The FDIC's latest "Consumer Compliance Supervisory Highlights" for 2024 provides essential information for state-chartered banks and thrifts, detailing compliance performance, frequently cited violations, and enforcement actions. These insights are crucial for maintaining robust compliance management systems (CMS) and mitigating risks to consumers.
Here are the key points of most interest to bankers:
- Overall Strong Compliance: In 2024, 97 percent of FDIC-supervised institutions received a satisfactory or better rating (ratings of "1" or "2") for consumer compliance, indicating effective CMS and risk mitigation efforts.
- Most Frequently Cited Violations: The FDIC cited 1,275 violations in 2024, with the top five Level 2 (medium severity) or Level 3 (high severity) violations representing approximately 73 percent of the total. These critical areas are:
- Truth in Lending Act (TILA) / Regulation Z (470 violations): The most common issues were failures to provide required information on periodic statements for open-end credit, accurate good faith estimates, and detailed loan costs for closed-end real property transactions. Violations in this area often lead to consumer harm and may require reimbursements.
- Flood Disaster Protection Act (FDPA) / 12 CFR Part 339 (143 violations): The primary violation involved institutions failing to ensure adequate flood insurance was in place for loans secured by property in special flood hazard areas when required.
- Truth in Savings Act (TISA) / Regulation DD (129 violations): Frequently cited for not providing clear and accurate disclosures about the terms and costs of consumer deposit accounts, particularly before account opening.
- Electronic Fund Transfer Act (EFTA) / Regulation E (122 violations): Most common violations related to institutions failing to properly investigate allegations of electronic fund transfer errors and report results within required timeframes.
- Home Mortgage Disclosure Act (HMDA) / Regulation C (65 violations): The main issue was insufficient data collection, reporting, and public disclosure of mortgage lending activity, including borrower demographics and loan details. HMDA replaced Section 5 of the FTC Act in the top five most cited violations compared to the previous year.
- Enforcement Actions and Penalties: In 2024, the FDIC initiated 31 formal and 23 informal enforcement actions. This resulted in civil money penalty (CMP) orders totaling approximately $5.6 million for violations of acts like FDPA, HMDA, and Section 5 of the FTC Act. Furthermore, supervised institutions provided voluntary restitution payments totaling $33.3 million to approximately 400,000 consumers for various consumer protection law violations. The FDIC also referred three matters to the U.S. Department of Justice due to suspected patterns or practices of discrimination under the Equal Credit Opportunity Act.
- Consumer Complaint Trends: The FDIC's Consumer Response Unit (CRU) closed 26,451 written complaints and telephone inquiries in 2024, a 14 percent increase from 2023.
- Top Products for Complaints: Credit cards (4,733), checking accounts (3,152), installment loans/consumer lines of credit (2,708), and residential real estate loans (844) were the most common banking products involved in complaints.
- Common Issues: Key complaint issues included credit reporting disputes (18%), discrepancy transaction errors (9%), and accounts opened without knowledge (6%).
- Third-Party Providers (TPPs): Complaints involving one or more TPPs increased by nearly 13 percent, with 116 apparent violations identified in such cases. This highlights an area of increasing risk.
These highlights emphasize the FDIC's commitment to consumer protection and provide clear areas where institutions should focus their compliance efforts to avoid violations and subsequent penalties.
Click here to read the full release from the FDIC.
