The Consumer Financial Protection Bureau (CFPB) filed a lawsuit in federal district court this week against an Ohio-based company for alleged false promises of mortgage savings.
The suit against Nationwide Biweekly Administration, Inc., Loan Payment Administration LLC, and the companies’ owner, Daniel Lipsky, alleges that “Nationwide misrepresents the interest savings consumers will achieve through a biweekly mortgage payment program and misleads consumers about the cost of the program.”
Loan Payment Administration LLC is a wholly owned subsidiary of Nationwide.
The company transmits funds from consumers to their mortgage servicers, and its payment program is known as the Interest Minimizer. Allegedly, consumers paid $49 million between 2011 and 2014 in fees for the company’s mortgage payment program, according to the CFPB.
“Consumers enrolled after being promised substantial and immediate savings on their mortgages,” the CFPB says in a statement.
However, the CFPB alleges the defendants know that consumers will pay more in fees than they save in interest for the first several years in the program, and that many consumers will leave the program without saving any money at all.
Such practices violate the Telemarketing Sales Rule and the Consumer Financial Protection Act’s prohibition against unfair, deceptive or abusive acts or practices.
“Most consumers who enroll in the Interest Minimizer program send Nationwide half their monthly mortgage payment every two weeks, effectively making one additional monthly payment per year,” the CFPB says, adding that Nationwide charges consumers a setup fee of up to $995 to enroll in the program and charges consumers between $84 and $101 in payment processing fees each year they remain enrolled.
Nationwide advertises the Interest Minimizer program online and via direct mail, and in 2014 aired an infomercial on Lifetime television.
“Many of the company’s marketing materials promise that consumers who enroll will save money, with language such as ‘Am I guaranteed to save money? Yes!,’” states the CFPB. “Other documents contained statements like ‘soon you will be … saving thousands of dollars in unnecessary payments.’”
The CFPB is seeking compensation for harmed consumers, a civil penalty, and an injunction against the companies and their owner.
“These companies and their owner, Daniel Lipsky, took advantage of consumers with false promises of savings on their mortgage,” says CFPB Director Richard Cordray. “Homeowners deserve accurate information in the financial marketplace. Today we are taking action to end these illegal and deceptive practices, and to hold these companies accountable for their actions.”
Written by Cassandra Dowell