Nationwide Biweekly claims CFPB suit contains multiple errors

“We are puzzled by the CFPB’s allegations”

Nationwide Biweekly Administration, which stands accused by the Consumer Financial Protection Bureau of misrepresenting the savings that customers will achieve by using the company’s biweekly mortgage payment program, has responded to the CFPB’s charges, saying that the CFPB’s lawsuit is full of errors.

In a statement released to HousingWire, Sherry Ann Scott, vice president of administration for Nationwide Biweekly, said that the company is “puzzled” by the CFPB’s charges and said that the CFPB did not contact the company before filing its lawsuit.

“We genuinely respect the Consumer Financial Protection Bureau and its mission, so we are puzzled by the allegations in this suit,” Scott said in a statement. “We wish the agency attorneys had worked with us to discuss these issues before taking this action.”

In its lawsuit, the CFPB alleges that Nationwide, Loan Payment Administration, and Daniel Lipsky, who owns both companies, falsely promise consumers they can achieve savings without increasing their payments, falsely promise immediate savings that actually take years to achieve, mislead consumers about the costs associated with the program, and falsely claim to be affiliated with mortgage lenders and servicers.

In a lengthy response to what it claims are a series of “errors” in the CFPB’s lawsuit, Nationwide Biweekly details the supposed falsities in the CFPB’s lawsuit and answers each in kind.

Nationwide Biweekly’s statement lists one CFPB claim as such: Falsely promising consumers could achieve savings without paying more.

In answering that claim, Nationwide Biweekly states the following (excerpted in full) –

FACTS: Here’s what NBA really said:

For example, in a letter for a $283,600 loan with estimated savings of $53,884, NBA explained “*Sample figures only: $283,600, 30 year fixed term, $2,115 monthly payment includes average escrow, savings is net of all fees based on biweekly program for life of loan, sample 5.0 interest rate (not your actual rate) used to calculate savings.” Currently, approximately 93% of NBA customers have escrow in their payments.

The letter also says: “This process results in 26 biweekly debits annually, which equals 13 monthly payments.”

The letter says that the equivalent of “13 monthly payments” will be made, which contradicts the “claim.” The letter also says that the sample savings are “net of fees,” which contradicts the “claim.” The facts are clear in the direct mail marketing letter itself.

Nationwide goes on to say that it “remits all 26 biweekly debits to the lender each year (after the setup fee is paid from the first extra biweekly debit which only happens once and provides the customer a lifetime enrollment for future loans).”

Nationwide says that the borrower’s monthly payment to his or her lender does not change, but that Nationwide takes the customer’s standard payment, divides it by two and debits that every other week, with a “small” debit fee added in.

“Does NBA charge for the program? Yes, of course. Like every company, NBA has bills to pay and charges a fee for providing this automated program,” Nationwide said in its statement.

“However, that fee is small compared with the substantial savings consumers using our program gain over the term of their loan,” Nationwide continued. “Even consumers who use our program for only one year will save more over the term of their mortgage than they have paid to our company. Again, if the customer was on the program for only one year and then cancelled, they would achieve these savings.”

Another of the CFPB charges is that Nationwide “falsely promises immediate savings that actually took years to achieve.” To those charges, Nationwide said that its marketing materials are very clear on the timeline of savings.

“The NBA direct mail marketing letter itself says in this sample that the savings will accumulate over ‘23.9 years’ compared with a 30-year loan with no savings,” Nationwide said. “Again, this estimate is based on 30-year loans – not 4-year or 9-year loans. The facts are clear in the direct mail marketing letter itself. NBA’s letter contradicts the ‘claim.’”

Another CFPB charge is that Nationwide misleads consumers about the cost of the program. Nationwide also says that charge is untrue.

Nationwide said that the costs associated with the program are “customized” for each person and are explained fully during the enrollment call.

Nationwide includes a section of its customer service script that discusses the fees and costs, which states: “Based upon the figures you’ve given me, your biweekly debit will be $(debit amount). That includes a small $3.50 biweekly debit fee which covers the cost of processing your payments automatically.

“Your one-time deferred set-up fee, which covers your lifetime program enrollment, is equal to just one standard biweekly debit. We will simply deduct it from the first extra biweekly debit that occurs on the program within the first six months. The remaining extra biweekly debits will go 100% to the principal of your loan. Do you have any questions?”

Nationwide states that the script and the Biweekly Program Agreement “explicitly” disclose the amount of the fees. Nationwide adds that these written documents contradict the CFPB’s “claim.”

Nationwide also said that it “explicitly and repeatedly” states in its direct mail marketing letters that it is not affiliated with mortgage lenders or servicers, in direct contradiction to what the CFPB said in it lawsuit.

In its lawsuit, the CFPB said that Nationwide’s marketing materials misrepresent that it is affiliated with consumers’ mortgage lenders or servicers, adding that in one sales script, when consumers ask “Do you work with/affiliated with my lender?” sales representatives were instructed, “Do NOT say ‘No’” – when the accurate answer is “No.”

Nationwide said that is not true.

“In fact, NBA representatives are instructed to give a thorough answer to the affiliation question so consumers understand that, even though NBA is not affiliated with their lender, NBA’s program will work for them,” Nationwide said. “What consumers really want to know is ‘will this work for my loan?’ We are educating them that yes, NBA’s program will work for their loan.”

Nationwide said that it is independent of lenders and makes its customers fully aware of that fact.

“NBA is independent of lenders, makes it known that it is independent, and is proud to be independent,” Nationwide said. “Lenders have no financial interest in informing consumers about biweekly programs because the savings from the biweekly program results in lower profits to the lender. Every dollar the consumer saves as a result of NBA’s program, is a dollar that the lender is not receiving.”

Nationwide goes on to say that it wants to make sure homeowners continue to have access to an “important service” that it says can help them save tens of thousands of dollars over the term of their mortgage.

“This program not only helps consumers with mortgage debt, but also with other consumer debts such as credit cards and student loans,” Nationwide said.

“By helping the consumer, NBA’s program also helps the economy at large by putting more money into the pockets of middle- class consumers who can use those funds to buy goods and services that better their lives and stimulate our economy,” Nationwide continued. “This vision of minimizing debt and maximizing life is what drives NBA every day.”

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