The CFPB recently issued a consent order requiring a large national bank to pay $335 million in restitution to credit card borrowers to settle claims that it violated TILA by failing to reevaluate and reduce the APRs for certain accounts, and by failing to have reasonable written policies and procedures to conduct the APR reevaluations consistent with TILA’s Regulation Z.
Under amendments to TILA and Regulation Z that went into effect in 2010, creditors that increase the APR applicable to certain credit card accounts based on various factors, including the credit risk of the obligor and market conditions, must subsequently consider whether to reduce the APR at least every six months in light of changes in the same factors. The amendments also require the card issuer to maintain reasonable methodologies for assessing the factors at issue in the review.
The consent order alleges that the bank failed to properly reevaluate and reduce the APRs for some consumer credit card accounts by, for example, misapplying certain factors such as the customer’s ability to pay and their FICO score. The consent order further alleges that the bank failed to maintain reasonable written policies and procedures for conducting rate increase reevaluations.
Under the terms of the consent order, the bank must implement certain new policies and procedures for conducting APR reevaluations and must submit for the CFPB’s review both a compliance plan and a redress plan for affected consumers. Although the bank is required to pay $335 million in restitution to the approximately 1.75 million affected consumers, the CFPB said in a corresponding press release that it did not assess civil money penalties based on a number of factors, including that the bank self-identified and self-reported the violations, and self-initiated remediation to affected consumers.