CFPB Sues Lender Over Mortgage Overcharges!

DAILY REAL ESTATE NEWS | TUESDAY, MAY 12, 2015

The Consumer Financial Protection Bureau filed a lawsuit against Nationwide Biweekly Administration Inc., Loan Payment Administration LLC, and its owner on Monday, alleging the companies misrepresented the interest savings consumers stand to gain by participating in a biweekly mortgage payment program.

Nationwide Biweekly Administration is an Ohio-based company that transmits funds from consumers to their mortgage servicers. Loan Payment Administration LLC is a wholly owned subsidiary of Nationwide.

Nationwide’s product called “Interest Minimizer” allows consumers to make half of their monthly mortgage payment every two weeks, which results in the consumers making one additional monthly payment per year. Nationwide charges consumers a setup fee of $995 to enroll in the program. It also charges consumers between $84 and $101 in payment processing fees each year they remain enrolled in the program. The company touts throughout its marketing that the program will help home owners save money.

However, the CFPB’s lawsuit alleges that the company mislead consumers about the cost of the program. CFPB claims that Nationwide has collected about $49 million in setup fees between 2011 and 2014 through the program. CFPB also alleges that the company knows that consumers will end up paying more in fees than they will save in interest for the first several years in the program.

On average, a consumer in Nationwide’s program in 2013 had a 30-year mortgage for about $160,000 with an interest rate of 4.125 percent. According to CFPB’s lawsuit, average borrowers with such loan terms would then have to stay in the program for nine years in order to recoup the fees of more than $1,200 that they would have paid to Nationwide to be part of the program. 

Through the lawsuit, CFPB is seeking compensation for affected consumers as well as an injunction against the companies and 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. “Home owners 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.” 

Source: Consumer Financial Protection Bureau

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