Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices 7271 

DEPARTMENT OF COMMERCE 

International Trade Administration 

Cornell University, et al.; Application(s) 

for Duty-Free Entry of Scientific 

Instruments 

Pursuant to Section 6(c) of the 

Educational, Scientific and Cultural 

Materials Importation Act of 1966 (Pub. 

L. 89–651, as amended by Pub. L. 106– 

36; 80 Stat. 897; 15 CFR part 301), we 

invite comments on the question of 

whether instruments of equivalent 

scientific value, for the purposes for 

which the instruments shown below are 

intended to be used, are being 

manufactured in the United States. 

Comments must comply with 15 CFR 

301.5(a)(3) and (4) of the regulations and 

be postmarked on or before February 16, 

2021. Address written comments to 

Statutory Import Programs Staff, Room 

3720, U.S. Department of Commerce, 

Washington, DC 20230. Please also 

email an identical copy of any written 

comments to Dianne.Hanshaw@

trade.gov. Similarly, requests by the 

public to examine applications should 

be emailed to Dianne.Hanshaw@

trade.gov. 

Docket Number: 20–010. Applicant: 

Cornell University, Department of 

Materials Science and Engineering, 

Carpenter Hall, 313 Campus Road, 

Ithaca, NY 14853. Instrument: Six-axes 

sample manipulator for ample resolved 

photoemission. Manufacturer: Fermi 

Instruments, China. Intended Use: 

According to the applicant, the 

instrument will be used to fabricate on 

site new material and to study their 

electronic properties with several 

experimental techniques. Angle 

resolved photoemission (ARPES) will be 

the main one, as it conveys directly 

most information needed on the 

electronic structure of the material, e.g., 

whether it is conducting/insulating/ 

superconducting anisotropic, close to an 

electronic instability, likely to undergo 

an electronic transition, etc. According 

to the applicant, this is of great 

importance for fundamental physics, 

but in a longer-term perspective, also in 

order to identify the potential of 

materials for applications, in particular 

in energy production, conversion and 

storage. The ARPES set up, as well as, 

the molecular beam epitaxy station for 

materials fabrication, will be used as a 

facility for internal and external users, 

which will have to submit proposals 

and apply for time to perform their 

experiments. Justification for Duty-Free 

Entry: According to the applicant, there 

are no instruments of the same general 

category manufactured in the United 

States. Application accepted by 

Commissioner of Customs: August 6, 

2020. 

Docket Number: 12–011. Applicant: 

Cornell University, Department of 

Materials Science and Engineering, 

Carpenter Hall, 313 Campus Road, 

Ithaca, NY 14853. Instrument: Multi-gas 

lamp for angle-resolved photoemission. 

Manufacturer: Fermi, China. Intended 

Use: According to the applicant, the 

instrument will be used to fabricate on 

site new material and to study their 

electronic properties with several 

experimental techniques. Angle 

resolved photoemission (ARPES) will be 

the main one, as it conveys directly 

most information needed on the 

electronic structure of the material, e.g., 

whether it is conducting/insulating/ 

superconducting anisotropic, close to an 

electronic instability, likely to undergo 

an electronic transition, etc. According 

to the applicant, this is of great 

importance for fundamental physics, 

but in a longer-term perspective, also in 

order to identify the potential of 

materials for applications, in particular, 

in energy production, conversion and 

storage. The excitation source is a key 

element of any photoemission setup. It 

provides a beam of light which is 

directed to the sample and causes the 

emission of the electrons, object of the 

measurement. For angle-resolved 

photoemission, the standard excitation 

source is a helium (He) gas discharge 

lamp, which excites He atoms and emits 

light caused by the de-excitation 

process. It is widely used in many 

laboratories and sold by a few 

companies in the world. Justification for 

Duty-Free Entry: According to the 

applicant, there are no instruments of 

the same general category manufactured 

in the United States. Application 

accepted by Commissioner of Customs: 

August 10, 2020. 

Docket Number: 20–012. Applicant: 

University of Minnesota, Department of 

Chemical Engineering and Materials 

Science, 421 Washington Avenue SE, 

Minneapolis, MN 55455. Instrument: 

Spark Plasma Sintering Systems. 

Manufacturer: SUGA Co., Ltd., Japan. 

Intended Use: According to the 

applicant, the instrument will be used 

to study a variety of structural ceramic 

and metal materials including refractory 

alloys (e.g., containing combinations of 

Nb, Ta, W, Mo, Zr, Hf, etc.,), oxide 

ceramics such as Gd2Zr2O7), (Y5Al3O12), 

and Y2Si2O7, and non-oxide ceramics 

such as SiC and Si3N4. The instrument 

will also be used to study the sintering 

or consolidation behavior of these 

materials and will be used to prepare 

dense specimens to be analyzed using 

other instruments. The research focuses 

on the development or materials with 

improved performance in extreme 

environments. The instrument will be 

used to generate dense specimens of the 

materials described above, which will 

subsequently be tested using other 

methods to determine their performance 

in oxidizing or corrosive environments. 

A key aspect of the investigations 

involved rapid consolidation in order to 

achieve high density while limiting 

grain growth associated with longer 

exposures to high temperature used in 

other sintering techniques. Justification 

for Duty-Free Entry: According to the 

applicant, there are no instruments of 

the same general category manufactured 

in the United States. Application 

accepted by Commissioner of Customs: 

August 11, 2020. 

Dated: January 21, 2021. 

Richard Herring, 

Director, Subsidies Enforcement, Enforcement 

and Compliance. 

[FR Doc. 2021–01788 Filed 1–26–21; 8:45 am] 

BILLING CODE 3510–DS–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

Supervisory Highlights, Covid–19 

Prioritized Assessments Special 

Edition, Issue 23 (Winter 2021) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Supervisory Highlights. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is issuing 

its twenty-third edition of Supervisory 

Highlights. This is a special edition of 

Supervisory Highlights that details the 

Bureau’s Prioritized Assessment (PA) 

work. PA observations are described in 

the areas of mortgage, auto and student 

loan servicing, credit card account 

management, consumer reportingfurnishing, debt collection, deposits, 

prepaid cards, and small business 

lending. The report does not impose any 

new or different legal requirements, and 

all observations described in the report 

are based only on those specific facts 

and circumstances noted during those 

PAs. 

DATES: The Bureau released this edition 

of the Supervisory Highlights on its 

website on January 19, 2021. 

FOR FURTHER INFORMATION CONTACT: 

Jaclyn Sellers, Counsel, at (202) 435– 

7449. If you require this document in an 

alternative electronic format, please 

contact CFPB_Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: 


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7272 Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices 

1U.S. Department of Labor. July 17, 2020. 

Economics News Release: Employment Situation 

Summary, available at: https://www.bls.gov/ 

news.release/archives/laus_07172020.pdf. 

2Coronavirus Aid, Relief, and Economic Security 

Act, Public Law 116–136, 134 stat. 281 (March 27, 

2020). 

1. Introduction 

The Bureau is publishing this Special 

Edition of Supervisory Highlights to 

inform the public of observations in its 

prioritized assessment (PA) supervisory 

work conducted last year after the 

sudden onset of the COVID–19 

pandemic. PAs focused on assessing 

risks to consumers resulting from the 

pandemic. 

1.1 Background 

The COVID–19 pandemic had 

immediate and broad implications for 

Bureau-supervised entities. In a very 

short period of time, entities needed to 

adapt to a number of operational 

challenges, which included State stayat-home orders, staffing shortages, 

transition to partial or total remote 

work, and business closures. 

COVID–19 also deeply impacted 

consumers. Within three months of the 

pandemic’s start, the unemployment 

rate jumped to over 11 percent 1 and a 

significant number of consumers sought 

unemployment benefits. With large 

income losses, many households 

struggled to meet their credit 

obligations. In the early days of the 

pandemic, consumer requests for 

accommodations skyrocketed. 

On March 27, 2020, Congress passed 

the Coronavirus Aid, Relief, and 

Economic Security Act (the CARES 

Act),2 which included a temporary 

small business lending program known 

as the Paycheck Protection Program 

(PPP). It also amended certain 

provisions of the Fair Credit Reporting 

Act (FCRA) and established protections 

for consumers including homeowners 

and student loan borrowers. Institutions 

had to quickly implement the applicable 

CARES Act provisions. 

The Bureau recognized the challenges 

posed by the pandemic and encouraged 

supervised entities to focus on assisting 

consumers. The Bureau issued a number 

of statements that provided entities with 

temporary regulatory relief. The Bureau 

also announced that, in certain 

instances, the Bureau would take a 

flexible supervisory and enforcement 

approach during the pandemic. For 

more information about these 

statements please visit the Bureau’s 

website at https://www.consumer

finance.gov/compliance/supervisoryguidance/. 

1.2 Prioritized Assessments 

In May of 2020, the Bureau 

rescheduled about half of its planned 

examination work and instead 

conducted PAs in response to the 

pandemic. PAs were higher-level 

inquiries than traditional examinations. 

They were designed to obtain real-time 

information from a broad group of 

supervised entities that operate in 

markets posing elevated risk of 

consumer harm due to pandemic-related 

issues. 

The Bureau, through its supervision 

program, analyzed pandemic-related 

market developments to determine 

where issues were most likely to pose 

risk to consumers. The Bureau also 

prioritized markets where Congress 

provided special provisions in the 

CARES Act to help consumers. 

The Bureau sent targeted information 

requests to a significant number of 

entities to obtain information necessary 

to assess risk of consumer harm and 

violation of Federal consumer financial 

law. Each targeted information request 

was specific to the product market, that 

market’s attendant risks to consumers, 

and the institution. The targeted 

information requests focused on a short 

period of time, generally from early May 

2020 through September 2020. 

Typically, targeted information 

requests sought, as applicable: 

• Information on how the institution 

was assisting consumers; 

• challenges the institution was 

facing as a result of the COVID–19 

pandemic; 

• changes the institution made to its 

compliance management system (CMS) 

in response to the pandemic; 

• information about the institution’s 

relevant communications with 

consumers; 

• basic data regarding the 

institution’s response to the COVID–19 

pandemic; and 

• information about service 

providers. 

PAs were not designed to identify 

violations of Federal consumer financial 

law, but rather to spot and assess risks 

and communicate these risks to 

supervised entities so that they could be 

addressed to prevent consumer harm. 

The Bureau sent close-out letters to 

entities that detailed any observed risks 

and contained supervisory 

recommendations, if applicable. The 

Bureau will be following up on risks 

identified while conducting PAs in the 

normal course of the Bureau’s 

supervisory work. 

2. General Observations 

Many entities offered 

accommodations to consumers that 

experienced pandemic-related 

hardships. The CARES Act mandated 

forbearance options on federally backed 

mortgages and placed most student 

loans owned by the Department of 

Education into forbearance, and 

mandated zero interest accrual for all 

federally owned student loans. Even 

where not legally required, many 

entities also offered accommodations, 

including expanded payment assistance 

programs and fee waivers. For example, 

many auto servicers offered six-month 

payment deferrals to any consumer with 

a COVID–19 hardship, and many credit 

card issuers also offered deferrals that 

ranged from one to six months. 

Some Bureau-supervised entities 

struggled to adjust to the rapid changes 

brought on by the pandemic. Many 

institutions experienced increased call 

volumes from consumers requesting 

relief or disputing charges, with 

corresponding increases in hold times 

for many consumers. For some entities, 

the combination of rapid program 

implementation and operational 

challenges resulted in elevated risk of 

consumer harm. For example, several 

entities experienced a backlog of 

accommodation requests or provided 

inaccurate information to consumers 

about the accommodations they offered. 

Other risks observed by Bureau 

examiners ranged from inaccurate credit 

reporting to failure to send out timely 

disclosures. In many cases, staffing 

shortages or inaccurate training 

materials led to these issues. 

Many institutions created COVID–19 

response teams to identify and address 

consumer and industry challenges 

caused by the pandemic. Many entities 

engaged in robust monitoring of key 

processes, leading them to self-identify 

issues and implement corrective actions 

where needed. Other entities made 

changes in response to risks that Bureau 

examiners observed. Commonly seen 

changes made by institutions included: 

• Providing consumer remediation; 

• reversing fees; 

• updating scripts to provide accurate 

information to consumers; 

• transitioning from manual to 

automated processes; 

• correcting inaccurate credit 

reporting; and 

• correcting account histories. 

Some entities also increased staffing 

to clear backlogs and to address 

increased demand for accommodations. 

3. Supervisory Observations 

Specific PA observations are 

described in this report in the areas of 

mortgage, auto and student loan 

servicing, credit card account 

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3This document does not impose any new or 

different legal requirements. In addition, the risks 

described in this issue of Supervisory Highlights are 

based on the particular facts and circumstances 

reviewed by the Bureau as part of its PA work. A 

conclusion that elevated risk to consumers exists is 

based on the facts and circumstances described here 

and may not lead to such a finding under different 

facts and circumstances. 

4According to the Mortgage Bankers Association, 

an estimated 2.7 million borrowers were in 

forbearance plans as of December 2020. Mortgage 

Bankers Association. December 21, 2020. MBA: 

Share of Mortgage Loans in Forbearance Increases 

to 5.49 Percent, available at: https://www.mba.org/ 

2020-press-releases/december/share-of-mortgageloans-in-forbearance-increases-to-549-percent. 

5The CARES Act states that borrowers may 

request forbearance ‘‘regardless of delinquency 

status.’’ See CARES Act, section 4022(b)(1). 

6The CARES Act placed a moratorium on certain 

foreclosures. See CARES Act, section 4022. 

furnishing, debt collection, deposits, 

prepaid cards, and small business 

lending.3

3.1 Mortgage Servicing 

Market Response to Consumers & 

Industry Challenges 

The CARES Act established certain 

protections for homeowners. For 

example, for borrowers with federally 

backed mortgages, borrowers have the 

right to request and obtain forbearance 

for up to 180 days and to request and 

obtain an extension for another 180 days 

(for a total of 360 days). Since March 

2020, millions of borrowers have sought 

payment relief options and enrolled in 

CARES Act forbearances.4

Servicers faced a number of 

significant challenges. Beginning in 

March 2020, they had to quickly 

implement the CARES Act and make 

other operational changes in light of 

evolving investor guidance. Servicers 

reported taking a variety of steps to 

address issues related to the pandemic 

and enroll borrowers into CARES Act 

forbearances. Many servicers reported 

operational constraints, resource 

burdens, and service interruptions. 

Many servicers also moved employees 

from other duties to respond to 

forbearance requests. Some servicers 

reported disruptions to normal CMS and 

monitoring processes. 

Consumer Risk 

Examiners’ review of mortgage 

servicers’ PA responses indicated 

several issues that raise the risk of 

consumer harm. Some categories of 

issues are described below. 

Providing Incomplete or Inaccurate 

Information to Consumers About 

Forbearance 

Several servicers provided incomplete 

or inaccurate information to consumers 

regarding CARES Act forbearances. 

These issues present a range of potential 

risks of consumer harm, such as 

dissuading borrowers from requesting a 

forbearance and causing borrowers to 

pursue other options that may be less 

favorable to them than forbearance. 

Examiners observed instances of the 

following: 

• Customer service representatives 

provided inaccurate information 

regarding forbearances, including the 

available period for CARES Act 

forbearances and the interest accrued or 

amounts owed. Servicers told some 

borrowers that ‘‘lump sum’’ payment of 

all missed monthly payments would be 

required at the end of the forbearance 

period, when in fact that was not 

correct. 

• Representatives indicated that only 

delinquent borrowers could qualify for 

a forbearance, contrary to the CARES 

Act.5 As a result, representatives 

instructed some current borrowers to 

call back to request forbearance only 

after they had failed to make an on-time 

monthly payment. 

• Written materials, such as 

forbearance approval letters and 

customer service websites, included 

inaccurate or potentially misleading 

information regarding CARES Act 

forbearance. For example, one servicer 

suggested that consumers had to pay a 

fee to receive a forbearance and another 

provided incorrect due dates for the 

borrower’s next payment. 

• A servicer sent borrowers 

requesting CARES Act forbearances 

written agreements purporting to 

require a signature as a condition of 

enrollment and stating that payments 

would be due later that month, when in 

fact they would not be due for 90 or 180 

days. The CARES Act requires only that 

borrowers request a forbearance and 

attest to a financial hardship due to the 

pandemic to qualify. 

Sending Collections and Default 

Notices, Assessing Late Fees, and 

Initiating Foreclosures for Borrowers 

Enrolled in Forbearance 

Several servicers took actions on 

borrowers’ accounts that were erroneous 

or inconsistent with the fact that 

borrowers were enrolled in CARES Act 

forbearances. These issues present risks 

of direct financial harm and significant 

confusion for borrowers who were 

enrolled in forbearances. For example, 

some servicers sent automated 

collection notices to borrowers in 

CARES Act forbearances indicating that 

their accounts were past due, and that 

negative reporting and late fees could 

result. While collection notices may be 

required for FHA loans by regulation 

under some circumstances, they are not 

required for other loans and may result 

in confusion for consumers enrolled in 

CARES Act forbearances. In other cases, 

system issues resulted in erroneous late 

fees and default notices for borrowers 

enrolled in forbearances. Examiners also 

identified one servicer that erroneously 

initiated foreclosure actions in violation 

of the CARES Act’s moratorium on 

foreclosures and assessed related fees on 

borrowers in the early weeks of the 

pandemic.6

Cancelling or Providing Inaccurate 

Information About Borrowers’ 

Preauthorized Electronic Funds 

Transfers 

Several servicers provided inaccurate 

information or took actions concerning 

borrowers’ preauthorized electronic 

funds transfers without their knowledge 

or consent. These issues can result in 

inadvertent missed payments and other 

negative consequences for consumers. 

Due to manual data entry errors, 

representatives at one servicer cancelled 

borrowers’ preauthorized electronic 

funds transfers when they inquired 

about forbearance options over the 

phone. In addition, at other servicers, 

representatives provided inaccurate 

information to borrowers by stating that 

they did not need to take steps to cancel 

their preauthorized electronic fund 

transfers when they enrolled in 

forbearance, when in fact they did. 

Failing To Timely Process Forbearance 

Requests 

Many servicers experienced delays in 

processing forbearance requests in the 

early months of the pandemic. These 

delays were generally brief. However, a 

few servicers experienced more serious 

delays or failed to process forbearance 

requests. As a result, this issue presents 

a risk to consumers who do not timely 

receive the benefit of a requested 

forbearance and experience negative 

consequences, such as missed payments 

and negative credit reporting. For 

example, representatives processing 

borrower requests for forbearance 

incorrectly used a code indicating only 

that the borrowers inquired about 

forbearance, and no forbearance was 

processed. 

Enrolling Borrowers in Automatic or 

Unwanted Forbearances 

Many servicers enrolled borrowers in 

automatic or unwanted forbearances. 

Examiners observed the following: 

• Certain servicers did not effectively 

communicate to borrowers that they 

were applying for a forbearance. In some 

cases, borrowers believed that they were 


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7One servicer informed examiners that automatic 

forbearances were intended to allow borrowers to 

avoid the need to separately request forbearance on 

other loan accounts. However, examiners observed 

that a significant number of consumers enrolled in 

automatic forbearances called or submitted 

complaints seeking removal from forbearance. 

8The term ‘‘consumer reporting company’’ means 

the same as ‘‘consumer reporting agency,’’ as 

defined in the Fair Credit Reporting Act, 15 U.S.C. 

1681a(f), including nationwide consumer reporting 

agencies as defined in 15 U.S.C. 1681a(p) and 

nationwide specialty consumer reporting agencies 

as defined in 15 U.S.C. 1681a(x). 

simply reviewing information regarding 

forbearance on the servicers’ website or 

discussing a financial hardship with 

representatives on the phone. Those 

borrowers did not understand that they 

had applied for, or that the servicer 

would process, a forbearance. 

• Certain representatives used 

incorrect system codes that placed 

borrowers’ accounts into forbearances 

that they did not request. 

• Certain servicers automatically 

placed borrowers’ accounts into 

forbearance without their knowledge or 

approval. When borrowers with 

multiple loan accounts applied for 

forbearance on one account, some 

servicers automatically applied the 

forbearance to some or all of the 

borrowers’ other accounts. One servicer 

automatically converted in-process loan 

modification applications into 

forbearances without borrowers’ 

consent.7

• Several servicers acknowledged 

that, when accounts were placed in 

forbearance without borrowers’ request 

or approval, the servicers then furnished 

information to consumer reporting 

companies (CRCs) 8 indicating that the 

accounts had been placed in 

forbearance. 

Loss Mitigation Process Deficiencies 

Some servicers did not take 

appropriate steps relating to loss 

mitigation for borrowers in CARES Act 

forbearances. The risks to consumers 

from these issues include missed 

opportunities to pursue and enroll in 

appropriate repayment options or plans. 

Issues observed include: 

• One servicer enrolled borrowers 

who submitted incomplete loss 

mitigation applications in CARES Act 

forbearances and appropriately sent 

acknowledgement letters to these 

borrowers but failed to include a 

statement that the consumer will be 

evaluated for all options upon 

submitting a completed loss mitigation 

application, as required by Regulation 

X. 

• One servicer had no process in 

place to evaluate whether borrowers 

who submitted complete loss mitigation 

applications qualified for CARES Act 

forbearances because they were 

experiencing a pandemic-related 

hardship. Some borrowers were instead 

enrolled in forbearances that lacked 

CARES Act protections—such as a term 

up to 360 days and credit reporting 

protections. The servicer received 

complaints from borrowers who missed 

payments while in a loss mitigation 

process, when they likely could have 

been offered the protections of the 

CARES Act. 

3.2 Auto Servicing 

Market Response to Consumers & 

Industry Challenges 

Auto servicers reported large numbers 

of pandemic-related payment assistance 

requests beginning in early March 2020. 

Many servicers expanded existing 

payment assistance programs to help 

borrowers who were having trouble 

making payments. The changes 

included waiving late fees, permitting 

non-delinquent as well as delinquent 

borrower enrollments, and providing 

longer payment deferrals. 

The payment assistance programs 

generally offered loan payment 

deferment on a case-by-case basis, with 

most borrowers receiving a payment 

deferral period of three or more months. 

In the majority of cases, the payment 

deferments extended the loan term by 

the same number of months. Most 

servicers continued to charge interest 

during the deferral period. 

Servicers generally suspended 

repossessions between mid-March and 

early-May 2020, because State stay-athome orders halted repossession efforts. 

While some states may have imposed 

repossession moratoria, there was no 

Federal moratorium. 

Consumer Risk 

Examiners’ review of auto loan 

servicers’ PA responses indicated 

several issues that present risk of 

consumer harm, including the 

following: 

Many servicers provided information 

to consumers about the impact of 

interest accrual during deferment 

periods on the final loan payment 

amount that might not have been 

sufficiently precise for consumers to 

understand how much their payments 

would increase. For example, 

consumers who would face final 

payments that were more than double 

their regular payments may not have 

reasonably anticipated this result when 

servicers described the final payment as 

‘‘substantially larger than your regular 

monthly payment.’’ More specific 

information about the final payment 

may allow consumers to budget and 

plan for future large payments and 

mitigate the risks that consumer could 

not make that payment. Servicers have 

various options to better disclose the 

long-term payment obligations, such as 

estimating final payment amounts. 

Some servicers continued to 

withdraw funds for monthly payments 

after servicers had agreed to deferments. 

And some servicers failed to process 

certain payment assistance requests. 

One servicer sent borrowers notices 

warning them of possible repossession 

when, in fact, the servicers had 

suspended repossession operations 

during the relevant time period. This 

practice likely affected whether some 

borrowers, threatened by repossession, 

spent discretionary money on their car 

payments instead of other financial 

necessities during the pandemic. 

3.3 Student Loan Servicing 

Market Response to Consumers & 

Industry Challenges 

The CARES Act provided certain 

student loan borrowers with a range of 

protections. It temporarily reduced 

interest rates to zero for all federal loans 

owned by the U.S. Department of 

Education (ED) and suspended monthly 

payments for most of these loans. To 

facilitate the suspension, servicers 

placed most loans in repayment status 

into an administrative forbearance. In 

addition, the suspended monthly 

payments are considered eligible 

payments toward the total number of 

qualifying payments necessary for 

forgiveness under the Public Service 

Loan Forgiveness program and various 

income-driven repayment plans. 

Servicers reported that between March 

and May 2020 the number of delinquent 

accounts in the William D. Ford Federal 

Direct Loan Program (Direct loans) 

decreased from 1.9 million to fewer than 

150 accounts. 

Many loan holders of commercial 

Federal Family Education Loan Program 

(FFELP) loans directed servicers to use 

the natural disaster forbearance 

provisions to provide payment relief for 

consumers impacted by the pandemic. 

These provisions did not provide the 

forgiveness or interest rate features of 

the CARES Act relief afforded to 

borrowers with Direct loans and EDheld FFELP loans. 

Private student loan holders and 

lenders managed the early response to 

the pandemic with a variety of different 

payment relief options. Certain private 

student loan holders relied on options 

provided in the terms of the original 

note like economic hardship or natural 

disaster forbearances. Still others 


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created new short-term payment relief 

options for consumers. Private loan 

forbearance options and implementation 

of FFELP disaster forbearance programs 

often evolved as the extent of the 

economic impacts from the pandemic 

became more apparent. In general, 

servicers did not require any 

documentation to enroll borrowers into 

COVID–19 related forbearances. 

Between March and May 2020, servicers 

reported that the number of delinquent 

commercial FFELP and private student 

loans across all servicers reviewed fell 

from 270,000 to 146,000. 

Servicers faced a number of 

significant challenges. In March and 

April 2020, they quickly implemented 

the CARES Act for federally owned 

loans, identified and made available a 

variety of private and commercial 

FFELP payment relief options, and 

complied with local shelter-in-place or 

stay-at-home orders. Many servicers 

reported operational constraints and 

service interruptions, consistent with 

other servicing sectors. Finally, 

examiners observed that a large 

percentage of calls from commercial 

FFELP and private student loan 

borrowers related to the CARES Act 

even though they were not eligible for 

the benefits. For example, consumers 

often expressed confusion and 

frustration after receiving bills when 

they believed their loans should have 

been automatically placed into CARES 

Act forbearances. Other consumers 

inquired about how to enroll in the 

forbearances they heard about in the 

news. 

Consumer Risk 

Examiners’ review of student loan 

servicers’ PA responses, which related 

to federal and private student loans, 

indicated several issues that raise the 

risk of consumer harm, described below. 

One servicer provided incorrect or 

incomplete information about available 

payment relief options in written 

communications to numerous 

consumers. For example, some 

borrowers received inaccurate notices 

indicating that interest would capitalize 

at the conclusion of the natural disaster 

forbearances when, in fact, it would not. 

In another instance, private student loan 

borrowers received notices suggesting 

that they were eligible for natural 

disaster forbearances with certain terms 

when, in fact, the borrowers receiving 

these notices were ineligible. In both of 

these situations the servicer sent written 

communications informing affected 

borrowers of the error. 

Multiple servicers failed to routinely 

discuss all available repayment options 

with borrowers requesting payment 

assistance. While borrowers were 

eligible to enroll in various forbearances 

in the wake of the COVID–19 pandemic, 

they have other options as well. For 

example, commercial FFELP borrowers 

are eligible for income-based repayment, 

which may be a better option for many 

borrowers. Additionally, private loan 

borrowers may also be eligible for nonstandard repayment plans that can 

provide long-term payment relief. In 

these cases, consumers were never 

informed about alternative repayment 

options when they requested payment 

assistance. 

Operational challenges resulted in 

one servicer failing to maintain regular 

call center hours. While operational 

disruptions were common across the 

industry, during this period most call 

centers stayed open at least part of the 

time. The complete or partial closure of 

call centers created a range of problems 

for consumers who were unable to talk 

with representatives, particularly in 

connection with payment relief-specific 

guidance. 

One private loan holder was not 

responding to consumers’ forbearance 

extension requests. Many loan holders 

authorize servicers to grant initial 

forbearances for consumers that call to 

request payment assistance. However, 

some loan holders require that servicers 

seek their approval for any forbearance 

extension. Examiners observed that 

thousands of extension requests were 

delayed and ultimately denied because 

the loan holder never responded. This 

challenge needlessly hinders 

consumers’ abilities to make broader 

financial decisions and may cause 

certain consumers to believe the loan 

holder will evaluate the applications 

and that extensions are likely. 

One servicer provided inaccurate 

information related to the number of 

payments eligible for repayment, 

rehabilitation, or forgiveness programs. 

Unlike under most forbearances, months 

that federally owned loans are enrolled 

in the forbearance authorized by the 

CARES Act are considered eligible 

under a variety of programs. However, 

when providing information to 

consumers about the total number of 

eligible payments, one servicer failed to 

include these months in the count. 

Examiners observed some payment 

allocation errors when servicers applied 

voluntary payments to accounts 

enrolled in CARES Act forbearances. 

The servicers allow consumers to direct 

payments to individual loans within 

their accounts through individual 

instructions or standing orders. Many 

consumers use standing orders to 

establish a payment methodology that 

directs payments to loans with the 

highest interest rates. When consumers 

do not provide allocation instructions, 

servicers use their own default 

methodologies. Some servicers’ default 

methodologies allocate payments based 

on the interest rates of the loans. The 

CARES Act stopped all interest accrual 

on loans owned by ED, and in these 

loans, some servicers failed to comply 

with allocation methodologies or 

instructions that relied on loan-level 

interest rates. In one situation, a servicer 

did not comply with consumers’ 

standing payment instructions to 

allocate payments towards the highest 

interest rate loan first. Rather, 

representatives incorrectly used the 

CARES Act temporary interest rates and 

split payments evenly across the 

consumers’ loans despite underlying 

differences in interest rates. While the 

error was not systematic in that case, if 

uncorrected, consumers’ highest interest 

rate loans will not be paid down as 

much as they would be if servicers 

applied payments based on the 

permanent interest rate, so when 

payments and interest accrual resume, 

these borrowers would end up paying 

more over time. 

Some servicers failed to prevent 

preauthorized electronic funds transfers 

following forbearance approval for loans 

that are not federally owned. For 

example, due to manual errors, one 

servicer failed to timely enroll 

consumers in forbearances that they 

approved over phone calls and failed to 

cancel the relevant preauthorized fund 

transfers as well. In other examples, 

servicers failed to cancel preauthorized 

electronic funds transfers when 

consumers requested and were granted 

forbearances that halted all required 

payments. 

One servicer provided inaccurate 

information to consumers regarding the 

information required to evaluate 

forbearance applications for loans that 

are not federally owned. The servicer 

advised consumers that providing the 

date range related to the COVID–19 

impact was acceptable. In fact, the 

servicer denied forbearance requests for 

consumers who provided date ranges 

rather than precise dates of COVID–19 

impact. 

Certain servicers allow commercial 

FFELP consumers to enroll in natural 

disaster forbearances through their 

websites or automated phone systems. 

Examiners observed that one servicer 

failed to prevent certain ineligible 

borrowers in technical default (more 

than 270 days delinquent) from 

enrolling in forbearances. This resulted 

in the servicer confirming enrollment in 

forbearances that were not actually 

provided to consumers. Consumers may 


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7276 Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices 

9CFPB. May 13, 2020. Open-End (not HomeSecured) Rules FAQs related to the Covid–19 

Pandemic, available at: https://files.consumer

finance.gov/f/documents/cfpb_faqs_open-end-rulescovid-19_2020-05.pdf. 

have believed that they did not need to 

take any actions until the forbearance 

periods ended. However, these 

consumers in fact needed to make 

payments or, at a minimum, talk with 

representatives to resolve the issues. 

3.4 Credit Card Account Management 

Market Response to Consumers & 

Industry Challenges 

Credit card issuers generally provided 

some form of relief to consumers 

experiencing hardships as a result of the 

COVID–19 pandemic. The most 

common relief was allowing consumers 

to skip a payment or to defer payments 

for one to six months. While some 

issuers waived interest along with 

payment deferrals, interest continued to 

accrue on accounts at most issuers. 

Other relief options included lowered 

interest rates, waivers of annual and 

other fees, and extended deferred 

interest periods for credit card accounts 

that already had deferred interest on 

certain purchases. A few issuers made 

changes to manage credit risk. Some 

issuers tightened underwriting 

standards, stopped proactive scorebased credit limit increases, reduced 

credit limits, or closed some accounts. 

Some issuers also halted marketing 

campaigns to acquire new accounts and 

paused direct marketing campaigns due 

to uncertainty in the market. 

Issuers generally experienced some 

operational challenges as a result of the 

COVID–19 pandemic, such as increased 

call volume. The compliance-related 

challenges included: 

• Difficulty in meeting written 

disclosure timing requirements; or 

obtaining necessary consumer consent 

for electronic disclosures (e.g., for 

change-in-terms letters and statement 

messaging); 

• Meeting regulatory requirements to 

address customer disputes, sometimes 

resulting from business partner and 

merchant closures; and 

• Adjustments in regular monitoring 

and testing schedules for credit card 

operations. 

In responding to challenges, some 

issuers deployed their existing disaster 

preparedness and business continuity 

management plans to address some of 

the operational challenges related to the 

COVID–19 pandemic. However, several 

issuers had to modify existing programs 

and business line processes, and revise 

policies and procedures to respond to 

the unique operational challenges posed 

by the COVID–19 pandemic. 

Consumer Risk 

Examiners’ review of issuers’ PA 

responses indicated several issues that 

raise the risk of consumer harm. These 

issues are described below. 

Implementation and System 

Deficiencies 

Certain issuers reported problems 

implementing relief programs, and these 

problems may have caused consumer 

harm. These issuers relied on manual 

processes to handle high volumes of 

requests for relief and did not provide 

adequate employee training about relief 

programs. 

Some issuers that used manual 

processes to handle the high volumes of 

requests for relief reported significant 

backlogs in processing such requests. 

Due to these backlogs, accounts became 

delinquent between the time of 

consumers’ requests for relief and the 

actual processing of requests, exposing 

consumers’ accounts to potential 

negative credit reporting, charge-offs, or 

account closures. 

In some instances, consumers who 

requested relief were erroneously told 

that they would receive immediate relief 

as of the date of their request. In fact, 

these consumers would not receive 

relief until the consumer’s request was 

manually entered into the issuer’s 

system, which occurred days, or even 

weeks, later. In some cases, consumers 

were never manually enrolled in relief 

programs. Consequently, fees and 

interest that were supposed to be 

waived, along with the payment 

deferrals, were not waived. 

Some issuers also reported that 

employees provided inaccurate 

information to consumers in order to 

collect payments from them. For 

instance, representatives told consumers 

that they had to pay their past due 

amount to enroll in the payment 

deferment program when in fact, paying 

the past due amount was not a 

requirement for enrollment. 

Auto Pay Process Deficiencies 

Several issuers advised consumers 

who requested to skip or defer credit 

card payments pursuant to a pandemic 

relief program that they must adjust or 

separately cancel any preauthorized 

credit card payments (including 

preauthorized transfers from an external 

financial institution) that were set up to 

make their periodic credit card 

payments. Examiners observed that the 

instructions given to consumers in 

certain cases, including going through 

additional steps to cancel or defer 

payments after completing the 

pandemic relief request process, posed 

a risk of consumer harm. 

Some issuers did not immediately 

suspend preauthorized transfers upon 

enrolling consumers in pandemic relief 

programs, despite making 

representations to consumers that 

payments would be suspended as of the 

date the consumer enrolled. Rather, the 

issuers’ systems were programmed to 

suspend preauthorized transfers as of 

the date that the consumer’s request for 

relief was manually processed by the 

issuer. Because of processing backlogs, 

suspension of transfers did not occur 

until several days or weeks after the 

consumer’s oral request. Due to these 

processing backlogs, examiners 

observed that several consumers’ 

accounts were debited in error. 

Timing of Delivery of Disclosures 

At several issuers, some consumers 

who had not previously opted to receive 

electronic disclosures requested 

COVID–19 relief telephonically. For 

these consumers, the issuers had no 

practical way to provide written 

disclosures without delaying relief or 

obtaining the consumer’s consent to 

electronic disclosure. Rather than delay 

relief, the issuers provided immediate 

relief to cardholders and delivered 

written disclosures by letter or 

statement notice.9

Billing Disputes 

Some issuers reported that they failed 

to resolve billing disputes by the 

regulatory deadline. This failure was 

attributed to the increased volume of 

error notices and merchant closures 

which increased the amount of time to 

investigate and resolve such errors. 

3.5 Consumer Reporting and 

Furnishing 

Consumer reporting plays a critical 

role in consumers’ financial lives. CRCs 

assemble or evaluate consumer 

information for the purpose of 

furnishing consumer reports to third 

parties. Such consumer reports can 

determine a consumer’s eligibility for 

credit cards, car loans, and home 

mortgage loans—and they often affect 

how much a consumer is going to pay 

for that loan. Furnishers of information 

provide information to CRCs and thus 

play a crucial role in the accuracy and 

integrity of consumer reports. Inaccurate 

information on consumer reports can 

lead to market harm. For example, 

inaccurate information on a consumer 

report can impact a consumer’s ability 

to obtain credit or open a new deposit 

or savings account. Moreover, furnishers 

have an important role when consumers 

dispute the accuracy of information in 


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10 15 U.S.C. 1681i(a), 15 U.S.C. 1681s–2(a)(8), 15 

U.S.C. 1681s–2(b); 12 CFR 1022.43. 

11CARES Act, Public Law 116–136, sec. 4201 

(2020) (amending section 623(a)(1) of the FCRA 

subject to certain exceptions). 

12CFPB. June 16, 2020. Consumer Reporting 

FAQs Related to the CARES Act and COVID–19 

Pandemic, available at https://files.consumer

finance.gov/f/documents/cfpb_fcra_consumerreporting-faqs-covid-19_2020-06.pdf. 

13CFPB. August 31, 2020. The Early Effects of the 

COVID–19 Pandemic on Consumer Credit, available 

at https://files.consumerfinance.gov/f/documents/ 

cfpb_early-effects-covid-19-consumer-credit_issuebrief.pdf. 

14CARES Act, Public Law 116–136, sec. 4201 

(2020) (amending section 623(a)(1) of the FCRA). 

15Regulation V, 12 CFR 1022.42(a). 

16 15 U.S.C. 1681i(a), 15 U.S.C. 1681s–2(b)(1). 

their consumer reports. Consumers may 

dispute information that appears on 

their consumer report directly with 

furnishers (‘‘direct disputes’’) or 

indirectly through CRCs (‘‘indirect 

disputes’’). When CRCs and furnishers 

receive disputes, they are required to 

investigate the disputes to verify the 

accuracy of the information furnished.10

A timely and responsive reply to a 

consumer dispute may reduce the 

impact that inaccurate negative 

information in a consumer report may 

have on the consumer. 

Market Response to Consumers & 

Industry Challenges 

The CARES Act amended Section 

623(a)(1) of the FCRA (CARES Act 

FCRA amendment). This amendment 

applies if a furnisher makes an 

accommodation with respect to one or 

more payments on a credit obligation or 

account of a consumer, and the 

consumer makes the payments or is not 

required to make one or more payments 

pursuant to the accommodation. For 

accounts where the CARES Act FCRA 

amendment applies, if the credit 

obligation or account was current before 

the accommodation, during the 

accommodation the furnisher must 

continue to report the credit obligation 

or account as current. If the credit 

obligation or account was delinquent 

before the accommodation, during the 

accommodation the furnisher cannot 

advance the delinquent status.11 For 

more examples regarding the 

applicability of the CARES Act FCRA 

amendment, the Bureau has published 

detailed FAQs.12

Furnishers and CRCs faced challenges 

in responding to the pandemic and the 

new requirements of the CARES Act 

FCRA amendment. Several furnishers 

and CRCs reported temporary staffing 

challenges that affected the entities’ 

ability to complete reasonable dispute 

investigations within the time periods 

specified in the FCRA and Regulation V. 

Many furnishers also adapted to 

consumer need by offering new or 

expanded payment accommodations to 

consumers, which required changes in 

staffing to handle request volume. In 

light of the new statutory requirements 

for furnishing under the CARES Act 

FCRA amendment, these new or 

expanded accommodations also 

required that furnishers make changes 

in procedures to appropriately code 

accounts so that they would be 

furnished correctly according to the 

statute’s new requirements. 

Notwithstanding these challenges, most 

CRCs and furnishers provided 

information indicating that they have 

adapted to meet their FCRA and 

Regulation V obligations. This is 

consistent with the findings of the 

CFPB’s Office of Research that, in 

several credit markets including 

mortgage loans, auto loans, and student 

loans, the reported rate of new 

delinquencies, as well as the reported 

share of existing delinquencies that 

became more delinquent, decreased 

between March and June 2020.13

Consumer Risk 

Examiners’ review of furnishers’ and 

CRCs’ PA responses indicated several 

issues that present risk of consumer 

harm. 

Inaccurate Reporting of 

Accommodations 

Some entities furnished new and/or 

advancing delinquency information to 

CRCs after making an accommodation. 

As noted above, if a furnisher makes an 

accommodation, the furnisher must 

under certain conditions report the 

credit obligation or account as current, 

or if the credit obligation or account was 

delinquent before the accommodation, 

not advance the delinquent status 

during the period of the 

accommodation.14 Certain furnishers 

made accommodations, and 

communicated to the consumer that the 

accommodation had been made 

immediately after the consumer 

submitted the application. These 

furnishers then delayed processing 

accommodations due to backlogs 

created by the volume of 

accommodation requests. This resulted 

in: (i) Reporting some consumers who 

were current as delinquent, and then 

improperly advancing and reporting 

their incorrect delinquency status, or (ii) 

improperly advancing the delinquency 

status of other consumers who were 

delinquent at the time of the 

accommodation. 

Insufficient Furnishing Policies and 

Procedures 

Examiners observed that insufficient 

furnishing policies and procedures 

caused an entity to furnish inaccurate 

account information to CRCs related to 

the practice of home pickups of leased 

vehicles. 

Furnishers are required to ‘‘establish 

and implement reasonable written 

policies and procedures regarding the 

accuracy and integrity of the 

information relating to consumers that it 

furnishes to a consumer reporting 

agency. The policies and procedures 

must be appropriate to the nature, size, 

complexity, and scope of each 

furnisher’s activities.’’ 15

An auto furnisher failed to update 

furnishing policies and procedures to 

address the furnisher’s changed leased 

vehicle return practices. This caused the 

furnisher to erroneously report 

consumers as delinquent for leased 

vehicles that had, in fact, been returned. 

As a result of the pandemic, many auto 

dealerships were closed, so vehicles 

were picked up from consumers’ homes. 

This created delays or errors in the 

processing of lease termination, causing 

auto furnishers to report accounts as 

delinquent even though consumers had 

returned their vehicles on time. 

After making changes to 

accommodation programs offered to 

consumers during the pandemic, a 

number of furnishers did not update 

their written policies and procedures 

regarding the accuracy and integrity of 

the information related to consumers 

that they furnish to CRCs. 

Accommodation programs offered by 

furnishers may affect how the furnishers 

report information about its accounts to 

CRCs. Accordingly, there is a risk of 

furnishing inconsistent with the CARES 

Act FCRA Amendment if furnishers 

have made changes to accommodation 

programs without updating related 

furnishing policies and procedures. 

Untimely Dispute Investigations 

CRCs and furnishers are required to 

conduct an investigation with respect to 

the disputed information, review all 

relevant information provided by the 

consumers with the dispute, and 

respond with the results of the dispute 

investigation.16

In the second quarter of 2020, staffing 

challenges due to the pandemic 

impacted dispute investigation capacity 

at one or more furnishers and CRCs. As 

a result of these staffing challenges, 

some furnishers and CRCs were unable 

to timely conduct investigations of 


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7278 Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices 

17The Coronavirus Response and Relief 

Supplemental Appropriation Act of 2021 provides 

many consumers with a second Economic Impact 

Payment. The legislation authorizing the payments 

directs financial institutions to treat these EIPs as 

exempt from garnishment orders. 

disputed tradelines in the months of 

April and May. However, examiners 

observed data indicating that, by the 

end of June 2020, the average time to 

resolve disputes by furnishers had 

returned to the average time from prior 

years. 

Some CRCs and furnishers that 

experienced this problem in the Spring 

of 2020 took steps to reduce the risk of 

inaccurate consumer information 

caused by these staffing challenges. 

Specifically, these CRCs and furnishers 

continued to investigate the disputes 

and subsequently furnished updated or 

corrected information about such 

disputed items after completing their 

dispute investigations. CFPB 

Supervision is continuing to monitor 

dispute timeliness at CRCs and 

furnishers. 

3.6 Debt Collection 

Market Response to Consumers & 

Industry Challenges 

During the review period, some 

participants in the debt collection 

industry reported an increase in 

consumer contacts and payments, 

which several attributed to more 

consumers being at home, reduced 

spending, and the resources provided by 

pandemic assistance programs. 

Debt collectors altered their work 

practices in response to the pandemic to 

comply with State orders and reduce 

their employees’ risk of infection. In 

general, collectors responding to the 

PAs indicated that they transitioned 

partially or entirely to remote work 

during the review period. Other 

workplace changes were reported, 

including the implementation of remote 

call-monitoring tools and modifications 

to telework policies. 

Some states instituted pandemic 

measures that impacted the debt 

collection industry and consumers. 

These measures include prohibitions on 

new wage garnishments or bank 

attachments, and a requirement that 

consumers be offered the option to defer 

scheduled payments. 

Consumer Risk 

Examiners’ review of debt collectors’ 

PA responses indicated several issues 

that raise the risk of consumer harm, 

discussed below. 

In certain instances, there were delays 

in processing suspensions of 

administrative wage garnishments 

(AWG), followed by attempts by 

collectors to rectify the effects of those 

delays. Several servicers of 

commercially owned Federal student 

loans voluntarily suspended AWG 

collections. However, some employers 

did not promptly suspend garnishment 

of consumer wages. As a result, 

collectors made additional efforts to 

contact the employers and to provide 

refunds for wages garnished after the 

suspension. 

Examiners reviewed the potential for 

FDCPA compliance risks associated 

with new restrictions on wage 

garnishment and bank attachments. 

FDCPA violations can occur 

independent of whether State law has 

been violated. Nonetheless, when 

evaluating whether an action taken to 

enforce a judgment violates FDCPA 

section 808’s prohibition of ‘‘unfair or 

unconscionable’’ debt collection 

practices, one fact the Bureau may 

consider is whether applicable law 

permits resort to garnishment or 

attachment of a consumer’s assets in a 

particular set of circumstances. Several 

State laws or regulations promulgated 

during the review period appear to 

prohibit debt collectors from imposing 

new attachments on bank accounts or 

new wage garnishments on employers. 

Of the examined debt collectors that 

engage in litigation and judgment 

enforcement activities, several 

voluntarily stopped imposing new bank 

attachments and/or wage garnishments 

during the review period. Due to 

significant complexities and a rapidly 

shifting landscape of State restrictions, 

continued litigation and judgment 

enforcement during the pandemic could 

still pose compliance risks and, as a 

result, risks to consumers. 

There were payment processing 

delays for some entities caused by the 

transition to remote work. Certain 

collectors experienced delays in 

processing payments that were sent by 

mail and received at a physical location 

which was temporarily inaccessible due 

to the pandemic. In those instances, 

examiners generally observed the entity 

retroactively posting payments effective 

on the date payment was delivered. 

3.7 Deposits 

Market Response to Consumers & 

Industry Challenges 

As part of the CARES Act, Congress 

authorized direct monetary payments, 

known as Economic Impact Payments 

(EIPs), to many consumers. The CARES 

Act also increased the amount of State 

unemployment insurance consumers 

might receive. Direct deposit was the 

primary method of distribution for EIPs. 

Direct deposit was and is a significant 

distribution method for State 

unemployment insurance benefits. Due 

to the economic hardship caused by the 

pandemic, consumers’ ability to access 

these benefits was critical. 

Depository institutions responded to 

the challenges posed by the pandemic 

in several ways. Many institutions 

closed physical branch locations to 

protect the health of both their staff and 

customers. A number of institutions 

transitioned staff to remote work, 

increased call center staffing in order to 

deal with the influx of customer 

questions, and increased ATM deposit 

and withdrawal limits to maintain 

consumers’ access to their funds. 

In response to the pandemic, a 

number of institutions activated their 

existing disaster relief programs. 

Numerous institutions made temporary 

changes to existing policies and 

procedures and documented those 

changes in informal documents, 

including job aids, playbooks, and FAQs 

issued to employees. A few institutions 

also made changes to formal policies 

and procedures. Whether through 

existing disaster relief programs, 

temporary changes, or formal policy and 

procedure updates, many institutions 

reported taking actions to reach out to 

consumers to offer assistance and 

provide resources in connection with 

pandemic-related hardships. 

Consumer Risk 

Examiners’ review of institutions’ PA 

responses found several issues that 

elevate the risk of harm to consumers. 

The most commonly observed risks 

arose from the failure of institutions to 

fully implement the protections states 

put in place to protect consumers’ 

access to the full amount of their 

government benefits, specifically EIPs 

and unemployment insurance benefits. 

Some states prohibited institutions from 

using EIPs or unemployment insurance 

benefits to cover charged-off loan 

obligations, fees owed to the 

institutions, or overdrawn account 

balances. Other states limited actions to 

garnish government benefits to satisfy 

judgments, attachments, or levies for 

third-party creditors.17 These State 

actions took a number of different 

forms, including executive orders, 

emergency legislation, court orders, and 

State attorney general guidance. 

Many institutions sought to identify, 

analyze, and, as appropriate, ensure 

compliance with State measures that 

imposed legal obligations on the 

institutions. But based on the limited 

information obtained through the PAs, 

examiners could not determine that all 

the institutions identified and/or 


khammond on DSKJM1Z7X2PROD with NOTICES
Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices 7279 

18Electronic Fund Transfer Act, 12 U.S.C. 1693 

et seq.; Regulation E, 12 CFR 1005.15(c)(1); 

Regulation P, 12 CFR part 1016. 

analyzed compliance obligations under 

State laws with respect to exercising 

setoff rights and/or garnishing 

government benefits. Failure to properly 

identify, analyze, and, as applicable, 

comply with State actions poses a risk 

that consumers might be deprived of the 

full use of government benefits. Such a 

failure could, in turn, under certain 

circumstances, constitute an act or 

practice that violates Federal consumer 

financial law. 

For those institutions that did waive 

setoff rights in response to State actions 

discussed above or on their own 

initiative, other consumer risks were 

identified. Institutions used a variety of 

methods to waive setoff rights. These 

methods included refunding fees that 

contributed to a consumer’s account 

being overdrawn, permanently forgiving 

overdrawn account balances, and 

issuing checks to consumers with 

overdrawn accounts for the full amount 

of their EIPs or protected 

unemployment insurance benefits. 

Institutions most frequently waived 

setoff rights through the issuance of 

provisional credits in the amount of the 

overdrawn account balances. These 

credits would then be revoked at a later 

date, potentially leaving some 

consumers with a negative account 

balance. 

Waiver of setoff rights allowed 

consumers access to the full amount of 

government benefits. At several 

institutions, examiners found risk when 

the institutions failed to clearly 

communicate to consumers how and 

when provisional credits would be 

revoked. This risk was exacerbated if 

the institutions lacked a clear policy 

preventing assessment of an overdraft 

fee when the revocation of provisional 

credit resulted in a negative account 

balance. Consumer complaints 

indicated confusion about the use and 

revocation of provisional credits. 

Examiners also observed a risk with 

respect to policies and procedures 

around the waiver or refund of account 

fees. In response to COVID–19, some 

institutions expanded existing account 

fee waiver or refund policies either 

through a blanket waiver or upon 

consumer request. These institutions 

informed consumers of the changes on 

their websites or via press releases. 

However, examiners observed a risk 

when the institutions failed to 

implement policies and procedures that 

clearly and consistently operationalized 

account fee waivers and refunds. 

3.8 Prepaid Accounts 

Market Response to Consumers & 

Industry Challenges 

Pandemic-related business closures 

led to millions of consumers receiving 

State unemployment insurance benefits. 

For a period of time, the CARES Act 

enhanced the amount of unemployment 

insurance benefits that consumers 

received. Many States issue prepaid 

cards as a method for disbursing 

unemployment insurance benefits. 

Aside from unemployment insurance 

benefits, some consumers received EIPs 

on prepaid cards. As a result, prepaid 

accounts experienced an unexpected 

spike in demand. 

This rapid growth caused issues 

related to transaction and maintenance 

fees, service availability, and continuity. 

The industry encountered difficulty in 

fully staffing call centers to quickly 

answer questions and resolve conflicts 

relating to the significant increase in 

volume and number of prepaid 

accounts. Although depository 

institutions issue prepaid accounts, they 

often contract with third-party service 

providers to assist in managing the 

accounts. The compliance infrastructure 

at these third parties is generally less 

mature, which exacerbates the potential 

for consumer harm caused by 

unforeseen changes in the prepaid 

marketplace. 

Consumer Risk 

Prepaid account issuers generally 

made changes to address staffing 

challenges and operational difficulties 

caused by the COVID–19 pandemic and 

the significant rise in volume and 

number of accounts. Nonetheless, 

examiners highlighted a few key 

COVID–19 related risks with respect to 

issuers of unemployment insurance 

benefit prepaid accounts. 

Due to surge in demand, one 

institution lacked sufficient supply of 

the required disclosures and privacy 

notices and, rather than delay account 

access, mailed the prepaid account 

information to consumers without the 

required disclosures and privacy 

notices. To mitigate the lack of paper 

written disclosure, the institution 

included the address of a website where 

consumers could review the information 

online. The lack of paper disclosures 

presented a risk of harm as these 

consumers did not receive disclosures 

that included the terms of use and 

privacy notices as required by law.18

These required disclosures cover, 

among other things, the fee schedule 

and error resolution rights associated 

with the prepaid accounts. The 

institution addressed this issue by 

subsequently mailing the required 

disclosures and privacy notices to 

impacted consumers. 

3.9 Small Business Lending 

The Bureau has supervisory authority 

over large insured depository 

institutions and insured credit unions, 

many of which have originated PPP 

loans. Consistent with its authority to 

ensure compliance with the Equal 

Credit Opportunity Act (ECOA), the 

Bureau conducted PAs to assess 

potential fair lending risks attendant to 

the institutions’ participation in the 

program. Below are the supervisory 

observations resulting from these PAs. 

Market Response to Consumers & 

Industry Challenges 

The COVID–19 pandemic had a swift 

and dramatic impact on small 

businesses. Many small businesses were 

forced to shut down temporarily or 

reduce operations in response to 

mandatory State and local stay-at-home 

orders issued to reduce exposure to, and 

transmission of, COVID–19. Small 

businesses also experienced a 

significant drop in demand for goods 

and services and disruptions in their 

supply chains. Because of these 

impacts, many small businesses 

experienced a sharp drop in revenue 

and increased economic stress. 

To address this problem, section 1102 

of the CARES Act amended section 7(a) 

of the Small Business Act, 15 U.S.C. 

636(a), to create a temporary small 

business lending program known as the 

PPP. Under the PPP, small businesses 

could receive loans from private lender 

to cover eligible payroll, costs, business 

mortgage payments and interest, rent, 

and utilities for either an 8- or 24-week 

period after disbursement. Each loan is 

fully guaranteed by the Small Business 

Administration (SBA), which 

administers the PPP; small business 

borrowers do not have to make any 

payments during the first six months of 

the loan term and may receive a deferral 

up to one year; and small businesses 

may receive complete or partial 

forgiveness of their loans if they use 

their loans to cover certain expenses 

and meet other requirements. A wide 

range of financial institutions were 

eligible to participate as lenders in the 

PPP, including institutions that 

normally do not participate in the SBA’s 


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7280 Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices 

19The 7(a) loan program is the SBA’s primary 

program for providing financial assistance to small 

businesses. The program’s name comes from section 

7(a) of the Small Business Act, 15 U.S.C. 636(a). 

The SBA offers several different types of loans 

through the program. 

20 Institutions that were not SBA-certified did 

have to apply to the SBA and receive delegated 

authority to process PPP loan applications. 

7(a) lending program.19 This includes 

federally insured depository 

institutions, credit unions, and 

nonbanks.20

When the PPP opened on April 3, 

2020, demand for PPP loans far 

exceeded the initial $349 billion of 

funding for PPP loans and those funds 

were exhausted in less than two weeks. 

Congress subsequently provided another 

$310 billion (including $60 billion 

specifically to be lent by smaller banks 

and credit unions), bringing the total 

funding for the PPP to $659 billion. The 

second round of funding became 

available on April 27, 2020 and was not 

exhausted. When the PPP closed on 

August 8, 2020, $133 billion remained 

available. 

While the PPP was active, Congress 

made additional funds available, 

changed the term for new PPP loans, 

and revised other program 

requirements. The SBA also issued 

numerous interim final rules related to 

the program and lenders. PPP lenders 

were responsible for ensuring that their 

participation in the PPP complied not 

only with the CARES Act and SBA 

rules, but also with other applicable 

laws, including ECOA. 

Fair Lending Risk 

Examiners’ review of small business 

lenders’ PA responses identified certain 

issues that may pose fair lending risks. 

In implementing the PPP, multiple 

lenders adopted a policy that restricted 

access to PPP loans beyond the 

eligibility requirements of the CARES 

Act and rules and orders issued by the 

SBA (an ‘‘overlay’’). Specifically, several 

small business lenders restricted access 

by limiting eligibility for PPP loans to 

existing customers (an ‘‘existing 

customer overlay’’). The Bureau’s PA 

work in this area revealed that the 

existing customer overlay fell into two 

general categories: 

(1) Restrictive policies that allowed 

only small businesses with a preexisting relationship (or certain type of 

pre-existing relationship) with the 

institution the opportunity to apply for 

a PPP loan; and 

(2) less restrictive policies that 

required small businesses without a preexisting relationship to first become 

customers of the financial institution 

(usually by opening a business deposit 

account) and then apply for a PPP loan. 

Examiners determined that an overlay 

restricting access to PPP loans for small 

businesses that do not have an existing 

relationship with the institution, while 

neutral on its face, may have a 

disproportionate negative impact on a 

prohibited basis and run a risk of 

violating the ECOA and Regulation B. 

The small business lenders provided 

business justifications for their use of 

existing customer overlays, with the 

majority of institutions noting that they 

adopted such overlays because of Know 

Your Customer legal requirements, the 

prevention of fraud, or both. Several 

institutions also offered other, 

operational reasons for adopting this 

overlay, including managing extreme 

demand and enabling the institution to 

process as many applications as 

possible before funds were depleted. 

Examiners noted the challenges faced by 

small business lenders in implementing 

the PPP during a nationwide emergency 

and found that the institutions’ stated 

reasons for adopting their overlays 

reflected legitimate business needs 

during part or all of the review period. 

Examiners did not, however, conduct a 

full analysis of any institution’s overlay, 

and did not make any determination 

about whether an institution’s use of the 

overlay complies with ECOA or 

Regulation B. Examiners encouraged the 

small business lenders to consider the 

fair lending risks associated with 

participation in the PPP, in further 

implementation of the PPP, and in any 

new lending program and to evaluate 

and address any risks. 

4. Conclusion 

The Bureau is committed to being as 

transparent as possible about its 

supervisory findings and will continue 

to publish Supervisory Highlights to aid 

Bureau-supervised entities in their 

efforts to comply with Federal consumer 

financial law. While the Bureau’s PA 

reviews are substantially complete, in 

some instances, examiners identified 

issues that require follow up. The 

Bureau will follow-up on risks 

identified during PAs in the course of 

its regular supervisory work and 

findings may be shared in future 

editions of Supervisory Highlights. 

5. Signing Authority 

The Director of the Bureau, Kathleen 

L. Kraninger, having reviewed and 

approved this document, is delegating 

the authority to electronically sign this 

document to Grace Feola, a Bureau 

Federal Register Liaison, for purposes of 

publication in the Federal Register. 

Dated: January 19, 2021. 

Grace Feola, 

Federal Register Liaison, Bureau of Consumer 

Financial Protection. 

[FR Doc. 2021–01601 Filed 1–26–21; 8:45 am] 

BILLING CODE 4810–AM–P 

COUNCIL OF THE INSPECTORS 

GENERAL ON INTEGRITY AND 

EFFICIENCY 

Privacy Act of 1974; System of 

Records 

AGENCY: Council of the Inspectors 

General on Integrity and Efficiency 

(CIGIE). 

ACTION: Notice of a new system of 

records. 

SUMMARY: CIGIE proposes to establish a 

system of records that is subject to the 

Privacy Act of 1974. Pursuant to Public 

Law 116–136, CIGIE proposes this 

system of records in furtherance of the 

statutory mandate of CIGIE’s Pandemic 

Response Accountability Committee 

(PRAC) to promote transparency and 

conduct oversight of the funds 

disseminated per the Coronavirus Aid, 

Relief, and Economic Security Act 

(CARES Act); the Coronavirus 

Preparedness and Response 

Supplemental Appropriations Act of 

2020; the Families First Coronavirus 

Response Act; and any other act 

primarily making appropriations for 

Coronavirus response and related 

activities. 

DATES: This proposal will be effective 

without further notice on February 26, 

2021 unless comments are received that 

would result in a contrary 

determination. 

ADDRESSES: Submit comments 

identified by ‘‘CIGIE–5’’ by any of the 

following methods: 

1. Federal Rulemaking Portal: http:// 

www.regulations.gov. 

Submit comments via the Federal 

eRulemaking portal by searching for 

CIGIE–5. Select the link ‘‘Comment 

Now’’ that corresponds with ‘‘CIGIE–5.’’ 

Follow the instructions provided on the 

screen. Please include your name, 

company name (if any), and ‘‘CIGIE–5’’ 

on your attached document. 

2. Mail: Council of Inspectors General 

on Integrity and Efficiency, 1717 H 

Street NW, Suite 825, Washington, DC 

20006. ATTN: Virginia Grebasch/CIGIE– 

5, Notice of New System of Records. 

3. Email: comments@cigie.gov. 

FOR FURTHER INFORMATION CONTACT: 

Virginia Grebasch, Senior Counsel, 

Pandemic Response Accountability 

Committee, Council of the Inspectors 


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