The Consumer Financial Protection Bureau (CFBP) recently took action against a payment processing company, Paymap Inc. (Paymap), and mortgage servicing company, LoanCare, LLC (LoanCare), for deceptive conduct in connection with a mortgage payment program. Paymap partnered with more than thirty mortgage servicers, including LoanCare, to offer customers an accelerated payment program, allowing customers to make automatic mortgage payments on a weekly, biweekly, or semimonthly basis. LoanCare identified potential customers for the program and provided Paymap with specific account information regarding potential customers it identified. Paymap then used the information to create customized advertisements on LoanCare letterhead. According to the CFPB, Paymap and LoanCare advertised that customers would enjoy savings by making the additional payments contemplated by the automatic payment program.
In reality, however, the additional payments were not immediately credited to customers’ accounts on the accelerated schedule. Though customers’ accounts were debited more frequently, funds were simply held in a separate custodial account until the end of the month and then transferred to LoanCare, who then applied the funds on customers’ original monthly schedule. The CFPB claimed that any savings customers enjoyed were a result of a higher annual payment. The companies required a $295 enrollment fee plus an additional $2.50 transaction fee for each automatic payment. Roughly 125,000 consumers enrolled in the program, which resulted in Paymap generating $33.4 million in fees. LoanCare received $110 of the enrollment fee and $0.75 of each transaction fee.
Under the terms of the Consent Orders, Paymap and LoanCare are enjoined from further misrepresentations regarding the nature of the program and each must submit a compliance plan to the CFPB to ensure that future marketing materials comply with Federal consumer financial laws. Paymap will be required to return the full $33.4 million it received to provide redress to affected consumers and LoanCare must pay a $100,000 civil penalty to the CFPB’s Civil Penalty Fund. In addition, Paymap and LoanCare must adhere to a variety of other compliance provisions, including reporting requirements, order distribution and acknowledgment requirements, and record keeping requirements. Clearly, the CFPB is keeping a watchful eye on businesses that offer loan payment products to consumers.