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Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices
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
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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 7 One 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.
8 The term consumer reporting company means the same as consumer reporting agency, as defined in the Fair Credit Reporting Act, 15 U.S.C.
1681af, including nationwide consumer reporting agencies as defined in 15 U.S.C. 1681ap and nationwide specialty consumer reporting agencies as defined in 15 U.S.C. 1681ax.

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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 protectionssuch 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
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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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