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On Friday, the CFPB reported it has taken action against Draper & Kramer Mortgage Corporation for discriminatory mortgage lending activities that discouraged homebuyers from applying to Draper for homes in majority-Black and Hispanic neighborhoods in the greater Chicago and Boston areas.

Draper & Kramer Mortgage Corporation is a non-depository mortgage lender based in Downers Grove, Illinois. Draper received applications and originated mortgage loans across the United States, including in Illinois, Indiana, Massachusetts, New Hampshire, and Wisconsin.

The CFPB alleges that Draper located all its offices in majority-white neighborhoods, concentrated its marketing in majority-white neighborhoods, and avoided marketing to majority-Black and Hispanic areas. These actions resulted in disproportionately low numbers of mortgage loan applications and mortgage loan originations from majority-Black and Hispanic neighborhoods in Chicago and Boston compared to other lenders. If entered by the court, the proposed consent order announced on Friday would ban Draper from engaging in residential mortgage lending activities for five years, and require Draper to pay a $1.5 million civil money penalty into the CFPB’s victims relief fund.

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• Complaint exhibits

The CFPB on Friday announced it has ordered the American Honda Finance Corporation to pay $12.8 million for reporting inaccurate information that affected the credit reports of 300,000 people. During the COVID-19 pandemic, Honda Finance deferred certain vehicle loan payments. However, the CFPB found that the company told credit reporting companies that borrowers were delinquent when they should have been reported as current. The CFPB’s investigation also found multiple other credit furnishing accuracy and dispute investigation failures.

The CFPB is ordering the company to pay $10.3 million in redress to harmed customers and to pay a $2.5 million civil money penalty.

The CFPB has issued released Issue 38 (Winter 2025) of its Supervisory Highlights series, an "Advanced Technologies Special Edition" that focuses on select examinations of institutions that use credit scoring models, including models built with advanced technology commonly marketed as AI/ML technology, when making credit decisions.

The CFPB yesterday announced it has taken action to resolve its case, initiated in 2017, against the National Collegiate Student Loan Trusts for unlawfully filing defective debt collection lawsuits to collect on private student loan debt. The CFPB and the Trusts filed a proposed stipulated judgment that, if entered by the court, would require the Trusts to pay $2.25 million in redress to student borrowers who were harmed. The CFPB's action follows a March 2024 ruling by the United States Court of Appeals for the Third Circuit that the Trusts are covered persons under the Consumer Financial Protection Act. The National Collegiate Student Loan Trusts had previously claimed that, as trusts, they were not covered under the Consumer Financial Protection Act. In December, the Supreme Court declined to hear the Trusts' appeal, leaving the Third Circuit decision in place.

The CFPB’s order, if entered by the court, requires National Collegiate Student Loan Trusts to:

• Pay $2.25 million redress to consumers: The funds will be paid to the CFPB for the purpose of providing relief to borrowers who were harmed.
• Stop collecting on certain debts covered by the lawsuit: The Trusts must take steps to end certain pending debt collection lawsuits involving time-barred debt or where necessary documentation cannot be located, and to otherwise cease debt collection activities related to debt identified in those lawsuits.

The Office of the Comptroller of the Currency has issued its January 2025 announcement of enforcement actions. Included were:

• The previously announced Cease and Desist Order against Bank of America, N.A., for violations and unsafe or unsound practices related to the bank's BSA/AML and sanctions compliance programs
• The previously announced Order of Prohibition and Order for Civil Money Penalty against Claudia Russ Anderson and Orders to Cease and Desist and Orders for Civil Money Penalty against David Julian and Paul McLinko, all former executives at Wells Fargo Bank, N.A.
• An Order of Prohibition against Brian Hernandez, a former financial services representative at a Queens, New York, branch of TD Bank, N.A., Wilmington, Delaware, for accessing the accounts of two elderly bank customers and making unauthorized ATM withdrawals totaling at least $187,000
• An Order of Prohibition against De'Anna Herrell, a former teller at and Atlanta, Georgia, branch of Wells Fargo Bank, N.A., Sioux Falls, South Dakota, for cashing a series of checks that she knew or had reason to know were fraudulent, resulting in a loss of at least $117,000 to the bank
• An Order of Prohibition against Cassandra Meadows, a former lead customer service representative at a Plainfield, Indiana, branch of Fifth Third Bank, N.A., Cincinnati, Ohio, for misappropriating at least $15,000 from the bank’s vault and the accounts of three bank customers, including an elderly customer’s account
• An Order of Prohibition against Nakyra Singletary, a former customer service and support representative at PNC Bank, N.A., Wilmington, Delaware, for providing confidential bank customer information to a third-party not employed by the bank, resulting in the misuse of customer information, fraud against bank customers, and a loss of at least $47,000 to the bank
• An Order of Prohibition and Cease and Desist Order against David Wu, a former loan officer at Sterling Bank and Trust, FSB, Southfield, Michigan, and current mortgage broker. While employed as a loan officer at Sterling, Wu did not disclose that he originated loans for clients of his closely held mortgage brokerage company. As a mortgage broker, Wu also used fraudulent means, including making false statements, concealing or otherwise not disclosing his role and fees, impersonating both applicants and their purported employers, and providing fraudulent or falsified documents, to cause Citizens Bank, N.A., Providence, Rhode Island, to originate mortgage loans for his clients and himself.

The OCC also updated its enforcement actions search tool to allow users to search for enforcement actions issued since 2012 by subject matter and to easily view subject matters covered in those actions. This update provides additional transparency into and search capability for the contents of the public enforcement action database.

The OCC yesterday announced enforcement actions against three former senior executives of Wells Fargo Bank, N.A., Sioux Falls, South Dakota. The actions were taken in response to the former executives’ unsafe or unsound banking practices related to the bank’s systemic and widespread sales practices misconduct.

The enforcement actions are described in two written decisions issued by Acting Comptroller of the Currency Michael J. Hsu, covering Claudia Russ Anderson and jointly covering David Julian and Paul McLinko.

• The decision covering Ms. Anderson found that from 2013 to 2016, she failed to credibly challenge the bank’s incentive compensation program, failed to institute effective controls to manage risks posed by sales practices misconduct, failed to escalate known or obvious risks, and repeatedly and consistently downplayed the sales practices misconduct. The decision also noted that Ms. Anderson committed violations of law by failing to provide information or providing false, incomplete, or misleading information to the OCC during its 2015 examinations. Ms. Anderson was issued an order of prohibition and assessment of a $10 million civil money penalty.
• The decision against Mr. Julian and Mr. McLinko resulted in personal cease and desist orders and assessments of civil money penalties of $7 million and $1.5 million, respectively. Julian and McLinko were found to have failed to plan and manage audit activity that would detect and document sales practices misconduct and failed to adequately escalate the sales practices misconduct. Mr. McLinko also failed to maintain professional independence from the Community Bank, the bank’s largest business line that housed the retail branches.

The Federal Reserve Board, FDIC, OCC, NCUA and the California Department of Financial Protection and Innovation have issued a statement that they recognize the serious impact of the California wildfires and straight-line winds on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions operating in the affected areas to meet the financial services needs of their communities.

The statement addresses the subjects of temporary facilities, publishing requirements, regulatory reporting requirements, the Community Reinvestment Act, and investments, and provides links to the Interagency Supervisory Examiner Guidance for Institutions Affected by a Major Disaster.

The Federal Reserve Board has published in today's Federal Register amendments to Regulations A and D to change interest rates paid to the Fed for primary and secondary credit (Reg A) and revise the rate of interest paid on reserve balances maintained at Reserve Banks by or on behalf of eligible institutions (Reg D). The amendments reflect reductions in rates approved by the Fed and the Federal Open Market Committee that were announced in December.

• Regulation A (Extensions of Credit by Federal Reserve Banks) — Amendment published at 90 FR 3614
• Regulation D (Reserve Requirements of Depository Institutions) — Amendment published at 90 FR 3615

Both amendments are effective January 15, 2025, and applicable on December 19, 2024.

The CFPB yesterday announced a new report, Flood Risk and the U.S. Mortgage Market, which found significant differences in the likelihood that homeowners with a mortgage are adequately insured against flooding based both on location and on income and assets. According to findings, homeowners in coastal areas were most likely to have flood insurance and generally had higher incomes and assets, suggesting that they were the best positioned to recover from flooding. Homeowners living near inland streams and rivers, however, were less likely to have flood insurance and less likely to have other financial resources to draw on to recover from a flood. The report uses a sample of mortgage applications from 2018-2022.

This report looks at flood risk in the southeast and central southwest census regions of the United States, as measured by flood risk data from both the Federal Emergency Management Agency (FEMA) and the First Street Foundation. FEMA's assessment of flood risk is retrospective and focuses mostly on coastal flooding, while the First Street Foundation data better identifies inland flooding as well as having a forward-looking measure of flood risk. The analysis shows that the flood risk exposure of the mortgage market is more extensive and more geographically dispersed than previously understood. Homeowners can have significantly different access to insurance and therefore sharply different financial outcomes based on whether their risk of flooding comes from the coast or from inland rivers, streams, rainfall, and stormwater flooding.

Key findings include:

• Current flood insurance maps may not capture accurate flood risk exposure.
• Over 400,000 homes may be underinsured for flooding events in the southeast and central southwestern parts of the country alone.
• Homeowners who may be underinsured for flood risk also are least likely to be able to self-insure and recover from flooding.

The CFPB has published [90 FR 3566] in today's Federal Register a proposed rule and request for comment that would add new Part 1027 (Prohibited Terms and Conditions in Agreements for Consumer Financial Products or Services - Regulation AA) to Title X of the Code of Federal Regulations.

The proposal would prohibit covered persons from including in their contracts any provisions purporting to waive substantive consumer legal rights and protections (or their remedies) granted by state or federal law. The proposal would also prohibit contract terms that limit free expression, including with threats of account closure, fines, or breach of contract claims, as well as other contract terms. The proposal would also codify certain longstanding prohibitions under the Federal Trade Commission’s (FTC) Credit Practices Rule.

Comments will be accepted through April 1, 2025.