WASHINGTON—In separate actions, the Consumer Financial Protection Bureau has taken action against several organizations, including Mastercard and UniRush, and law firms in the debt collection business.
The CFPB announced it took action against Mastercard and UniRush for breakdowns that left tens of thousands of economically vulnerable RushCard users unable to access their own money to pay for basic necessities, the CFPB reported.
In October 2015, a rash of preventable failures by Mastercard and UniRush meant that many customers could not use their RushCard to get their paychecks and other direct deposits, take out cash, make purchases, pay bills, or get accurate balance information. UniRush then failed to provide customer service to many consumers who reached out for help during the service breakdown, the Bureau explained.
The CFPB has ordered Mastercard and UniRush to pay an estimated $10 million in restitution to tens of thousands of harmed customers. The CFPB also fined Mastercard and UniRush $3 million.
“Mastercard and UniRush’s failures cut off tens of thousands of vulnerable consumers from their own money, and threw some into a personal financial crisis,” said CFPB Director Richard Cordray. “The companies must set things right for consumers and make sure such devastating service disruptions are not repeated.”
UniRush LLC is a Delaware corporation headquartered near Cincinnati. It is the program manager for RushCard, a reloadable prepaid debit card co-founded by entrepreneur Russell Simmons, and oversees operations such as the cardholder website.
Mastercard International Inc. is headquartered in Purchase, N.Y. One of its units, Mastercard Payment Transaction Services, is the current payment processor for the RushCard.
RushCard is advertised as a way for consumers to get direct deposits on their card “up to two days sooner.” These deposits include government benefits or payroll funds. In 2014, UniRush picked Mastercard as its new payment processor. Mastercard and UniRush spent 13 months preparing to switch to Mastercard’s processing platform, which ultimately took place Oct. 10-12, 2015. At the time of the switch, RushCard had about 650,000 active users, of which about 270,000 received direct deposits on their RushCard, the CFPB explained.
Mastercard and UniRush’s actions before, during, and after the changeover harmed tens of thousands of consumers, the Bureau stated. The CFPB received about 830 consumer complaints from RushCard users in the weeks that followed the switch in payment processors. By comparison, the CFPB received 147 complaints about prepaid cards from November 2014 to January 2015.
As a result of its “preventable failures,” the CFPB found that Mastercard or UniRush:
- Denied consumers access to their own money: UniRush did not accurately transfer all accounts to Mastercard. As a result, thousands of consumers could not access funds stored on their cards for days, or in some circumstances, weeks. Because of Mastercard’s actions, accounts of about 1,110 consumers were incorrectly suspended. UniRush also delayed crediting cash deposits to consumers’ accounts and shut off access to certain funds that consumers put aside for savings. UniRush did not issue a working replacement card to consumers whose cards were lost or stolen during this period.
- Botched the processing of deposits and payments: UniRush delayed processing direct deposits for more than 45,000 consumers, and did not process or improperly return deposits of 2,000 others. As a result, consumers could not access their paychecks or government benefits. UniRush also erroneously double posted deposits and did not promptly process electronic debit transactions, which falsely inflated those RushCard holders’ account balances. As a result, thousands of consumers accidentally spent more money than was loaded on their RushCard. With no advance notice to consumers, UniRush used funds consumers subsequently loaded onto their RushCards to offset negative balances caused by its processing errors.
- Gave consumers inaccurate account information: Mastercard did not make sure it was sending accurate information about consumers’ account balances to UniRush when it declined to authorize certain transactions. As a result, some consumers received incorrect information telling them their account balances were zero, when the consumers actually had funds stored on their cards.
- Failed to provide customer service to consumers impacted by the breakdowns: UniRush did not have an adequate plan to step up its customer service response to meet the increased demand caused by service disruptions. Even after hiring additional personnel, UniRush failed to train customer service agents in time to meet the surge in demand. As a result, some consumers who called customer service waited on hold for hours and could not obtain critical information about the status of their funds and accounts.
Enforcement Action
Under the terms of the consent orders, Mastercard and UniRush must:
- Pay an estimated $10 million in restitution to tens of thousands of harmed consumers: Mastercard and UniRush must pay an estimated $10 million in restitution to tens of thousands of customers who could not access their funds or who suffered other problems created or worsened by the failures and subsequent actions. Under the terms of the Bureau’s order, the amount each consumer will receive depends on the particular failure the consumer experienced. UniRush will send funds to affected consumers.
- Draw up a plan to prevent future problems: Mastercard and UniRush must devise a plan to prevent future service disruptions. The CFPB will monitor the companies for compliance as they implement the plan.
- Pay a $3-million civil penalty: Mastercard and UniRush must pay a civil money penalty of $3 million to the CFPB Civil Penalty Fund.
The consent order against Mastercard and UniRush is available at: http://files.consumerfinance.gov/f/documents/201702_cfpb_UniRush-Mastercard-consent-order.pdf
Separately, the Consumer Financial Protection Bureau took action against Prospect Mortgage, LLC, a major mortgage lender, for paying illegal kickbacks for mortgage business referrals, the agency reported.
The CFPB also took action against two real estate brokers and a mortgage servicer that took illegal kickbacks from Prospect. Under the terms of the action announced today, Prospect will pay a $3.5 million civil penalty for its illegal conduct, and the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties.
“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”
Prospect Mortgage, LLC, headquartered in Sherman Oaks, Calif., is one of the largest independent retail mortgage lenders in the United States, with nearly 100 branches nationwide. RGC Services, Inc., (doing business as ReMax Gold Coast), based in Ventura, Calif., and Willamette Legacy, LLC, (doing business as Keller Williams Mid-Willamette), based in Corvallis, Ore., are two of more than 100 real estate brokers with which Prospect had improper arrangements, the CFPB stated. Planet Home Lending, LLC is a mortgage servicer headquartered in Meriden, Conn., that referred consumers to Prospect Mortgage and accepted fees in return.
Prospect Mortgage
Prospect Mortgage offers a range of mortgages to consumers, including conventional, FHA, and VA loans. From at least 2011 through 2016, Prospect Mortgage used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act, the CFPB said.
“For example, Prospect established marketing services agreements with companies, which were framed as payments for advertising or promotional services, but in this case actually served to disguise payments for referrals,” the Bureau said.
Specifically, the CFPB found that Prospect Mortgage:
- Paid for referrals through agreements: Prospect maintained various agreements with over 100 real estate brokers, including ReMax Gold Coast and Keller Williams Mid-Willamette, which served primarily as vehicles to deliver payments for referrals of mortgage business. Prospect tracked the number of referrals made by each broker and adjusted the amounts paid accordingly. Prospect also had other, more informal, co-marketing arrangements that operated as vehicles to make payments for referrals.
- Paid brokers to require consumers – even those who had already prequalified with another lender – to prequalify with Prospect: One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings. “Writing in” meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender, the CFPB explained.
- Split fees with a mortgage servicer to obtain consumer referrals: Prospect and Planet Home Lending had an agreement under which Planet worked to identify and persuade eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages. Prospect compensated Planet for the referrals by splitting the proceeds of the sale of such loans evenly with Planet. Prospect also sent the resulting mortgage servicing rights back to Planet.
Under the consent order issued Tuesday, Prospect will pay $3.5 million to the CFPB’s Civil Penalty Fund for its illegal kickback schemes. The company is prohibited from future violations of the Real Estate Settlement Procedures Act, will not pay for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services, the Bureau stated.
The consent order filed against Prospect Mortgage is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_ProspectMortgage-consent-order.pdf
ReMax Gold Coast and Keller Williams Mid-Willamette
ReMax Gold Coast and Keller Williams Mid-Willamette are real estate brokers that work with consumers seeking to buy or sell real estate. Brokers or agents often make recommendations to their clients for various services, such as mortgage lending, title insurance, or home inspectors, the Bureau explained.
Among other things, the Real Estate Settlement Procedures Act prohibits brokers and agents from exploiting consumers’ reliance on these recommendations by accepting payments or kickbacks in return for referrals to particular service providers.
The CFPB’s investigation found that ReMax Gold Coast and Keller Williams Mid-Willamette accepted illegal payment for referrals. Both companies were among more than 100 brokers who had marketing services agreements, lead agreements, and desk-license agreements with Prospect, which were, in whole or in part, vehicles to obtain illegal payments for referrals.
Under the consent orders filed Tuesday, both companies are prohibited from violating the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services, the CFPB said. ReMax Gold Coast will pay $50,000 in civil money penalties, and Keller Williams Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties.
The consent order filed against ReMax Gold Coast is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_RGCServices-consent-order.pdf
The consent order filed against Keller Williams Mid-Willamette is available at:http://files.consumerfinance.gov/f/documents/201701_cfpb_Willamette-Legacy-consent-order.pdf
Planet Home Lending
In 2012, Planet Home Lending signed a contract with Prospect Mortgage that facilitated the payment of illegal referral fees, the CFPB said.
Specifically, the CFPB found that Planet Home Lending:
- Accepted fees from Prospect for referring consumers seeking to refinance: Under their arrangement, Planet Home Lending took half the proceeds earned by Prospect for the sale of each mortgage loan originated as a result of a referral from Planet. Planet also accepted the return of the mortgage servicing rights of that consumer’s new mortgage loan.
- Unlawfully used “trigger leads” to market to Prospect to consumers: Planet ordered “trigger leads” from one of the major consumer reporting agencies to identify which of its consumers were seeking to refinance so it could market Prospect to them. This was a prohibited use of credit reports under the Fair Credit Reporting Act because Planet was not a lender and could not make a firm offer of credit to those consumers, the agency said.
Under the consent order filed against Planet Home Lending, the company will directly pay harmed consumers a total of $265,000 in redress. The company is also prohibited from violating the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services, the CFPB stated.
The consent order filed against Planet Home Lending is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_PlanetHomeLending-consent-order.pdf