Politics & MoneyMortgage

CFPB orders Paymap to repay $33.4 million for deceiving customers

LoanCare also fined for falsely promising savings with biweekly payment program

The Consumer Financial Protection Bureau announced Tuesday that it is ordering Paymap, a Colorado-based payment processing company, to return $33.4 million to consumers for falsely promising mortgage savings to borrowers who used their biweekly mortgage payment program.

According to the CFPB, Paymap, along with LoanCare Servicing, a Virginia-based residential mortgage servicer, marketed a electronic payment system that boasted it could save borrowers as much as $33,000, while in actuality, borrowers did not save much, if at all.

Paymap and LoanCare advertised an “Equity Accelerator Program” – an electronic payment system that enabled consumers to make automatic mortgage payments via electronic debits taken from their bank accounts.

According to the CFPB, consumers are typically charged an enrollment fee of $295 when signing up for the Equity Accelerator Program, and a transaction fee for each automatic debit that Paymap makes, typically $2.50.

Since July 21, 2011, approximately 125,000 consumers enrolled in the Equity Accelerator Program and paid Paymap $33.4 million in fees.

And now Paymap is being ordered to return all of those fees to all of those customers.

The CFPB is also fining Paymap $5 million.

In a release, the CFPB said that Paymap and LoanCare advertised that consumers who enrolled in the Equity Accelerator Program would have a new, biweekly payoff schedule that would lead to “significant interest savings because of the more frequent payments.”

But the Equity Accelerator Program did not make more frequent payments on consumers’ mortgages, and, Paymap’s prominent claims of tens of thousands of dollars in interest savings were made without any supporting evidence, the CFPB said.

The CFPB said that Paymap partnered with many mortgage servicers, including LoanCare, to market the Equity Accelerator to the mortgage servicers’ customers.

LoanCare and Paymap marketed the Equity Accelerator to LoanCare’s customers in 2012 by sending them solicitations on LoanCare’s letterhead. Like the other servicers it partnered with, Paymap shared a portion of consumers’ fees with LoanCare.

According to the CFPB, Paymap claimed, via its website, that the average customer will achieve over $33,000 in interest savings using the Equity Accelerator Program.

“However, Paymap had no factual basis to support this claim,” the CFPB said in a release. “Moreover, only a tiny percentage, if any, of its customers achieved that amount of interest savings.”

The CFPB said that Paymap told consumers that enrolling in the Equity Accelerator Program would change the consumers’ payoff schedule to “every 2 weeks.”

While Paymap makes more frequent withdrawals from consumers’ accounts in the Equity Accelerator Program, it does not actually make more frequent payments on consumers’ mortgages, the CFPB said.

Instead of making the payments every two weeks, Paymap holds the collected payments in custodial accounts, and then pays consumers’ mortgages on their original monthly schedule.

Consumers are charged a transaction fee with every withdrawal, despite their payments not being made any faster.

Any interest savings that consumers may achieve through the Equity Accelerator Program is because they make a higher annual mortgage payment in the program, using the same payment schedule as before enrollment, the CFPB said.

The CFPB found that Paymap and LoanCare violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against deceptive acts and practices and is taking action.

Paymap is also ordered to cease its “unlawful advertising and marketing practices,” the CFPB said.

“Paymap is prohibited from advertising any benefits of the Equity Accelerator Program without credible evidence to support its claims, and from implying that the program will change a consumer’s regular mortgage payment schedule,” the CFPB said.

“Paymap must disclose that the source of any projected interest savings through the program is the higher annual mortgage payment a consumer will make in such a program,” the CFPB added.

LoanCare is also ordered to cease its “unlawful advertising and marketing practices” and ordered to pay a $100,000 civil penalty to the CFPB.

“Deceptive advertising has no place in the financial marketplace,” said CFPB Director Richard Cordray. “Today’s action is delivering relief for consumers deceived by Paymap and LoanCare, and sending a clear message that these practices will not be tolerated.” 

The Paymap and LoanCare fines mark the second time in recent months that the CFPB has targeted a biweekly loan payment program.

In May, the CFPB filed a lawsuit in federal district court against Nationwide Biweekly Administration, Loan Payment Administration, and Daniel Lipsky, the owner of both companies, accusing the companies of deceptive mortgage practices.

According to the CFPB, Nationwide and Loan Payment Administration transmit money from consumers to their mortgage servicers. The CFPB alleged that the companies misrepresented the savings that customers will achieve by using the companies’ biweekly mortgage payment program and misled consumers about the costs associated with the program.

Nationwide Biweekly Administration responded to the CFPB’s charges, saying that the CFPB’s lawsuit was 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.”

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