CFPB Takes Action against Deceptive Mortgage Payment Program

CFPB Takes Action against Deceptive Mortgage Payment Program
July 28, 2015

Consumers who were misled into signing up for an interest reduction program may have a portion of their losses returned.

The Consumer Financial Protection Bureau (CFPB) filed a consent order today against Paymap Inc. and LoanCare LLC for promising its mortgage payment program would save tens of thousands of dollars in interest savings, but had no evidence to back up its claims. Under the terms of the orders, Paymap will return $33.4 million in fees to consumers and pay a $5 million civil penalty to the CFPB, and LoanCare will pay a $100,000 civil penalty.

Paymap Inc. is a Colorado-based payment processing company, and LoanCare Servicing is a Virginia-based residential mortgage servicer. Together, they marketed and provided the "Equity Accelerator Program"– an electronic payment system that enables consumers to make automatic mortgage payments via electronic debits from their bank accounts.

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, about 125,000 consumers enrolled in the Equity Accelerator Program and paid Paymap $33.4 million in fees.

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.

In fact, the Equity Accelerator Program did not make more frequent payments on consumers' mortgages. Although consumers made multiple payments, the company held the money in custodial accounts and paid the mortgage company according to the consumer's regular payment schedule. Consumers did achieve some interest savings through making higher monthly payments, but the additional fees often wiped out those savings.

Consumers were told that the average customer will achieve more than $33,000 in interest savings, but Paymap had no factual basis to support this claim and few customers actually achieved that amount of interest savings.

A copy of the consent order for Paymap is available at:http://files.consumerfinance.gov/f/201507_cfpb_consent-order_paymap.pdf

A copy of the consent order for LoanCare is available at:http://files.consumerfinance.gov/f/201507_cfpb_consent-order_loan-care.pdf

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