Alert December 23, 2013

CFPB and State Regulators Take Enforcement Action for Alleged UDAAP Violations

The CFPB announced an enforcement action against a nonbank mortgage lender and its mortgage servicer alleging the companies engaged in unfair, deceptive and abusive acts or practices in violation of the Consumer Financial Protection Act. According to the complaint, the companies failed to timely and accurately apply payments made by borrowers, charged unauthorized fees for default-related services, imposed force-placed insurance when the companies knew or should have known that borrowers had adequate coverage, misrepresented to borrowers that loss mitigation programs would delay or halt foreclosure proceedings, engaged in robo-signing, and provided false information to consumers about the status of the loss mitigation review while referring loans to foreclosure, among other allegations.

The terms of the proposed order require the mortgage lender and its servicer to (1) establish a compliance committee and submit a compliance plan addressing dealer compensation policies, notices to dealers explaining ECOA and the bank’s expectations for dealers, among other things, (2) pay a civil money penalty of $18,000,000 to the CFPB and DOJ, (3) refund $125,000,000 to affected consumers, (4) provide $2 billion for principal reduction to consumers facing foreclosure, and (5) submit to compliance monitoring and reporting.