A mortgage payment company owned by Western Union has agreed to return $33.4 million to consumers following allegations that it misled customers into thinking they could save thousands of dollars on their home loans.
The Consumer Financial Protection Bureau announced today that Paymap Inc, a unit of Western Union Co, and loan servicer LoanCare LCC agreed to pay a total of $38.5 million to resolve charges they deceptively lured consumers into signing up for a program advertised to help pay off mortgages faster, while also saving on interest payments.
According to the CFPB consent orders against Colorado-based processing company Paymap [PDF] and Virgina-based LoanCare [PDF], the companies marketed and provided the “Equity Accelerator Program” as a way for consumers to make automatic mortgage payments via electronic debts from their bank accounts.
Advertisements for the program included promises that “the average customer will achieve over $33,000 in interest savings.” However, the CFPB contends that Paymap had no factual basis to support such a claim.
As a result of the unsubstantiated claim, since 2011 nearly 125,000 consumers signed up for the program, paying an enrollment fee of $295 and a transaction fee of $2.50 for each automatic withdrawal made from their bank accounts. In all, the CFPB estimates that the program collected $33.4 million in fees for Paymap.
Starting in 2012, Paymap and LoanCare teamed up to advertise the program as having a new, biweekly payoff schedule that would lead to significant interest savings because of the more frequent payments.
In reality, the CFPB claims the even though Paymap made more frequent withdrawals from consumers’ accounts, it did not actually make more frequent payments to consumers’ mortgages.
Instead, the company held the collected payments in custodial accounts and then paid the mortgages on the same monthly schedule. By increasing the number of withdrawals made against a consumers’ account, Paymap was collecting additional $2.50 fee.
Under its settlement with the CFPB, Paymap has agreed to return $33.4 million to approximately 125,000 consumers who enrolled in the Equity Accelerator Program since July 21, 2011. The company must also pay a $5 million civil penalty to the CFPB’s Civil Penalty Fund.
For its part, LoanCare must pay a $100,000 fine to the CFPB’s Civil Penalty Fund. Additionally, both companies have agreed to cease advertisements of the programs benefits without provide credible supporting evidence or implying that they could change payment schedules.
by Ashlee Kieler via Consumerist
No comments:
Post a Comment