The CFPB ordered that Paymap return $33.4 million in fees to consumers and pay a $5 million civil penalty to the Bureau. In addition, LoanCare, LLC must also pay a $100,000 civil penalty to the Bureau.
When questioned about the vast difference in the penalty amounts, Samuel Gilford, a spokesperson for the CFPB told DSNews, "Regarding the size of the civil money penalties, the Dodd-Frank Act provides a framework for assessing civil money penalties, and requires the Bureau to take into consideration a number of factors, including the size of the respondent, the respondent’s financial resources, its good faith efforts to comply with the law and cooperate with the Bureau, the gravity of the violations, the severity of the losses to consumers, any history of previous violations, and other matters as justice requires."
He adds, "I’d also note that Paymap is the creator and operator of the equity accelerator program."
According to the CFPB, Paymap, a Colorado-based payment processing company partnered with LoanCare Servicing, a Virginia-based residential mortgage servicer to market their Equity Accelerator program.
The CFPB also noted that "Paymap partnered with many mortgage servicers, including LoanCare, to market the Equity Accelerator to the mortgage servicers’ customers. Like the other servicers it partnered with, Paymap shared a portion of consumers’ fees with LoanCare."
The question that the Bureau refused to answer was how this partnership with LoanCare was different from any other partnership that Paymap had entered into in the industry. Instead spokeperson Gilford said, "We cannot discuss non-public enforcement activities, but the Bureau will address violations of Federal consumer financial laws as appropriate."
The Bureau contends that Paymap falsely promised that consumers would save tens of thousands of dollars in interest from making bi-weekly mortgage payments through an electronic payment system that draws debits from their bank accounts when in fact, borrowers saved little, if any.
To enroll in the Equity Accelerator program, consumers are typically charged an enrollment fee of $295 and a transaction fee of $2.50 for each automatic debit that Paymap makes. Approximately 125,000 consumers enrolled in the program since July 21, 2011 and paid Paymap $33.4 million in fees.
In the release, the CFPB says that Paymap and LoanCare deceptively advertised that consumers who enrolled in the program would have a new, biweekly payoff schedule that would lead to "significant interest savings because of the more frequent payments."
Paymap made claims on its website such as, “The average customer will achieve over $33,000 in interest savings”
"However, Paymap had no factual basis to support this claim," the CFPB said. "Moreover, only a tiny percentage, if any, of its customers achieved that amount of interest savings."
The CFPB determined that that Paymap and LoanCare violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against deceptive acts and practices. The Bureau found that consumers were lured by deceptive promised of savings and misled about when their payments would be applied.
Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against companies engaging in unfair, deceptive, or abusive practices in the consumer financial marketplace.
Under the terms of the consent order filed today, Paymap is required to return $33.4 million to approximately 125,000 consumers, which represents all fees paid by every consumer who enrolled in the equity accelerator program since July 21, 2011.
"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.”
Despite the message, Tim Anderson, director of eServices at DocMagic, expressed a growing anxiety in the industry. "It has become a running theme and concern with the CFPB that they are using fines and fees as the tool for “enforcement” to interpret regulations that are broad, general and vague in terms of lenders knowing exactly how to comply beforehand."
CFPB's Enforcement Actions:
Under the terms of the consent order filed today, Paymap is required to:
- Paymap will return $33.4 million to consumers, which represents all fees paid by every consumer who enrolled in the Equity Accelerator Program since July 21, 2011. Approximately 125,000 consumers will receive refunds.
- Paymap must ensure that its marketing practices comply with federal law. Paymap is prohibited from advertising any benefits of the Equity Accelerator Program without credible evidence to support its claims, and from implying that the program will change a consumer’s regular mortgage payment schedule. Paymap must disclose that the source of any projected interest savings through the program is the higher annual mortgage payment a consumer will make in such a program.
- Paymap will pay $5 million to the CFPB’s Civil Penalty Fund.
Under the terms of the consent order filed today, LoanCare is required to:
- LoanCare is prohibited from advertising any benefits of the Equity Accelerator Program without credible evidence to support its claims, and from implying that the program will change a consumer’s regular mortgage payment schedule. LoanCare must disclose that the source of any projected interest savings is the higher annual mortgage payment a consumer will make in such a program.
- LoanCare will pay $100,000 to the CFPB’s Civil Penalty Fund.
Based on language contained in the consent order issued by the CFPB, LoanCare stopped using PayMap as far back as 2012. CFPB did not disclose whether there were servicers currently using PayMap.