Nationwide Biweekly Administration, Loan Payment Administration and Daniel Lipsky - the owner of both companies - are named as defendants in a Consumer Financial Protection Bureau lawsuit that accuses the firms of deceptive mortgage practices.
The defendants, according to the complaint, transmitted money from consumers to their mortgage servicers and allegedly misrepresented the savings customers would achieve by using the companies' biweekly mortgage payment program.
The defendants are accused of falsely promising consumers they can achieve savings without increasing their payments, falsely promising immediate savings that actually took years to achieve, misleading consumers about the costs associated with the program and claiming to be affiliated with mortgage lenders and servicers. The defendants were not immediately available for comment.
Nationwide offers a product called the "Interest Minimizer" and advertises the product online and via direct mail. The CFPB said Nationwide also aired an infomercial about the Interest Minimizer on Lifetime television in 2014.
Most consumers who enroll in the Interest Minimizer program send Nationwide half their monthly mortgage payment every two weeks, instead of twice per month, meaning homeowners are basically making two additional payments per year, the CFPB said.
Nationwide also charges consumers a setup fee that can reach $995 to enroll and further charges consumers between $84 and $101 in payment processing fees each year they remain enrolled. The CFPBs complaint collected approximately $49 million in setup fees between 2011 and 2014.
The CFPB alleges the Nationwide is fully aware 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.
The CFPB alleges that the defendants' practices violate the Telemarketing Sales Rule and the Consumer Financial Protection Acts prohibition against unfair, deceptive or abusive acts or practice.
"These companies and their owner, Daniel Lipsky, took advantage of consumers with false promises of savings on their mortgage," said 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."
The CFPB seeks compensation for any harmed consumers, a civil penalty and an injunction against the companies and their owner.
