Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z)

CFPB Takes Motion Towards Mortgage Fee Firm And Servicer For Misleading Advertisements

Customers Deceived by “Fairness Accelerator” Claims to Obtain $33.4 Million

Washington, D.C. – The Shopper Monetary Safety Bureau (CFPB) took motion at this time in opposition to Paymap Inc. and LoanCare, LLC for deceiving customers with ads for a mortgage fee program that promised tens of 1000’s of {dollars} in curiosity financial savings from extra frequent mortgage funds. Below the phrases of the orders introduced at this time, Paymap will return $33.4 million in charges to customers and pay a $5 million civil penalty to the CFPB, and LoanCare pays a $100,000 civil penalty.

“Misleading promoting has no place within the monetary market,” mentioned CFPB Director Richard Cordray. “At the moment’s motion is delivering reduction for customers deceived by Paymap and LoanCare, and sending a transparent message that these practices is not going to be tolerated.”

Paymap Inc. is a Colorado-based fee processing firm, and LoanCare Servicing is a Virginia-based residential mortgage servicer. Collectively, they marketed and offered the “Fairness Accelerator Program” – an digital fee system that allows customers to make automated mortgage funds through digital debits from their financial institution accounts. Customers are sometimes charged an enrollment payment of $295 when signing up for the Fairness Accelerator Program, and a transaction payment for every automated debit that Paymap makes, sometimes $2.50. Since July 21, 2011, roughly 125,000 customers enrolled within the Fairness Accelerator Program and paid Paymap $33.4 million in charges.

Paymap partnered with many mortgage servicers, together with LoanCare, to market the Fairness Accelerator to the mortgage servicers’ clients. LoanCare and Paymap marketed the Fairness Accelerator to LoanCare’s clients in 2012 by sending them solicitations on LoanCare’s letterhead. Like the opposite servicers it partnered with, Paymap shared a portion of customers’ charges with LoanCare.

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Paymap and LoanCare marketed that customers who enrolled within the Fairness Accelerator Program would have a brand new, biweekly payoff schedule that will result in important curiosity financial savings due to the extra frequent funds. In actual fact, the Fairness Accelerator Program didn’t make extra frequent funds on customers’ mortgages, and, Paymap’s outstanding claims of tens of 1000’s of {dollars} in curiosity financial savings have been made with none supporting proof.

The CFPB discovered that Paymap and LoanCare violated the Dodd-Frank Wall Road Reform and Shopper Safety Act’s prohibition in opposition to misleading acts and practices. Particularly, the Bureau discovered that customers have been:

  • Lured with misleading guarantees of financial savings: Paymap made claims on its web site reminiscent of, “The typical buyer will obtain over $33,000 in curiosity financial savings” utilizing the Fairness Accelerator Program. Nevertheless, Paymap had no factual foundation to help this declare. Furthermore, solely a tiny proportion, if any, of its clients achieved that quantity of curiosity financial savings.
  • Misled about when their funds can be utilized: Paymap and LoanCare advised customers of their junk mail solicitations that enrolling within the Fairness Accelerator Program would change the customers’ payoff schedule to “each 2 weeks.” Though Paymap makes extra frequent withdrawals from customers’ accounts within the Fairness Accelerator Program, it doesn’t really make extra frequent funds on customers’ mortgages. As a substitute, Paymap holds the collected funds in custodial accounts, after which pays customers’ mortgages on their unique month-to-month schedule. Customers are charged a transaction payment with each withdrawal. Any curiosity financial savings that customers might obtain by the Fairness Accelerator Program is as a result of they make a better annual mortgage fee within the Program, utilizing the identical fee schedule as earlier than enrollment.
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Enforcement Actions

Pursuant to the Dodd-Frank Act, the CFPB has the authority to take motion in opposition to corporations participating in unfair, misleading, or abusive practices within the client monetary market.

Below the phrases of the consent order filed at this time, Paymap is required to:

  • Pay $33.4 million to customers: Paymap will return $33.4 million to customers, which represents all charges paid by each client who enrolled within the Fairness Accelerator Program since July 21, 2011. Roughly 125,000 customers will obtain refunds.
  • Stop its illegal promoting and advertising and marketing practices: Paymap should make sure that its advertising and marketing practices adjust to federal regulation. Paymap is prohibited from promoting any advantages of the Fairness Accelerator Program with out credible proof to help its claims, and from implying that this system will change a client’s common mortgage fee schedule. Paymap should disclose that the supply of any projected curiosity financial savings by this system is the upper annual mortgage fee a client will make in such a program.
  • Pay a $5 million civil penalty: Paymap pays $5 million to the CFPB’s Civil Penalty Fund.

Below the phrases of the consent order filed at this time, LoanCare is required to:

  • Stop its illegal promoting and advertising and marketing practices: LoanCare should make sure that its advertising and marketing practices adjust to federal regulation. LoanCare is prohibited from promoting any advantages of the Fairness Accelerator Program with out credible proof to help its claims, and from implying that this system will change a client’s common mortgage fee schedule. LoanCare should disclose that the supply of any projected curiosity financial savings is the upper annual mortgage fee a client will make in such a program.
  • Pay a $100,000 civil penalty: LoanCare pays $100,000 to the CFPB’s Civil Penalty Fund.
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A duplicate of the consent order for Paymap filed at this time is accessible at:
https://recordsdata.consumerfinance.gov/f/201507_cfpb_consent-order_paymap.pdf

A duplicate of the consent order for LoanCare filed at this time is accessible at:
https://recordsdata.consumerfinance.gov/f/201507_cfpb_consent-order_loan-care.pdf

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The Shopper Monetary Safety Bureau is a twenty first century company that helps client finance markets work by making guidelines more practical, by constantly and pretty implementing these guidelines, and by empowering customers to take extra management over their financial lives. For extra data, go to consumerfinance.gov.