The CFPB filed a lawsuit against Nationwide Biweekly Administration, an Ohio-based company that transmits funds between borrowers and their mortgage servicers. The agency also sued Loan Payment Administration, a wholly-owned subsidiary of Nationwide.
Nationwide touts a product called “Interest Minimizer,” which allows consumers to make half of their monthly mortgage payment fortnightly. Doing so results in borrowers making one additional monthly mortgage payment per year. The company charges a fee of $995 to enroll in the program, and between $84 and $101 in payment processing fees each year. Between 2011 and 2014, the company collected about $49 million in setup fees. Nationwide claims in its marketing that the program will help borrowers save money.
The CFPB, however, alleges that Nationwide misled borrowers about the cost of the program. According to the agency, borrowers will pay more in fees than they would save in interest, at least for the first several years they are enrolled in the program. Borrowers “will not save the ‘monthly’ amounts promised by Nationwide until they are nearly halfway through their loan term,” the CFPB stated in its complaint. “Most of the promised savings will not be realized until the last years of the loan.”
According to the CFPB, an average borrower would have to remain in the program for nine years even to recoup the fees they paid to be a part of the program.
The CFPB is seeking compensation for affected homeowners and an injunction against Nationwide, Loan Payment Administration, and their owner.
“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 Consumer Financial Protection Bureau sued a mortgage payment company this week, alleging the company wasn’t truthful about the interest savings customers could gain by participating in a payment program.