WASHINGTON The Consumer Financial Protection Bureau filed a lawsuit on Monday against an Ohio-based loan administrator and its owner for allegedly deceptively marketing services that claimed to save consumers money on their mortgage while any actual savings were offset by high fees.
The CFPB said that Nationwide Biweekly Administration, Inc., and its subsidiary Loan Payment Administration LLC, which are both owned by Daniel Lipsky, charged consumers $49 million in setup fees between 2011 and 2014 for providing a service that administered biweekly mortgage payments. The setup fees could be as high as $995 per account and included annual service fees of $84 to $101, eating away at any savings a consumer might experience from making additional mortgage payments on the biweekly schedule.
These companies and their owner, Daniel Lipsky, took advantage of consumers with false promises of savings on their mortgage, CFPB Director Richard Cordray said in a statement. Homeowners deserve accurate information in the financial marketplace.
Nationwide advertised the biweekly payment service as Interest Minimizer and the CFPB alleges that marketing materials for the service made false claims about possible savings and that sales representatives were given sales scripts that were intended to be deceptive.
The CFPB said that according to Nationwides own 2013 figures, the median customer in the Interest Minimizer program would have to stay in the program for nine years to recoup the more than $1,200 they would have paid in fees. By the end of 2014, only 25% of their customers had actually been enrolled in the program for more than four years.
The CFPB is seeking redress for consumers that were harmed as well as civil penalties.
A request for comment from Nationwide on the lawsuit was not immediately answered.