FDIC's Consumer Compliance Supervisory Highlights for July 2025
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.
