CFPB Fines Bait-and-Switch Mortgage Scheme $19M

CFPB Fines Bait-and-Switch Mortgage Scheme $19M Photo: Diego M. Radzinschi/NLJ Richard Cordray.

Online mortgage lender Amerisave Corp. on Tuesday was ordered to pay $19.3 million by the Consumer Financial Protection Bureau for deceiving tens of thousands of borrowers with a bait-and-switch mortgage-lending scheme.

According to the agency, the Atlanta-based lender advertised misleading interest rates and illegally overcharged consumers for “third-party” services provided by its affiliate, Novo Appraisal Management Co.

“Amerisave lured consumers in with deceptive advertising, trapped them with costly upfront fees, and then illegally overcharged them for services from an undisclosed affiliate,” director Richard Cordray said in a news release. “By the time consumers could have discovered the advertised low rates were too good to be true, they had already committed to pay hundreds of dollars to Amerisave.”

Amerisave counsel K&L Gates partner Steven Kaplan in an email said, “In order to resolve this matter promptly and fully, the company entered into a settlement agreement with the CFPB. Under the agreement, the company did not admit or deny the facts or conclusions.”

He continued, “The issues raised in the complaint have been previously addressed. With this settlement, the company can put its total focus on serving customers by providing high quality service at competitive rates.”

The agency charged Amerisave, Novo and the owner of both companies, Patrick Markert, with violating the Consumer Financial Protection Act, the Real Estate Settlement Procedures Act, the Truth in Lending Act and the Mortgage Acts and Practices Rule.

The agency in an administrative complaint said Amerisave quoted consumers interest rates based on an atypically high credit score of 800. In other instances, the advertised rates were simply unavailable. The company also required consumers to authorize payment for an appraisal before it would provide a good-faith estimate on the cost of the mortgage.

“By leading customers to believe they were already obligated to pay such costly fees, often $400 or more, Amerisave restricted consumers’ ability to shop for alternative products and better prices,” the agency said.

Amerisave, which does business in all 50 states, will refund $14.8 million to consumers and pay a $4.5 million penalty. Markert will pay an additional $1.5 million penalty. The company also agreed to cease running deceptive ads, implement a quality-control program and hire an independent consultant to review its advertising practices. Furthermore, it will not charge fees or make referrals to its affiliates before giving consumers the proper disclosure forms.

Contact Jenna Greene at jgreene@alm.com or on Twitter @jgreenejenna.

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