Once again, a company is being fined millions of dollars for deceptive advertising practices. You may have seen ads which claim to save you thousands of dollars in interest if you pay off your mortgage early. While the concept is sound, companies who charge big fees or make deceptive promises are not above-board. Paymap, a Colorado-based company and LoanCare, a Virginia-based company were both targeted by the Consumer Financial Protection Bureau. LoanCare was slapped with a $100,000 civil penalty, while PayMap will pay a $5 million civil penalty and must return $33.4 million in fees to affected consumers.
Paymap and LoanCare both engaged in consumer advertising, which promised those who enrolled in their Equity Accelerator Program would garner significant savings in interest payments. Consumers were set up with a new, biweekly payoff schedule, paying an enrollment fee of $295 and a biweekly transaction fee of $2.50. These fees amounted to approximately $33.4 million from more than 125,000 customers. CFPB Director, Richard Cordray, noted “Deceptive advertising has no place in the financial marketplace.” Those who want to pay off their mortgage early can save on interest simply by making additional principal payments to the bank or mortgage servicer—with no fees or middlemen.
When a consumer “buys” an accelerated biweekly payment plan from a mortgage service company, they are basically asking the company to make them pay off their mortgage early. The company collects biweekly checks from the consumer, fining them if one of the payments is missed. The companies justify their setup fees, maintenance fees and penalties by assuring the consumer it is well worth it to save tens of thousands of dollars on a mortgage. Some companies charge even more than Paymap or LoanCare, with startup fees as high as $350 and biweekly processing fees as high as $10. Some also charge a monthly and/or annual maintenance fee. As an example, if you pay a $250 initial startup fee and $10 per month in processing fees you will pay $2,650 over 20 years, plus late fees and penalties for not paying on time.
Paymap Inc., is part of Western Union, and LoanCare is a sub-servicer for ServiceLink which is mostly controlled by Fidelity National Financial. Both Paymap and LoanCare promised “tens of thousands of dollars in interest savings,” to consumers who signed up with the companies and agreed to make biweekly mortgage payment. LoanCare partnered with Paymap to market the Equity Accelerator Program, then the fees charged by Paymap were shared with LoanCare. While both companies agreed to the order to pay fines and refund millions to consumers, they neither confirmed nor denied the underlying allegations.
Paymap and LoanCare are not alone in the services they offer to consumers, however these two companies held customer’s payments until they were due within the typical monthly period, then charged a transaction fee. In other words, the companies were collecting interest on consumers’ money—and charging them to do so. Paymap frequently advertised huge savings on interest costs with no supporting evidence to back up those claims. The CFPB said only a tiny fraction of Paymap and LoanCare’s customers reached the level of savings on interest the company’s advertised. Paymap has been banned from advertising the benefits of its payment program until credible evidence to back up those claims is produced. LoanCare received similar advertising prohibitions.
Consumers who want to create their own mortgage accelerator program can simply divide one regular mortgage payment by 12 and add that amount to the normal monthly payment. The principal amount of the mortgage will be reduced quicker than it would normally be, with no resulting fees and penalties.
Contact Our Experienced National Deceptive Advertising Lawyers
If you believe that your bank or mortgage company has engaged in deceptive advertising and you have been harmed by their deception, we can help. Our experienced national consumer law attorneys will explain your legal rights and determine the best course of action for your situation.
For a free review of your case, call the Pennsylvania class action lawyers at Golomb Legal today at (215) 278-4449 or fill out our confidential contact form.
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