Samantha: Hello, this is Samantha Shares.
This episode covers the F D I C's Consumer Compliance Supervisory
Highlights for July 2025
The following is an audio summary version of that document.
This podcast is educational and is not legal advice.
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And now the the F D I C's Consumer Compliance Supervisory Highlights.
Today we're going to explore what this comprehensive report tells us about the
state of consumer compliance in banking.
Before we jump in, I want to note that while this report focuses on F
D I C-supervised institutions, the principle-based guidance and compliance
trends we'll discuss today serve as an excellent tool for credit unions as well.
The consumer protection laws and regulations covered here apply broadly
across the financial services industry, making these insights valuable for
any institution serving consumers.
Let's start with the big picture.
The F D I C supervises approximately 2,800 state-chartered banks and thrifts that are
not members of the Federal Reserve System.
Most of these institutions are community banks that provide
credit and services locally.
The F D I C examines these supervised institutions for compliance with federal
consumer financial protection laws.
What's encouraging is that the F D I C's consumer compliance
examinations are risk focused.
As the report states, "As part of every consumer compliance examination, F D I
C examination staff review information gathered about a financial institution
to direct resources to those consumer compliance areas that pose the greatest
potential risks of consumer harm."
So how did these institutions perform in 2024?
The results are actually quite positive.
In 2024, the F D I C conducted approximately 800 consumer
compliance examinations.
The F D I C uses the Federal Financial Institutions Examination Council's
Uniform Interagency Consumer Compliance Rating System to evaluate supervised
institutions' adherence to consumer protection laws and regulations.
Here's the key finding: as of December 31, 2024, 97 percent of all F D I C-supervised
institutions were rated satisfactory or better for consumer compliance.
That means they received ratings of 1 or 2 on the examination scale.
Additionally, 97 percent were rated Outstanding or Satisfactory for
the Community Reinvestment Act.
But what about the institutions that didn't meet these standards?
The report explains that "Institutions rated less than satisfactory for consumer
compliance had overall compliance management system weaknesses, which often
resulted in violations of law and either potential or actual consumer harm."
Now let's talk about violations.
This is where things get really interesting for compliance professionals.
In 2024, F D I C consumer compliance examiners identified regulatory
violations that ranged in severity from the highest to lowest level of concern.
These are categorized as Levels 3, 2 and 1, with Level 1 representing
the lowest level of concern.
The F D I C cited 1,275 violations of consumer protection statutes
and regulations in 2024.
The top five most frequently cited violations represented 929
violations or approximately 73 percent of the total violations cited.
This concentration tells us where institutions are struggling most.
Let me break down these top five violations for you, because understanding
these patterns can help your institution avoid similar pitfalls.
Number one on the list is the Truth in Lending Act, known as TILA, and its
implementing regulation, Regulation Z.
This accounted for a whopping 470 violations.
The report explains that "TILA requires disclosures about mortgage costs,
and if institutions do not comply with TILA, consumers could be harmed
and reimbursements may be required."
The three most common TILA violations were first, failing to provide proper
periodic statements for open-end credit plans that must disclose information
like previous balance, transaction details, credits, the balance on which
finance charges are computed, periodic rates, annual percentage rates, grace
period, and other relevant information.
Second, failing to provide good faith estimates for closed-end
transactions secured by real property within specific timing requirements.
And third, failing to provide a detailed breakdown of all loan costs
associated with closed-end credit transactions secured by real property
in the prescribed table format.
These three violations alone comprised 21 percent of the total
TILA violations cited in 2024.
The second most cited violation area was the Flood Disaster Protection Act, or
FDPA, and its implementing regulation, 12 CFR Part 339, with 143 violations.
The report notes that "the flood insurance provisions included in
the FDPA ensure that consumers are protected against certain risks related
to flooding if the property is located in a special flood hazard area."
The most common FDPA violation was institutions' failure to provide
flood insurance when required.
According to the regulation, "adequate flood insurance must be in place
at the time a loan secured by a building or mobile home located in
a special flood hazard area is made, increased, extended, or renewed."
This single issue represented 45 percent of the total FDPA
violations cited in 2024.
Third on the list is the Truth in Savings Act, TISA, and
its implementing regulation, Regulation DD, with 129 violations.
The report states that "TISA requires banks to provide clear
disclosures about the terms and costs of consumer deposit accounts."
The most common violations involved institutions failing
to provide accurate disclosures.
The two most frequently cited issues were first, failing to make required
disclosures clearly and conspicuously in writing, and second, failing to provide
proper disclosures before opening an account with all the required details
about rates, compounding, crediting of interest, balance computation, fees,
transaction limitations, features of time accounts, and bonuses.
Together, these two issues represented 68 percent of the total TISA violations.
Fourth is the Electronic Fund Transfer Act, EFTA, and
its implementing regulation, Regulation E, with 122 violations.
The most cited violation here related to investigations of
electronic fund transfer errors.
The report explains that "financial institutions must investigate
allegations of electronic fund transfer errors, determine whether
an error occurred, report the results to the consumer, and correct the
error within certain timeframes."
This requirement represented 47 percent of the total EFTA violations cited in 2024.
Finally, the fifth most cited violation was the Home Mortgage Disclosure Act,
HMDA, and its implementing regulation, Regulation C, with 65 violations.
HMDA requires financial institutions to collect, report,
and publicly disclose data about their mortgage lending activity.
The most common violations involved institutions failing to provide
sufficient data for one or more of the required data fields.
As the report notes, "financial institutions must collect data
regarding applications for covered loans received, originated, and
purchased for each calendar year.
For example, data is reported on the borrower such as ethnicity,
race, sex, age, and income and on the loan including amount, purpose,
type, action taken, and location."
This data collection requirement represented 77 percent of the total
HMDA violations cited in 2024.
It's worth noting that this list contains four of the same laws and
regulations from the previous year's report, but HMDA replaced Section 5
of the Federal Trade Commission Act as the fifth most cited violation.
This shows us that while some compliance challenges persist,
others evolve over time.
The report emphasizes an important point about why these particular violations are
so common: "Because the F D I C conducts consumer compliance examinations using
a risk-focused methodology, the most frequently cited violations generally
involve regulations that represent the greatest potential for consumer harm."
Now let's talk about enforcement actions, because violations
can have real consequences.
In 2024, the F D I C initiated 31 formal enforcement actions and 23 informal
enforcement actions to address consumer compliance examination findings.
The F D I C issued civil money penalty orders totaling approximately $5.6
million against institutions to address violations of the FDPA,
Section 5 of the FTC Act, HMDA, and unsafe and unsound banking practices
related to an institution's compliance with various consumer financial
protection laws and regulations.
But here's what's particularly significant: supervised
institutions provided voluntary restitution payments totaling $33.3
million to approximately 400,000 consumers for violations of various
consumer protection laws and regulations.
That's real money going back to real consumers who were
harmed by compliance failures.
The F D I C also referred three matters to the United States Department of
Justice after having reason to believe the institution engaged in a pattern or
practice of discrimination in violation of the Equal Credit Opportunity Act.
This shows that fair lending violations are taken very seriously and can
escalate to federal prosecution.
Now let's shift our focus to consumer complaints, because these provide
another lens into compliance performance.
The F D I C's National Center for Consumer and Depositor Assistance, Consumer
Response Unit, closed 26,451 written complaints and telephone call inquiries
in 2024 compared to 23,290 in 2023.
That's a 14 percent increase, which suggests either growing awareness of
complaint channels or increasing issues.
The performance metrics here are impressive though.
In 2024, the Consumer Response Unit acknowledged 100 percent of written
complaints within 14 days and investigated and responded to 98.6
percent of complaints within established performance goal timeframes.
Of the 23,444 written complaints closed in 2024, the unit retained and
investigated 10,860 and referred 12,478 to other federal banking regulators.
As a result of these investigations, they identified 305 apparent errors
made by institutions, 132 apparent federal consumer protection regulation
violations, and 59 cases requiring escalation to the appropriate F D I
C Regional Office for further review.
There's an interesting trend regarding third-party providers that's worth noting.
One or more third-party providers were identified among 4,282 consumer complaint
cases in 2024, representing nearly a 13 percent increase from 2023 when 3,800
complaints involved third-party providers.
The report defines a third-party provider as "a non-bank financial
company that performs single or multiple services on behalf of banks,
such as credit card servicing and processing, payment processing,
and transaction error disputes."
An apparent violation of a federal consumer protection regulation was
identified in 116 consumer complaint cases involving a third-party provider in 2024.
This trend toward increased third-party provider involvement in complaints is
something institutions should monitor closely, as it suggests potential risk
management issues in vendor oversight.
The Consumer Response Unit's interactions with consumers and
banks resulted in consumers receiving $2,044,071 in total voluntary
restitution and compensation in 2024.
While this was down from $7,091,241 in the previous year, the report notes
that the large drop is attributed to an outlier situation at one institution
that resulted in approximately $4.5
million in restitution in 2023.
Beyond monetary compensation, the unit's efforts resulted in 937 cases resulting
in non-monetary compensation such as updating credit reports, updating bank
records, reinstating an account or releasing a block on a card, ceasing
collection calls or actions, forgiving debt, and granting loan modifications.
Let's look at what consumers are complaining about most.
The top four banking products that generated complaints were credit cards
with 4,733 complaints, checking accounts with 3,152 complaints, installment
loans and consumer lines of credit with 2,708 complaints, and residential
real estate loans with 844 complaints.
When we look at the issues behind these complaints, credit reporting
disputes topped the list at 18 percent of all complaints.
This was followed by discrepancy transaction errors at 9 percent,
accounts opened without knowledge at 6 percent, disclosure issues at
6 percent, and inability to provide requested service at 5 percent.
The five-year trend analysis in the report shows some interesting patterns.
Credit cards have remained consistently high, representing 29 percent of
complaints in 2024, down slightly from 30 percent in both 2022 and 2023.
Checking accounts have declined from 25 percent in 2020 to 19 percent in 2024.
Installment loans and consumer lines of credit have remained
relatively stable at around 12 to 15 percent over the five-year period.
For credit cards, the top three issues were credit reporting errors
at 38 percent, accounts opened without knowledge at 13 percent, and
collection practices at 11 percent.
For checking accounts, the issues were discrepancy transaction errors at 30
percent, account closure at 14 percent, and account blocks at 12 percent.
What's particularly concerning is the persistent issue of accounts opened
without knowledge, which suggests ongoing challenges with account opening procedures
and customer identification programs.
Fair lending complaints, while representing a small portion of
overall complaints, decreased from 68 in 2023 to 62 in 2024,
representing a 9 percent decrease.
While this is positive, fair lending remains an area of
intense regulatory focus.
So what can institutions learn from all this data?
First, the most frequently cited violations tend to cluster
around disclosure requirements.
Whether it's TILA disclosures for lending, TISA disclosures for
deposits, or HMDA data collection and reporting, getting the paperwork
right remains a fundamental challenge.
Second, operational issues like flood insurance requirements and electronic
fund transfer error resolution require robust processes and staff training.
These aren't one-time compliance tasks but ongoing operational requirements
that need consistent attention.
Third, the rise in third-party provider-related complaints
suggests that vendor management and oversight need continued focus.
When you outsource functions, you don't outsource compliance responsibility.
Fourth, consumer complaint trends can serve as an early warning system.
The persistence of credit reporting disputes and account opening issues
suggests these are areas where proactive compliance improvements could reduce
both violations and complaints.
The overall message from this report is cautiously optimistic.
With 97 percent of institutions receiving satisfactory or better
ratings, the vast majority of F D I C-supervised institutions are meeting
their consumer compliance obligations.
However, the concentration of violations in specific areas suggests that
targeted improvements in disclosure practices, operational procedures, and
vendor oversight could significantly improve the compliance landscape.
For credit unions and other financial institutions, this data
provides valuable benchmarking information and identifies areas for
proactive compliance enhancement.
The principle-based approach used by the F D I C in identifying and
categorizing these violations can inform compliance risk assessments and
training programs across the industry.
Remember, compliance isn't just about avoiding violations and penalties.
It's about protecting consumers and maintaining the trust that's
essential to our financial system.
The institutions that view compliance as a competitive advantage rather
than a regulatory burden are the ones that will thrive in an increasingly
complex regulatory environment.
That wraps up our deep dive into the F D I C's Consumer Compliance
Supervisory Highlights for July 2025.
I hope this analysis helps you better understand current compliance
trends and identify areas for improvement in your own institution.
Thanks for listening, and we'll see you next time.
If your Credit union could use assistance with your exam, reach out to Mark Treichel
on LinkedIn, or at mark Treichel dot com.
This is Samantha Shares and we Thank you for listening.