On September 8, a federal judge in California ordered a national mortgage services company to pay a $7.9 million civil penalty based on false or misleading marketing statements it allegedly made to consumers about its mortgage loan repayment services. The court, however, denied the Consumer Financial Protection Bureau’s (“CFPB”) request for $74 million in restitution, finding that the CFPB failed to meet its burden to show restitution was warranted.
According to the CFPB, the company sent thousands of mailers advertising that its Interest Minimize Program (“IM Program”) services would help borrowers pay less interest on their mortgage loans. After a seven day bench trial, the judge determined that the language in the mailers, as well as call scripts used with customers, were deceptive under the Consumer Financial Protection Act (“CFPA”), 12 U.S.C. § 5531(a), because they misrepresented that borrowers would have “immediate” savings in interest when, in fact, the company’s program did not affect borrowers’ interest for several months after enrollment. As a result, the judge ordered defendants to pay $7,930,000 in statutory penalties under the CFPA, which provides a basic penalty of up to $5,000 per day while violating any provision of federal consumer financial law. 12 U.S.C. § 5565(c)(1).
The court, however, determined that the CFPB did not meet its burden to show that the nearly $74 million in restitutionary relief it proposed was warranted. In addition to penalties, the CFPB had sought restitution on behalf of approximately 126,500 consumers who participated in the IM Program. In denying the claim for restitution, the court noted that some of the alleged misrepresentations and omissions did not apply to all consumers. The court added that the CFPB failed to prove that the alleged fees for the program were inadequately disclosed, and that one category of allegedly misleading representations actually had an articulable basis in fact. Thus, it was inappropriate to require a refund of all fees paid by customers.
The judge also ordered that the parties meet and confer to negotiate the form and content of appropriate injunctive relief.