Have you adjusted your complaint response policies for 2014 changes?
Today we just wanted to deliver some "straight talk" on deadlines for responding to consumer complaints / inquiries that are in effect now (some new to 2014).
Responding to consumer complaints is an important part of any effective compliance management system. You can't take it personal, just shake, shake, shake it off.* But let's discuss some of the mandatory deadlines for responding, because some are new in 2014.
There are two new Federal rules and one Massachusetts rule to discuss today.
Notice of Error
This is the first of two similar Federal regulations that took effect this January. (And no, your "small servicer" exemption does not exempt you from either of these requirements.)
Triggered by:
A written letter from a borrower that identifies a potential error regarding the servicing of a residential mortgage loan. For example, the borrower writes in to complain that your Bank forgot to apply her last payment, or that you should not have force-placed her insurance. This does not apply to oral complaints. Note: As we've discussed here before, "error" means a legitimate error regarding the mortgage loan. If a borrower writes in to complain about your teller's "Forrest Gump style" haircut, that is not an error for these purposes.
Responses Required:
With some exceptions, you are required to provide two separate responses to a "notice of error."
#1. Acknowledgement. First, you should send a letter acknowledging that you received the borrower's correspondence. This must be in writing and within 5 days.
#2. Full Response. Second, you are generally required to provide a full response in writing within 30 days, after an investigation into the matter. Here are your options for this full response-
Correct if Error Exists. Correct the error and respond in writing with a statement that explains the correction.
Notify if No Error Exists. You have to do an investigation into the potential error and then notify the borrower, in writing, that explains how you reached this conclusion. E.g., "We reviewed your ARM adjustments and determined that we correctly calculated the payments in accordance with X,Y,Z ....
Request More Information. You can ask the borrower for more info., but you cannot use this to avoid investigating the issue, or require the borrower to provide this to you.
Note:
- If you find an additional or different error during this process, you're required to correct it and notify the borrower of this fact, i.e. that you found a new error and what action you took to fix it.
2 Exceptions -- Of course, there have to be exceptions! Here are two that you might come across ... (there are actually a couple more).
1. "Quick Fix" Exception
If you can fix the error and respond within 5 days, you don't have to give both the acknowledgment and full response. Good for you!
2. "Improper Request" Exception
You are not required to respond to a Notice of Error that is "improper." Make sure to track the regulatory language if you are using this, and also note you'll have to notify the borrower much sooner- within 5 days- if you plan to use this exception. Note: A request is improper when it is (i) duplicative, (ii) overbroad, or (iii) untimely. In other words, you don't have to respond if (i) you've already responded to the same notice of error, (ii) their notice of error is so broad/vague that you cannot reasonably be expected to respond, or (iii) it's been more than 1 year after either the balance was paid in full or you transferred servicing to another servicer.
Information Request
This is another Federal rule new in 2014. The timing and response requirements are very similar, so we won't restate them here (there are a few differences, happy to share if you e-mail or call). The big difference here is just that, instead of fixing an error within a certain amount of time, you have to answer the borrower's question (or provide information) within a certain amount of time.
We just have two notes on this new rule:
It is triggered by a "Request for Information" (instead of a notice of error). So in this case, the borrower is writing in to request information about his mortgage loan, and this rule requires you to respond.
Be on the lookout for a "Request for Information" that is actually a "Notice of Error" (or both). If a borrower writes in requesting information, but there is enough information to put you on notice of a potential error, you will need to follow the procedures for Notice of Error (above). Example: Borrower writes in with a "Request for Information" and asks for information relating to the automatic debiting of her mortgage payment. She says that she wants this information because your bank deducted $1,675 when it should have only deducted $1,275. In this case, it would not be enough just to send her this information. You would have to treat this as both a request for information and notice of error, which essentially means you'd have to investigate and fix the error if possible (in addition to providing the requested information).
Demand for Relief: Massachusetts Unfair Practices Regulations
Massachusetts bans "unfair and deceptive" practices in lending. So, word to the wise - if you ever get a letter asserting a violation of the Massachusetts unfair/deceptive practices rules (demand for relief), keep in mind that you better respond with an offer within 30 days. Why? This is what the rule says:
"Any person receiving such a demand for relief who, within thirty days of the mailing or delivery of the demand for relief, makes a
written tender of settlement which is rejected by the claimant may, in any subsequent action, file the written tender and an affidavit concerning its rejection and thereby limit any recovery to the relief
tendered if the court finds that the relief tendered was reasonable in relation to the injury actually suffered by the petitioner."
Now- we can't give out legal advice, but the point is this - don't put this in your "to do next month" box. Look into this right away. This appears to be a way to limit your damages to a "reasonable" amount--thus protecting your company from double or treble damages, attorneys' fees, and other costs. If you have confidence in yourself (and maybe your compliance officer), there's no law requiring you to bring in a lawyer-- but keep in mind that this is a situation where there's a high likelihood help from an attorney will be necessary (and save you money in the long run).
Other news/thoughts/trivia:
Interested in hearing compliance people discuss the new Massachusetts Flood law? Listen in to the MMBA's compliance call on September 12 for this exciting event!
Go here for the CFPB's new rule modifying the thresholds for QM and HOEPA (they have to adjust these annually).
"The Russian government gave all 44 of its Olympic medalists a new Mercedes. When asked what happened to the athletes who didn't medal, Putin said, 'Do not open trunk.'" - Jimmy Fallon
Here's an interesting article explaining the background of HMDA and what the CFPB plans to do with it--it asserts that the new changes will make "HMDites" out of all of us.
Is there anything wrong with having fun? Does work always have to serve a serious purpose. John tells me that the key is to "make work fun," as opposed to "having fun at work." So we try to make work itself interesting, dynamic, and not-too-easy and not-too-hard (trying to find "Goldilocks assignments" for employees)--as opposed to giving employees more time to scroll through social media. Take time to celebrate work accomplishments and recognize success--as opposed to celebrating personal accomplishments (perhaps emphasis on work anniversaries more than on birthdays?).
"To find joy in work is to discover the fountain of youth."
- Pearl S. Buck
Thanks so much for reading our weekly newsletters. We're not always going to be perfect, but because we always do our best and try not to overpromise, we hope that we're always going to be trustworthy. Your calls and e-mails are very helpful - please keep contributing.
**These are our opinions. We're not authorized, or willing, to express those of others.**