CFPB and State Regulators Take Enforcement Action for Alleged UDAAP Violations

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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.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.