CFPB announces settlement with mortgage lender and its owner charged with “bait-and-switch” scheme

by Ballard Spahr LLP

On August 12, the CFPB announced that it has issued a Consent Order under which Atlanta-based Amerisave Mortgage Corporation, its affiliate appraisal management company, Nova Appraisal Management Company, and a principal and indirect owner of both companies, Patrick Markert, agreed to pay nearly $21 million for deceiving and overcharging consumers in a bait-and-switch mortgage-lending scheme. The companies and principal did not admit or deny the CFPB’s findings of fact or conclusions of law.

According to the CFPB’s press release, “Amerisave lured consumers by advertising misleading interest rates, locked them in with costly up-front fees, failed to honor its advertised rates, and then illegally overcharged them for [undisclosed] affiliated “third-party” services.”

Between mid-2011 and 2014, the CFPB said, Amerisave advertised its interest rates and terms in all 50 states and the District of Columbia using banner ads and rate tables on third-party websites. According to the CFPB, these advertisements were inaccurate, and when consumers were directed to Amerisave’s own website, the company advertised interest rates based on an 800 credit score quote, even when the majority of consumers had already entered lower credit scores. The information that the mortgage quote was actually based on an 800 credit score was not disclosed to consumers until after they began a mortgage application.

In addition, the Consent Order states that from at least January 2009 to May 2011, Amerisave charged consumers a $35 fee at the outset of a mortgage application, before Amerisave provided them with a GFE and the consumer indicated an intent to proceed. Although the CFPB cited the upfront fee restrictions under Regulation X and Regulation Z that apply to residential mortgage loans, the CFPB did not note that the Regulation X restriction applies to applications received on or after January 1, 2010 and the Regulation Z restriction applies to applications received on or after July 30, 2009. It appears that in referring to a “GFE” the CFPB is referring to the Good Faith Estimate under Regulation X and the initial TILA disclosure under Regulation Z. But in certain cases the CFPB is not clear regarding what conduct in its view violated which specific restriction under the Regulations.

At first the upfront fee charged by Amerisave was an application fee. Then around the time the Regulation Z prohibition on imposing upfront fees beyond a bona fide and reasonable credit report fee became effective, the $35 fee was charged as a credit report deposit fee. The CFPB asserts that during this time, individual and joint credit reports actually cost Amerisave only $7.50 and $12, respectively.

The CFPB asserts that Amerisave also required consumers to order and authorize a $375 to $500 payment for an appraisal from Novo before receiving a GFE. The Consent Order states that Amerisave did not disclose Novo’s affiliation or that there was a 24 hour cancellation fee of 50% until after the consumer had authorized payment and at Amerisave’s encouragement, scheduled the appraisal for “as soon as possible.”

Addressing the effect on consumers, in the press release the CFPB stated that “By leading customers to believe that 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.” In the Consent Order, the CFPB asserts that “By marking up the cost of credit reports and requiring appraisal fee credit or debit card authorizations before giving consumers their first GFE and receiving an indication of the consumer’s intent to proceed with a loan covered by the GFE, Amerisave violated RESPA, Regulation X and TILA, Regulation Z. “

As we have previously covered, in Freeman, et al. v. Quicken Loans, Inc., the United States Supreme Court ruled that RESPA section 8 does not prohibit a single party from marking up the cost of a settlement service. Potentially, the CFPB markup position is based on the upfront fee restrictions in Regulation X and Regulation Z. In particular, the Regulation Z restriction expressly requires that an upfront credit report fee be bona fide and reasonable. The Regulation X restriction permits a fee limited to the cost of a credit report. An assertion that such restriction under Regulation X prohibits markups would appear to present an issue for review by the courts. 

Finally, the CFPB asserted that Amerisave charged consumers $100 at closing for “appraisal validation” reports without disclosing that the service was provided by Novo, and that the reports were marked up by as much as 900%. Apparently based on its assertion that Amerisave referred appraisal-related business to Novo without disclosing the nature of its relationship with Novo to consumers, the CFPB concluded that the companies were not entitled to rely on the affiliated business arrangement exception to the RESPA referral fee prohibition.

Amerisave and Novo consented to refund $14.8 million to consumers and pay $4.5 million in civil money penalties. In addition, Markert agreed to pay a $1.5 million civil money penalty. However, Markert is jointly and severally liable with the companies to pay the full amount of the damages and civil money penalties. In connection with any redress to affected consumers, the Consent Order prohibits the obtaining of a waiver from the consumers.

Additionally, among other provisions, the Consent Order (1) bars Amerisave from advertising unavailable mortgage rates and requires various procedures to provide for accurate advertisements, (2) requires that Amerisave provide an affiliated business arrangement disclosure before making referrals, or requiring the use (when permitted), of an affiliate, (3) prohibits Amerisave from charging any fee other than the actual cost of a credit report before providing a GFE and affiliated business arrangement disclosure and the consumer has indicated an intent to proceed, and (4) prohibits Amerisave from scheduling an appraisal or otherwise making any referral of third party services (other than for a credit report) until it has provided a GFE and, in the case of referrals to or a permitted required use of an affiliate, an affiliated business arrangement disclosure.

The prohibition on the ordering of an appraisal may be viewed with concern by the industry. While the upfront fee restrictions bar charging a consumer for an appraisal before the consumer has received initial disclosures and indicated an intent to proceed, they do not expressly prohibit the ordering of an appraisal (although care must be taken to avoid suggesting to a consumer that they would be responsible for the cost even if they do not proceed with the transaction).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.