)(4), which prohibits any person from making false or misleading
representations about deposit insurance or misusing the FDIC’s name or logo. The proposed rule would
establish a more transparent process that will promote stability and public confdence in FDIC deposit
insurance and the nation’s fnancial system. Specifcally, the proposed rule would describe the: (1) process
by which the FDIC will identify and investigate conduct that may violate section 18(a)(4); (2) standards
under which such conduct will be evaluated; and (3) procedures which the FDIC will follow when formally and
informally enforcing section 18(a)(4). The comment period ended on July 9, 2021, and the FDIC is reviewing the
comments received and expects to issue the fnal rule in 2022. Separately, on April 9, 2021, the FDIC re-issued
a request for information (RFI) regarding the FDIC Sign and Ofcial Advertising Requirements, which overlaps
to a degree with this proposed rule
will follow when formally and
informally enforcing section 18(a)(4). The comment period ended on July 9, 2021, and the FDIC is reviewing the
comments received and expects to issue the fnal rule in 2022. Separately, on April 9, 2021, the FDIC re-issued
a request for information (RFI) regarding the FDIC Sign and Ofcial Advertising Requirements, which overlaps
to a degree with this proposed rule. For example, the RFI asks about how to deal with parties that may be
fraudulently impersonating insured depository institutions, which necessarily relates to the proposed rule.
Simplification of Deposit Insurance Rules for Trust and Mortgage Servicing
Accounts
On July 20, 2021, the FDIC published a proposed rule to amend the deposit insurance regulations for trust
accounts and mortgage servicing accounts. The fnal rule, issued on January 21, 2022, is intended to make
the deposit insurance rules easier to understand for depositors and bankers, facilitate more timely insurance
determinations for trust accounts in the event of a bank failure, and enhance consistency of insurance
13 | Consumer Compliance Supervisory Highlights
coverage for mortgage servicing account deposits. Under the fnal rule, the revocable and irrevocable
trust deposit insurance categories are merged into a new “trust accounts” category. In addition, the rule
establishes a simpler, common formula for calculating coverage for both revocable and irrevocable trusts.
Furthermore, under the fnal rule, an owner’s trust deposits would be insured in an amount up to $250,000
for each of the trust benefciaries, not to exceed fve, regardless of whether a trust is revocable or irrevocable;
this would provide for a maximum amount of deposit insurance coverage of $1,250,000 for trust deposits,
per owner, per insured depository institution
ble and irrevocable trusts.
Furthermore, under the fnal rule, an owner’s trust deposits would be insured in an amount up to $250,000
for each of the trust benefciaries, not to exceed fve, regardless of whether a trust is revocable or irrevocable;
this would provide for a maximum amount of deposit insurance coverage of $1,250,000 for trust deposits,
per owner, per insured depository institution. Finally, mortgage servicers’ advances of principal and
interest funds on behalf of mortgagors in a mortgage servicing account would be insured up to $250,000
per mortgagor, consistent with the coverage for payments of principal and interest collected directly from
mortgagors. The rule will take efect on April 1, 2024.
Transitioning from the London Interbank Ofered Rate (LIBOR)
On December 7, 2021, the CFPB fnalized a rule facilitating the transition away from the LIBOR interest rate
index for consumer fnancial products. The rule establishes requirements for how creditors must select
replacement indices for existing LIBOR-linked loans after April 1, 2022. No new fnancial contracts may
reference LIBOR as the relevant index after the end of 2021. Starting in June 2023, LIBOR can no longer be
used for existing fnancial contracts.
Efective April 1, 2022, the fnal rule includes closed-end credit provisions that require creditors to choose an
index comparable to LIBOR when changing the index of a variable rate loan, or consider it a refnancing for
purposes of Regulation Z. For open-end loans, the rule adds LIBOR-specifc provisions to permit creditors or
card issuers for home equity lines of credit (HELOC) and credit card accounts to replace the LIBOR index and
adjust the margin used to set a variable rate on or after April 1, 2022, if certain conditions are met. The rule
also fnalizes change-in-terms notice requirements proposed by the CFPB for disclosing margin reductions
for HELOCs and credit card accounts when LIBOR is replaced
reditors or
card issuers for home equity lines of credit (HELOC) and credit card accounts to replace the LIBOR index and
adjust the margin used to set a variable rate on or after April 1, 2022, if certain conditions are met. The rule
also fnalizes change-in-terms notice requirements proposed by the CFPB for disclosing margin reductions
for HELOCs and credit card accounts when LIBOR is replaced. These disclosure requirements are efective
April 1, 2022, with a mandatory compliance date of October 1, 2022. The rule also amends Regulation Z to
address how to re-evaluate rate increases on credit card accounts when transitioning from using a LIBOR
index to a replacement index.
In addition, on July 29, 2021, the FDIC issued FIL-54-2021 to provide answers to FAQs about the impact
of LIBOR transitions on regulatory capital instruments. Among other things, the FAQs address the issue
of changing a reference rate from LIBOR to an alternative rate and clarify that such a transition would not
change the capital treatment of the instrument, provided the alternative rate is economically equivalent with
the LIBOR-based rate. The FAQs can be found on the FDIC’s website.
FDIC Risk Assessments Relating to the CARES Act and Mortgage Servicing
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law
to provide relief to those who are impacted by the COVID-19 emergency. The CARES Act includes various
provisions that afect fnancial institutions and their customers. In addition to CARES Act-mandated
forbearance, mortgage servicers ofered debt relief options to borrowers facing hardships related to the
COVID-19 pandemic. In 2020, the FDIC conducted targeted risk assessments of certain fnancial institutions
to assess any challenges, issues, or concerns related to the CARES Act, and to determine the extent to which
the institutions implemented relevant CARES Act provisions. Although there were challenges with the high
14 | Consumer Compliance Supervisory Highlights
ng hardships related to the
COVID-19 pandemic. In 2020, the FDIC conducted targeted risk assessments of certain fnancial institutions
to assess any challenges, issues, or concerns related to the CARES Act, and to determine the extent to which
the institutions implemented relevant CARES Act provisions. Although there were challenges with the high
14 | Consumer Compliance Supervisory Highlights
volume of COVID-19-related mortgage requests and questions from customers, as well as internal eforts to
maintain a healthy workforce, the FDIC found supervised institutions had compliance management systems
that identifed, mitigated, and responded to consumer compliance risks in the institution’s operations, and
associated products and services.
In 2021, the FDIC conducted follow-up risk assessments of FDIC-supervised institutions with signifcant
mortgage servicing portfolios. This included institutions that participated in the 2020 risk assessment, as
well as others with signifcant mortgage servicing portfolios. Overall, the FDIC’s 2021 risk assessments found
supervised institutions reported relatively low volumes of loans in forbearance, particularly when compared
to the total volume of loans in forbearance at the peak of the pandemic, and to total loans serviced. The
institutions also reported they do not anticipate elevated levels of borrowers seeking additional debt relief
assistance. The institutions noted they had adjusted resources and implemented programs, processes, and
monitoring throughout the pandemic that have allowed for successful management of forbearance plans and
all loss mitigation eforts. Though COVID-19 presented serious challenges, supervised institutions created
or revised policies and procedures, provided ongoing training, and exhibited efective oversight to support
compliance with the CARES Act and mortgage servicing rules.
15 | Consumer Compliance Supervisory Highlights
demic that have allowed for successful management of forbearance plans and
all loss mitigation eforts. Though COVID-19 presented serious challenges, supervised institutions created
or revised policies and procedures, provided ongoing training, and exhibited efective oversight to support
compliance with the CARES Act and mortgage servicing rules.
15 | Consumer Compliance Supervisory Highlights
Resources for Financial Institutions
The FDIC provides resources for fnancial institutions to support their eforts to serve and meet the needs
of their communities. In addition, these resources may provide information that can help institutions stay
current with regulatory developments and provide guidance on consumer compliance topics.
Banker Resource Center
The FDIC’s Banker Resource Center provides supervisory resources for banking professionals. The site
includes links to applicable laws and regulations, frequently asked questions, archived webcasts and
teleconferences, statements of policy, and other information issued either on an interagency basis or
individually by the FDIC. It also contains links to published materials from other agencies.
On December 23, 2021, the FDIC released fve mortgage-servicing videos for the Technical Assistance Video
Program. The videos provide a high-level overview to help FDIC-supervised institutions understand and
comply with the mortgage servicing rules. The frst video provides an overview of mortgage servicing and
describes how to determine whether a servicer meets the defnition of a small servicer under Regulation Z.
The second video discusses key provisions for which small servicers do not have an exception. These are the
provisions with which all servicers, small and large, must comply. The third video provides an overview of
some of the requirements from which small servicers are exempt
ervicing and
describes how to determine whether a servicer meets the defnition of a small servicer under Regulation Z.
The second video discusses key provisions for which small servicers do not have an exception. These are the
provisions with which all servicers, small and large, must comply. The third video provides an overview of
some of the requirements from which small servicers are exempt. The fourth video discusses successors in
interest, including the defnition of successor in interest and a general overview of what to be aware of when
working with successors in interest. Finally, the ffth video provides information and examples related to
developing a compliance management system that considers the mortgage servicing rules. The videos range
in duration from around 8 to 27 minutes.
On February 23, 2021, the FDIC released nine technical assistance videos on fair lending. These videos provide
a high-level overview to help FDIC-supervised institutions understand how FDIC examiners evaluate fair
lending compliance and provide information to institutions on assessing and mitigating diferent types of
fair lending risks. The frst video provides an overview of the Federal fair lending laws and regulations. The
second video focuses on how a bank’s CMS can mitigate fair lending risk. The third video discusses the FDIC’s
fair lending examination approach. The remaining six videos provide overviews of overt discrimination, as
well as risks relating to underwriting, pricing, steering, redlining, and marketing. The videos range in length
from approximately 10 to 28 minutes.
16 | Consumer Compliance Supervisory Highlights
ses on how a bank’s CMS can mitigate fair lending risk. The third video discusses the FDIC’s
fair lending examination approach. The remaining six videos provide overviews of overt discrimination, as
well as risks relating to underwriting, pricing, steering, redlining, and marketing. The videos range in length
from approximately 10 to 28 minutes.
16 | Consumer Compliance Supervisory Highlights
An Overview of Consumer Complaint Trends
The National Center for Consumer and Depositor Assistance’s (NCDA) Consumer Response Unit (CRU) closed
and responded to 17,714 written complaints and telephone calls from consumers in 2021, which represents
a 16 percent increase from the 15,217 case records in 2020. The CRU closed and responded to 14,236 written
consumer complaints in 2021 by investigating the complaint or referring the complaint to the appropriate
FDIC division/ofce or other agency. The CRU acknowledged 100 percent of written complaints within 14 days
and investigated and responded to 99 percent of non-fair lending complaints within established timeframes.
Of the 14,236 written complaints, the CRU investigated 8,529 of the written complaints or inquiries. The
completed investigations of the noted products, issues, and applicable regulations found 429 apparent bank
errors and 201 apparent violations. Fair Lending complaints investigated by the CRU increased from 48 in
2020 to 63 in 2021, a 31 percent increase.
The volume of third-party providers (TPPs) associated with complaints increased to 4,100 from 3,298, or
24 percent. These relationships generally involve contractual agreements between banks and entities that
perform a variety of services, such as credit card servicing and processing deposit account transactions and
error disputes. The CRU tagged a case involving a TPP in 3,846 instances. TPPs were associated with 97 cases
refecting an apparent violation of a federal consumer protection regulation
4 percent. These relationships generally involve contractual agreements between banks and entities that
perform a variety of services, such as credit card servicing and processing deposit account transactions and
error disputes. The CRU tagged a case involving a TPP in 3,846 instances. TPPs were associated with 97 cases
refecting an apparent violation of a federal consumer protection regulation.
The CRU’s interaction with consumers and banks resulted in consumers receiving $1,292,695 in total
voluntary restitution and compensation through December 2021, compared to $949,925 received for the
same period in 2020, a 36 percent increase. In addition to monetary compensation, the CRU’s interaction
also resulted in 871 cases refecting non-monetary compensation. The types of non-monetary compensation
provided included: updating bank records, reinstating an account or releasing a block on a card, ceasing
collection calls or actions, loan modifcations, and forgiving debt.
The CRU coded each complaint within the Enterprise Public Inquiries and Complaints (EPIC) system with
at least one product, issue, regulation, and fnding. In 2021, the CRU determined the top fve products to
include: checking accounts (3,160), credit cards (3,032), installment loans (1,169), residential real estate (1,029),
and consumer line of credit (950). The following chart provides the breakdown of the top products in 2021.
17 | Consumer Compliance Supervisory Highlights
EPIC) system with
at least one product, issue, regulation, and fnding. In 2021, the CRU determined the top fve products to
include: checking accounts (3,160), credit cards (3,032), installment loans (1,169), residential real estate (1,029),
and consumer line of credit (950). The following chart provides the breakdown of the top products in 2021.
17 | Consumer Compliance Supervisory Highlights
The following table provides a five-year analysis of the top products and the associated top issues for
those products.
MOST COMMON PRODUCT COMPLAINTS
REVIEWED BY THE CRU IN 2021
% OF PRODUCTS COMPARED TO
TOTAL VOLUME
MOST COMMON ISSUES (2021)
(% OF PRODUCT TOTALS)
2017
2018
2019
2020
2021
1. Error Resolution (25%)
2. Customer Identifcation Policy
Checking Accounts
17%
23%
29%
25%
23%
(15%)
3. Account Closure (15%)
1. Credit Reporting Errors (35%)
Credit Cards
16%
17%
20%
18%
23%
2. Loan Forgery/ID Theft (13%)
3. Billing Disputes (8%)
1. Disclosures (12%)
Residential Real Estate
15%
14%
10%
8%
9%
2. Credit Reporting Errors (10%)
3. Loan Modifcation (8%)
1. Credit Reporting Errors (30%)
Installment Loans
9%
8%
9%
7%
9%
2. Disclosures (13%)
3. Loan Forgery/ID Theft (8%)
1. Credit Reporting Errors (45%)
Lines of Credit
11%
11%
8%
7%
7%
2. Loan Forgery/ID Theft (15%)
3. Collection Practices (10%)
While checking account complaints remained the top product in 2021, it is refecting a decrease since it peaked
in 2019. The CRU will monitor this decrease to see if the availability of alternative banking products may be
responsible for the decline. The issue customer identifcation policy increased to 416 complaints in 2021, or 120
percent. Complaints regarding this issue involve concerns a bank has blocked or closed an account until the
consumer provides the requested identifcation documents.
Credit card complaints increased to 3,302, or 55 percent after decreasing in 2020
alternative banking products may be
responsible for the decline. The issue customer identifcation policy increased to 416 complaints in 2021, or 120
percent. Complaints regarding this issue involve concerns a bank has blocked or closed an account until the
consumer provides the requested identifcation documents.
Credit card complaints increased to 3,302, or 55 percent after decreasing in 2020. Complaints regarding credit
reporting error involve concerns regarding the reporting of inaccurate information and fraudulent accounts.
Loan forgery/ID theft concerns increased 629 percent through December 31, 2021. The CRU has noted an
increase of loan forgery/ID theft concerns for several loan products in 2021.
Residential real estate complaints increased slightly in 2021. In 2022, the CRU will be watching to see if it
receives an increase in complaints regarding COVID-19 forbearance exit plans as banks servicing Fannie Mae
loans must follow Fannie Mae guidance.
18 | Consumer Compliance Supervisory Highlights
-
The CRU also associated 13,409 issues with products. The top 15 issues of 2021 are noted below:
MOST COMMON ISSUES IN CONSUMER COMPLAINTS AND INQUIRES ABOUT FDIC SUPERVISED INSTITUTIONS
Credit Reporting Disputes
16%
Unable to Provide Requested Service*
7%
Disclosures
7%
Loan Forgery/ID Theft
5%
Error Resolution Procedures
5%
Customer Identifcation Policy
5%
Account Closures
4%
Deposit Transaction Error
4%
Debt Collection Practices
3%
Fees and Finance Charges (Loans)
3%
Billing Disputes
3%
Account Block
2%
Loan Discrepancies/Crediting of Payments
2%
Fees and Service Charges (Deposits)
2%
Funds Availability/Hold Notifcations
2%
*Includes service disruption issues and other service-related concerns when customers cannot immediately access their accounts.
Two top issues refect connections with three other top issues. Credit reporting remains the top issue in 2021,
with a 59 percent increase from 2020
iscrepancies/Crediting of Payments
2%
Fees and Service Charges (Deposits)
2%
Funds Availability/Hold Notifcations
2%
*Includes service disruption issues and other service-related concerns when customers cannot immediately access their accounts.
Two top issues refect connections with three other top issues. Credit reporting remains the top issue in 2021,
with a 59 percent increase from 2020. Four products comprise 96 percent of the credit reporting concerns:
credit cards, consumer line of credit, installment loans, and residential real estate. Of the complaints noting credit
reporting error concerns, approximately a third of the complaints also refected loan forgery/ID theft concerns.
Overall, loan forgery/ID theft concerns increased 423 percent in 2021. Three products refected 94 percent of
the concerns: credit cards, consumer line of credit, and installment loans. In most instances, consumers voiced
concerns that accounts were established in their name without their permission
Concerns regarding customer identifcation policy increased by 87 percent through December 31, 2021. The
CRU did not start tracking this issue until 2019. The products checking accounts and prepaid cards comprised
70 percent of this issue. Of the complaints noting customer identifcation policy concerns, several also noted
concerns about the bank either blocking or closing their account.
19 | Consumer Compliance Supervisory Highlights
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.