WASHINGTON—The Consumer Financial Protection Bureau has filed a lawsuit in federal district court against Nationwide Biweekly Administration, Inc., Loan Payment Administration LLC, and the companies’ owner, Daniel Lipsky, alleging that Nationwide misrepresents the interest savings consumers will achieve through a biweekly mortgage payment program and misleads consumers about the cost of the program.
The CFPB is seeking compensation for harmed consumers, a civil penalty, and an injunction against the companies 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 in a statement. “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.”
Nationwide Biweekly Administration is an Ohio-based company that transmits funds from consumers to their mortgage servicers. Loan Payment Administration LLC is a wholly owned subsidiary of Nationwide. Daniel Lipsky is the founder, president, and sole owner of Nationwide, and has managerial responsibility for both companies.
According to the CFPB, Nationwide offers a product for mortgage borrowers that it calls the “Interest Minimizer.”
Most consumers who enroll in the Interest Minimizer program send Nationwide half their monthly mortgage payment every two weeks, effectively making one additional monthly payment per year. Nationwide charges consumers a setup fee of up to $995 to enroll in the program and charges consumers between $84 and $101 in payment processing fees each year they remain enrolled.
The CFPB’s complaint alleges that the defendants made misrepresentations about Nationwide’s mortgage payment program to consumers, and collected approximately $49 million in setup fees between 2011 and 2014. Consumers enrolled after being promised substantial and immediate savings on their mortgages. However, the Bureau alleges the defendants know that consumers will pay more in fees than they save in interest for the first several years in the program, and that many consumers will leave the program without saving any money at all. The CFPB alleges these practices violate the Telemarketing Sales Rule and the Consumer Financial Protection Act’s prohibition against unfair, deceptive or abusive acts or practices.