MBA Compliance Essentials: Consumer Complaints Resource Guide

MBA Compliance Essentials℠:
Consumer Complaints Resource Guide
3
TABLE OF CONTENTS
Author Biographies and Information about the Firm ................................................................................... Page 4
Summary of Compliance Resource Contents ............................................................................................. Page 6
Statutory Background and Requirements ................................................................................................... Page 6
State Law Requirement ........................................................................................................Page 15, Appendix A
Model Draft Customer Complaint Policy ..............................................................................Page 24, Appendix B
Policies and Procedures Checklist .......................................................................................Page 36, Appendix C
CFPB Company Portal Manual ............................................................................................Page 41, Appendix D
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SUMMARY OF COMPLIANCE RESOURCE CONTENTS
This section of the resource guide discusses the various provisions of federal and state law, and
agency guidelines that address or impact how lenders handle complaints from residential
mortgage loan borrowers and others with respect to mortgage origination and loan servicing.
The section on "Statutory Sources of Requirements for Handling Consumer Complaints" explains
the legal basis for consumer complaint systems.
The discussion of Disclosures and Notices describes the form, content, and timing requirements
or suggestions for handling of consumer complaints. It also includes intake materials for the
CFPB system.
STATUTORY SOURCES OF REQUIREMENTS FOR HANDLING
CONSUMER COMPLAINTS
Mortgage companies can receive complaints that originate directly from consumers or come from
various agencies in different forms. The discussion in this section regarding sources of consumer
complaints provides an overview of the separate agencies and regulators responsible for
coordinating consumer complaints. Companies have varying responsibilities depending on the
source of the complaint. As discussed below, companies should take note of the numerous
sources from which potential complaints may be received.
Further, companies should take note of the timing requirements under the various agency
issuances to ensure compliance with specific regulatory provisions. For example, the CFPB
consumer complaint portal manual requires companies to respond to a consumer complaint
within 15 days and close out the complaint within 60 days of receipt. Other regulators, such as
the FHA, encourage “prompt” responses but do not require a specific time requirement for
providing a consumer with a response. Meanwhile, regulations under the Real Estate Settlement
Procedures Act (RESPA) require mortgage servicers to send an acknowledgment of receipt to
the consumer within five (5) days.
Moreover, states have their own mortgage banking regulations and statutes with which
companies must comply. Companies subject to state law should note that federal law does not
preempt state law regarding consumer complaints. Thus, states are free to establish their own
requirements for answering consumer complaints. Also, some states have established offices for
monitoring or receiving consumer complaints against companies conducting business within
those states. Relevant state provisions regarding consumer complaints are outlined below.
A “complaint” may differ under various regulatory requirements or a mortgage company’s policies
and procedures. For instance, a "complaint" may or may not be considered a Qualified Written
Request (QWR) under the RESPA, or an escalated process under the Home Affordable
Modification Program (HAMP) or the Fannie Mae and Freddie Mac Servicer Alignment Initiative.
Also, a "response" could mean a lender has acknowledged or investigated the matter and
indicated to the consumer the next steps for resolution. Additionally, "resolution" could have a
prescribed meaning, such as under the Regulation Z billing error notice requirements for
HELOCs. Such term could also be used merely to describe one of several outcomes in a
voluntary consumer complaint process.
Thus, financial services companies should have in place policies and procedures, along with
applicable timelines to address consumer complaints, in order to protect against reputational risk,
operate in safe and sound manner and otherwise comply with applicable regulatory requirements.
A mortgage company should have procedures and systems in place to be able to respond to
borrower inquiries and complaints relating to the origination and servicing of mortgage loans. A
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mortgage company should ensure that these consumer inquiries and complaints are provided fair
consideration, given timely and appropriate responses, and that consumers are provided with a
sufficient resolution. Companies can achieve these measures by implementing the appropriate
policies and procedures to manage the consumer complaints that arise.
Most importantly, mortgage companies should remember that consumer complaints can come
from various sources and require different timeframes for acknowledging and responding to the
consumer. The assorted agencies and regulators also have varying timeframes for responding to
complaints, requests for information, or notices of error. Moreover, within one agency’s rules,
there may be different timeframes depending on the type of consumer complaint or request. For
example, CFPB regulations will generally require a company to acknowledge a qualified written
request within five (5) days but allow lenders 15 days to respond to other consumer complaints
received through the CFPB Portal. Finally, note that certain aspects of this area of regulation and
guidance are new and evolving, some of the provisions outlined below are merely guidelines or
suggestions, and the rules and expectations in the area of handling consumer complaints
undoubtedly will continue to evolve.
Administrative Oversight
The CFPB has enforcement authority with respect to Federal consumer financial laws over
“covered persons”, including non-bank mortgage companies and "large" depository institutions.1
Federal banking agencies also retain enforcement authority as prudential regulators over
institutions subject to or transferred to their jurisdiction (the OCC for “small” national bank and
thrifts, the Federal Reserve, NCUA and Farmer Credit Administration for small creditors subject to
their supervisory authority).
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act),
Congress directed the CFPB to establish, in consultation with the appropriate Federal regulatory
agencies, reasonable procedures to provide a timely2 response to consumers, in writing where
appropriate, to complaints against, or inquiries concerning, a covered person (encompasses
depository institutions and mortgage companies), including:
 steps that have been taken by the regulator in response to the complaint or inquiry of the
consumer,
 any responses received by the regulator from the covered person, and
 any follow-up actions or planned follow-up actions by the regulator in response to the
complaint or inquiry of the consumer.3
Under the Dodd-Frank Act, a covered person subject to supervision and enforcement by the
CFPB is required to provide a timely response, in writing where appropriate, to the CFPB and any
other agency having jurisdiction over such covered person concerning a consumer complaint or
inquiry, including:
 steps that have been taken by the covered person to respond to the complaint or inquiry
of the consumer,
 responses received by the covered person from the consumer, and
 follow-up actions or planned follow-up actions by the covered person to respond to the
complaint or inquiry of the consumer.4
1
12 U.S.C. §§ 5481(12)(G), 5514(c), and 5515(c).
2
Please note, the term “timely” is not defined by the Dodd-Frank Act.
3
Dodd-Frank Act section 1034(a).
4
Dodd-Frank Act section 1034(b).
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A covered person subject to supervision and primary enforcement by the CFPB shall, in a timely
manner, comply with a consumer request for information in the control or possession of such
covered person concerning the consumer financial product or service that the consumer obtained
from such covered person, including supporting written documentation concerning the account of
the consumer.5
A covered person subject to supervision and primary enforcement by the CFPB, a prudential
regulator, and any other agency having jurisdiction over a covered person (subject to supervision
and primary enforcement by the CFPB) may not be required by this section to make available to
the consumer:
 any confidential commercial information, including an algorithm used to derive credit
scores or other risk scores or predictors,
 any information collected by the covered person for the purpose of preventing fraud or
money laundering, or detecting or making any report regarding other unlawful or
potentially unlawful conduct,
 any information required to be kept confidential by any other provision of law, or
 any nonpublic or confidential information, including confidential supervisory information. 6
CFPB Portal
The Dodd-Frank Act directs the CFPB to facilitate the coordinated collection, monitoring, and
response to consumer complaints regarding certain financial products and services. The CFPB
began handling mortgage complaints through the Portal on December 1, 2011.
Participation in the Portal currently is not mandatory. The Bureau has made clear, however, that
its supervision authority will be complaint driven and that companies with significant complaints
will be a priority for further review and monitoring. Companies, therefore, should sign up to
receive, review and respond to their customers' complaints lodged through the CFPB's Company
Portal.
To request access to the Portal, a company should designate an authorized point of contact, who
can request access to the Portal by submitting a request through the Help tab via the Submit a
Ticket link on the Portal. The ticket should include the company name, and the company
representative’s name, phone number, and email address. The CFPB Consumer Response team
will review your request and follow-up with your company’s point of contact.
To log in to the Portal, users should go to https://secure.consumerfinance.gov and use the email
address provided when a user name and access were requested and provided. Once logged into
the Portal, a user will be able to view all of his or her company’s complaints.
Once a complaint is logged in the Portal, companies are given 15 days to provide a substantive
response to a consumer's complaint. Companies then have 60 days to close out the complaint,
although extensions may be requested and granted. Note, however, that the response times
indicated in the Portal do not replace or satisfy statutory or regulatory requirements for
responding to consumer complaints, including the timelines required under those statutory or
regulatory requirements.
The CFPB Company Portal manual requests that a company provide a response to each
complaint through the Portal within 15 calendar days of the complaint being received. The
suggested Portal response time requirements do not replace statutory or regulatory requirements.
In circumstances when a complaint cannot be closed within 15 calendar days, a company may
5
Dodd-Frank Act section 1034(c)(1).
6
Dodd-Frank Act section 1034(c)(2).
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 include methodologies for assessing a servicer’s compliance with its escalation policies.
These methodologies must be included in a mortgagee’s quality control Plan.16
National Servicer Settlement
Pursuant to the National Mortgage Settlement (NMS) entered into by five large servicers with 49
states' attorneys general, HUD and the Department of Justice in February 2012, the five bank
servicers are required to adopt enhanced billing dispute procedures, including:
 Implementing methods for lodging complaints, including toll free numbers on the monthly
billing statement and email access,
 Maintaining adequate staff to respond properly to billing disputes,
 Establishing a dispute escalation process, and
 Implementing procedures to promptly correct errors, including inaccurate reports to credit
reporting agencies.
Servicer also must communicate with the borrower’s authorized representative, upon the written
request of the borrower. This includes communicating with states' attorneys general or financial
regulators acting on a written complaint submitted by a borrower and forwarded to the servicer.
Bank servicers also are required to develop loan portals in which:
 Borrowers can check, at no cost, the status of their loan modifications,
 Housing counselors can communicate with banks/servicers, and
 Banks/Servicers shall update the status of pending loan modifications every 10
(business) days.
Bank servicers also are required to ensure that their vendors follow the procedures and process
outlined in the NMS. Such vendors include sub-servicers.
Fair Lending Complaints
Consumers may submit complaints regarding lender discrimination under fair lending laws
through a number of channels. A consumer may complete an electronic form through the CFPB
Portal, send a written demand letter through an attorney, or file a complaint with a state regulator
or HUD, among other means. Mortgage companies should be aware that fair lending complaints
are perhaps the number one priority for the CFPB and other agencies at this time. Any consumer
correspondence of complaints that addresses or mentions discrimination should be immediately
escalated to counsel or the Board of Directors for further and immediate review. Generally, a
properly trained and experienced attorney can be of great assistance in determining the proper
legal action and timing for response that is necessary given the type of complaint. For example, if
an actual demand letter is received, the expected time for a response may be stated in the letter.
It is important to keep in mind that discrimination can be alleged through any of the agencies or
media noted above, and mortgage companies must treat allegations of discrimination with the
utmost care.
16
Id.; Id. § 4000.1.V.A.3.ii.
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Appendix A
State Law Requirements
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STATE LAW REQUIREMENTS
Several states' mortgage banking statutes impose requirements on mortgage companies with
regard to consumer complaints. Further, many state mortgage banking regulators will review how
well a licensed mortgage company subject to its jurisdiction operates regarding complaints, and
whether the company is handling and responding to consumer complaints in a prompt and
effective manner. At least one state’s mortgage banking statute authorizes the regulator to
furnish consumer complaints involving mortgage companies to the NMLS.17 Many states have
also adopted the Joint Statement On Sub-prime Lending For State-Licensed Mortgage Lenders
(the Statement), issued by the Conference of State Bank Supervisors, the American Association
of Residential Mortgage Regulators, and the National Association of Consumer Credit
Administrators in 2007.18 The Statement, which is non-binding guidance that addresses risks
associated with certain subprime mortgage products and lending practices, instructs mortgage
lenders to review consumer complaints to identify potential compliance problems or other
negative trends. Additional specific state law requirements are discussed below.
Alabama No applicable requirements found in the state mortgage lender licensing
statute(s).
Alaska No applicable requirements found in the state mortgage lender licensing
statute(s).
Arizona No applicable requirements found in the state mortgage lender licensing
statute(s).
Arkansas The managing principal or branch manager of a licensee under the Fair
Mortgage Lending Act must, among other things, establish procedures for
handling consumer complaints.19
California Under the California Finance Lenders Law20 and the California Residential
Mortgage Lending Act,21 if a licensee receives any reportable consumer
complaints involving loans subject to the Guidance on Nontraditional Mortgage
Product Risks (Guidance) and the Statement on Subprime Mortgage Lending
(Subprime Statement), the licensee must maintain a copy of each complaint
and the lender's written response or explanation of how the lender resolved
the complaint, including any workout arrangement.22 The lender must maintain
this documentation as part of its books and records and must make the
documentation available to the Commissioner upon request.23
All lenders must provide loan applicants with a Fair Lending Notice that
contains the name and address of all offices where a borrower may file a
complaint against the lender.24
Colorado No applicable requirements found in the state mortgage lender licensing
statute(s).
Connecticut No applicable requirements found in the state mortgage lender licensing
statute(s).
Delaware No applicable requirements found in the state mortgage lender licensing
statute(s).
17
See La. Rev. Stat. Ann. § 1088.4.
18
Joint Statement On Sub-prime Lending For State-Licensed Mortgage Lenders, June 27, 2007, available at
https://www.csbs.org/regulatory/policy/policy-guidelines/Documents/Final_CSBS-AARMR-
NACCA_StatementonSubprimeLending.pdf.
19
003-14 Ark. Code R. § 009(5008-1(b)).
20
Cal. Fin. Code §§ 22000 et seq.
21
Cal. Fin. Code §§ 50000 et seq.
22
Cal. Code Regs. tit. 10, §§ 1436, 1950.314.8.
23
Cal. Code Regs. tit. 10, §§ 1436(c), 1950.314.8(c).
24
Cal. Health & Saf. Code § 35830; Cal. Code Regs. tit. 21, § 7114.
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