Consumer Finance Insights
February 19, 2016

Massachusetts AG Settles Force-Placed Insurance Claims Against National Mortgage Lender for $4 Million

On February 18, the Massachusetts Attorney General (“AG”) announced a $4 million settlement with a national mortgage lender and servicer, resolving allegations that the lender received kickbacks for force-placed insurance policies.

The AG alleged that, prior to June 1, 2012, the lender received compensation and other kickbacks tied to (already high) force-placed insurance premiums charged to its borrowers.  Specifically, an affiliate of the lender was allegedly paid commissions for the sale of such insurance, even though that affiliate did not perform any of the functions of a traditional insurance agent.  The lender also participated in the insurance company’s quota-share reinsurance program, permitting its affiliate to share in profits from that company’s force-placed insurance business.  According to the AG, this arrangement created a conflict of interest in violation of state consumer protection laws.

Pursuant to the parties’ assurance of discontinuance, filed in Suffolk Superior Court, the lender agreed to pay $2.675 million in restitution to consumers charged for force-placed insurance premiums, and another $1.4 million to Massachusetts.  The lender further agreed not to accept commissions, profit-sharing, or reinsurance proceeds, or any free or below-market value services, from its force-placed insurance carriers.