Stack of Money, Calculator, Pad of Paper and Pen with Narrow Depth of Field.On Tuesday, July 28, the Consumer Financial Protection Bureau ordered Paymap Inc., a Colorado-based payment processing company and wholly owned subsidiary of Western Union Company, to repay consumers $33.4 million in fees and levied a $5 million civil penalty for violating a prohibition against unfair, deceptive, or abusive practices. The Bureau also ordered LoanCare, LLC, a Virginia-based mortgage servicer, to pay a $100,000 civil penalty for its role in the customer deception.

Both parties’ violations stem from their respective roles in a program called the Equity Accelerator Program (the “Program”), which allowed customers to make electronic payments on their mortgages and allegedly achieve a substantial savings from their regular mode of payment. Enrollees in the Program permitted Paymap to deduct a portion of their monthly mortgage payment from their bank account weekly, biweekly, or semi-monthly. For doing so, Paymap promised customers they would save money over the life of their mortgage because of the increased frequency of the payments. In fact, on Paymap’s website, it stated that “[t]he average customer will achieve over $33,000 in interest savings” and that “[m]ost homeowners save over $33,000 in interest payments.” For this service, customers were charged an enrollment fee of $295 and a transaction fee of $2.50 for each payment.

The Program, however, did not operate as advertised. Although Paymap charged customers a transaction fee with each withdrawal, Paymap did not actually transfer customers’ payments to the servicer when payments were debited from their account. Instead, Paymap held customers’ payments in a custodial account until the beginning of the month that the customer’s next mortgage payment was due and then transferred the funds to the servicer. The Program used the exact same payment schedule as the customer was originally using, and any interest savings a customer achieved was simply a result of the customer making a higher annual payment in the Program.

Though LoanCare did not administer the Program, its role was also deceptive. LoanCare partnered with Paymap to enroll LoanCare customers in the Program by gathering personal financial information on LoanCare customers and mailing solicitations to these customers on LoanCare letterhead. It also advertised the Program on its website.

The CFPB concluded that Paymap and LoanCare’s actions  violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against unfair, deceptive, or abusive practices. They did so by misleading customers about when their mortgage payments would be applied and promising substantial savings to customers without factual basis to support the claim. 12 U.S.C. 5536(a)(1)(B).

Along with the monetary penalties and fines, the orders prohibit Paymap or LoanCare from advertising the Program without credible evidence to support their claims, or from implying that the Program itself will change the payment schedule of a mortgage.

In the orders, neither party admitted or denied allegations that they violated the Dodd-Frank Act.