Feds File Deceptive Marketing Complaint against Mortgage Payment Company
The Consumer Financial Protection Bureau (CFPB) today filed a lawsuit against a company that allegedly used deceptive marketing tactics to misrepresent the interest savings of one of its programs.
The agency claims that Ohio-based Nationwide Biweekly Administration, Loan Payment Administration and the companies' owner Daniel Lipsky mislead consumers about the cost of a biweekly mortgage payment program, which charged more in fees than borrowers saved over the course of their time in the program.
The CFPB is seeking compensation for harmed consumers, a civil penalty, and an injunction against the companies and their owner.
Nationwide promoted its interest minimizer program as a way for consumers to pay off their home loans more quickly by sending Nationwide half of their monthly mortgage payment every two weeks, effectively making one additional monthly payment per year.
What Nationwide representatives failed to clearly explain - if they explained it at all - is that customers are charged a setup fee of $995 to enroll in the program and charges consumers between $84 and $101 in payment processing fees each year they remain enrolled.
The average borrower in the program had a 30-year mortgage for about $160,000 with an interest rate of 4.125 percent. With those loan terms, a customer would have to stay in the program for up to nine years to recoup the fees. A vast majority of borrowers left the program in less than four years.
Nationwide collected about $49 million in setup fees.
Consumers were told that 100 percent of the payments are directed toward the loan principle, but the company keeps the first $995 as part of the setup fee. Customer service representatives were told not to mention the dollar amount of the setup fee unless the consumer persisted to ask about the fees.
Representatives were also told not to tell consumers that Nationwide wasn't affiliated with their lender.
A copy of the complaint filed today can be found here.