The two companies jointly marketed and provided Equity Accelerator, an electronic payment system that let consumers make automatic mortgage payments via electronic debits from their bank accounts.
Paymap, a Colorado-based payment processor, violated the Dodd-Frank Act’s prohibition against deceptive acts and practices by claiming that customers would save thousands of dollars in interest with no factual basis and misleading customers about when their payments would be applied, the CFPB said.
Consumers who enrolled in the Equity Accelerator program were given a new, biweekly payoff schedule that would supposedly lead to significant interest savings because of the more frequent payments, the bureau said. The program did not, however, actually make more frequent payments on consumers’ mortgages. Rather, Paymap held the collected payments in custodial accounts and made payments on the original monthly schedule, the CFPB said.
Paymap partnered with LoanCare, a Virginia-based residential mortgage servicer, to market the program to their customers. In 2012, LoanCare customers received Equity Accelerator solicitations on LoanCare’s letterhead from the two companies. Paymap then shared a portion of consumers’ fees with LoanCare.
Customers were charged a one-time enrollment fee of $295 and a $2.50 transaction fee for each automatic debit that Paymap made. Since July 21, 2011, approximately 125,000 consumers have enrolled in the Equity Accelerator program and paid Paymap $33.4 million in fees, the bureau said.
Paymap has been ordered to return the $33.4 million to affected consumers and pay a $5 million civil penalty to the CFPB; LoanCare will pay a $100,000 civil penalty.
“Deceptive advertising has no place in the financial marketplace,” said CFPB Director Richard Cordray. “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.”