The CFPB last week brought an $18.5 million enforcement action against Discover Bank and its student loan affiliates for engaging in allegedly illegal private student loan servicing practices. The bureau’s enforcement action “demonstrates how Discover failed at providing the most basic functions of adequate student loan servicing for a portion of the loans that were transferred from Citibank,” said the bureau. Thousands of consumers encountered problems as soon as their loans became due and Discover gave them account statements that overstated their minimum payment, the CFPB said. Also, “Discover denied consumers information that they would have needed to obtain tax benefits and called consumers’ mobile phones at inappropriate times to contact them about their debts.” The CFPB concluded that the ...

The CFPB and the Department of Justice resolved a $24 million enforcement action against American Honda Finance Corp. last week with a settlement that will put new measures in place to address discretionary auto loan pricing and compensation practices. The joint CFPB/DOJ investigation concluded that Honda’s policies resulted in minority borrowers paying higher dealer markups. “Honda violated the Equal Credit Opportunity Act by charging African-American, Hispanic, and Asian and Pacific Islander borrowers higher dealer markups for their auto loans than non-Hispanic white borrowers,” said the bureau. “These markups were without regard to the creditworthiness of the borrowers.” Honda’s policies also injured thousands of minority borrowers, according to the CFPB. “Honda’s discriminatory pricing and compensation structure meant thousands of minority borrowers ...

The CFPB has filed a complaint and a proposed $5.2 million consent order in federal court against Sacramento, CA-based Student Financial Aid Services for allegedly illegal sales and billing practices.The company has operated websites and related call centers where it offers fee-based assistance to consumers filling out the federal government’s Free Application for Federal Student Aid. According to the CFPB’s complaint, when consumers entered their payment information for certain financial advisory services, SFAS began to bill them for an annual subscription without their knowledge or consent. These recurring charges typically ranged from $67 to $85 each year and were renewed annually, according to the bureau. The company enrolled consumers in these annual subscriptions without adequate disclosures and imposed recurring ...

The CFPB recently won some and lost some when it comes to the debt-collection arguments it advanced in CFPB v. Frederick J. Hanna & Associates, which the bureau initiated in July 2014. According to the CFPB’s complaint, the firm and its three principal partners – Frederick Hanna, Joseph Cooling and Robert Winter – ran a debt-collection lawsuit mill that used illegal tactics to intimidate consumers into paying debts they may not have owed. Between 2009 and 2013, the firm filed more than 350,000 debt-collection lawsuits in Georgia alone, but the attorneys only spent less than a minute reviewing each suit, according to the CFPB. In its motion to dismiss, Hanna & Associates argued that the claims brought by the CFPB focus only...

The CFPB recently launched the first in a new series of monthly reports to highlight key trends from consumer complaints submitted to the bureau, including data on company performance, complaint volume, state and local information, and product trends. The first installment in the series focuses on debt-collection complaints and complaints from consumers in Milwaukee. The bureau said it expects companies to respond to complaints within 15 days and to describe the steps they have taken or plan to take to resolve the complaint. “The CFPB expects companies to close all but the most complicated complaints within 60 days,” it said. “Complaints inform the bureau’s work and help to identify issues in the market, which feed into the bureau’s supervision and ...

Deputy Director Antonakes to Depart. CFPB Deputy Director Stephen Antonakes, the number two figure at the bureau, is leaving the agency at the end of July to spend more time with his family, according to an internal memo circulated within the CFPB, a copy of which was obtained by Inside the CFPB. “Steve has been an enormous asset to the bureau, and a great friend and colleague to me since our time together in [Supervision, Enforcement and Fair Lending] in the early days of the bureau,” said the memo, which was authored by Director Richard Cordray. “His contributions to this agency have been extensive in his dual roles as deputy director and supervision, enforcement, and fair lending associate director, and ...

Bank holdings of MBS have increased significantly this year, with the growth concentrated among large banks. Industry analysts suggest that large banks have increased their MBS holdings due to capital requirements, and demand is expected to persist for months to come, pushing up MBS prices. The 25 largest banks held a combined $1.15 trillion in MBS as of the end of June, according to an Inside MBS & ABS analysis of data from the Federal Reserve. The holdings increased by $63.90 billion compared with the end of 2014 and coincide with an increase in deposits at banks. “MBS performance so far this year owes...

Angel Oak Home Loans is still contemplating issuing a security backed by non-agency, non-prime mortgages, but the company’s original self-imposed deadline of July is not going to happen, according to officials familiar with the Atlanta-based originator. As reported by Inside MBS & ABS last month, Angel Oak had been shopping around a roughly $100 million package of nonprime whole loans to several investors. It’s unclear whether any of the portfolio traded. The fact that the lender had been trying...

Market factors are more favorably disposed toward non-agency MBS in the second half of the year than for agency bonds, according to a mid-year review and outlook from Deutsche Bank. “For the second half of 2015, we are cautiously optimistic for the non-agency MBS market, given the favorable fundamentals and technicals,” said Deutsche Bank analysts, who expect home price appreciation and servicer practices to continue to be the two biggest drivers of the MBS credit. On the technical front, the most important factor that affected legacy RMBS is...

United Wholesale Mortgage announced this week that it’s offering interest-only mortgages, joining a growing number of banks and nonbanks originating the loans that don’t meet standards for qualified mortgages. Officials at United Wholesale noted a distinction in the lender’s IO product: “Large banking institutions have widely offered this option, but mostly restricted its availability to jumbo borrowers,” United Wholesale said. The lender is offering IOs with ...