The Consumer Financial Protection Bureau on Tuesday charged Paymap Inc. and LoanCare LLC with deceiving consumers by allegedly steering them into a mortgage payment program that cost them millions of dollars in fees. 

Paymap Inc., a payment processor and affiliate of Western Union, and LoanCare, a mortgage servicer that serves as a subservicer for Black Knight (which is majority-controlled by Fidelity National Financial), were cited by the CFPB for wrongfully promising "tens of thousands of dollars in interest savings" to consumers if they made more frequent mortgage payments. 

Colorado-based Paymap agreed to return $33.4 million in fees to consumers and pay a $5 million civil penalty, while Virginia-based LoanCare will pay a $100,000 penalty. Both companies agreed to the order without confirming or denying the allegations.

The companies allegedly jointly marketed and provided the “Equity Accelerator Program” – an electronic payment system that allows 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 and a transaction fee for each automatic debit that Paymap makes, typically $2.50. 

Since July 21, 2011, approximately 125,000 consumers enrolled in the program, paying more than $33 million in fees, the CFPB said. Paymap's fees charged to consumers were then shared with LoanCare.

"Deceptive advertising has no place in the financial marketplace," said CFPB Director Richard Cordray in a press release. "Today's action is delivering relief for consumers deceived by Paymap and LoanCare, and sending a clear message that these practices will not be tolerated."

There are many companies that offer borrowers the option to lower their interest rate costs by making biweekly, or more frequent mortgage payments, the CFPB said but the named companies did not actually make those mortgage payments. Instead, payments were held until due within the typical monthly period and then a transaction fee was added. LoanCare is actually one of "many mortgage servicers" that partnered with Paymap to market the Equity Accelerator program, the CFPB said. 

Along with the consumer refunds and a $5 million penalty imposed on Paymap, the company was banned from advertising the benefits of its payment program until it has "credible evidence to support its claims," the CFPB said. This includes having to disclose that any projected interest savings through Paymap's program is based on the higher annual mortgage payment a consumer could pay through the program. LoanCare was similarly prohibited from advertising the program's benefits without such supporting evidence.

The CFPB found that Paymap and LoanCare violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against deceptive acts and practices. 

Specifically, the CFPB found that consumers were:

Lured with deceptive promises of savings: Paymap made claims on its website such as, “The average customer will achieve over $33,000 in interest savings” using the Equity Accelerator Program. However, Paymap had no factual basis to support this claim. Moreover, only a tiny percentage, if any, of its customers achieved that amount of interest savings.

Misled about when their payments would be applied: Paymap and LoanCare told consumers in their direct mail solicitations that enrolling in the Equity Accelerator Program would change the consumers’ payoff schedule to “every 2 weeks.” Although Paymap makes more frequent withdrawals from consumers’ accounts in the Equity Accelerator Program, it does not actually make more frequent payments on consumers’ mortgages. Instead, Paymap holds the collected payments in custodial accounts, and then pays consumers’ mortgages on their original monthly schedule. Consumers are charged a transaction fee with every withdrawal. Any interest savings that consumers may achieve through the Equity Accelerator Program is because they make a higher annual mortgage payment in the Program, using the same payment schedule as before enrollment.


Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.