WASHINGTON—The Consumer Financial Protection Bureau has taken action against a number of companies for violations ranging from causing some people to be mistakenly evicted to bogus threats to sue consumers, to MLA violations.
Among the companies issued a consent order was Seterus, Inc. and Kyanite Services, Inc., as Seterus’s successor in interest, after finding Seterus violated the Consumer Financial Protection Act of 2010 (CFPA) and Regulation Xd.
The Bureau said it found Seterus’ actions resulted in delaying or depriving some borrowers of a reasonable opportunity to get their loss mitigation applications completed and evaluated and in some borrowers failing to timely receive protections against prohibited foreclosure activities to which they were legally entitled.
The consent order addresses widespread failures in Seterus’s handling and processing of struggling homeowners’ applications for loss mitigation options, which are alternatives to foreclosure made available through their servicer.
The consent order requires Kyanite, as Seterus’s successor in interest, to $4,932,525 in total redress to approximately 11,866 of the consumers to whom Seterus sent a defective acknowledgment notice. The consent order also imposes a $500,000 civil money penalty and includes injunctive relief that would apply in the event Kyanite engages in mortgage servicing.
As a mortgage servicer, the CFPB said Seterus was responsible for collecting borrower applications for these programs, communicating with borrowers regarding their applications, determining eligibility, and implementing loss mitigation programs for qualified borrowers. At its height, Seterus, a former mortgage servicer based in North Carolina, serviced approximately 500,000 residential mortgage loans, but is no longer operating. On Feb. 28, 2019, after the relevant period covered by its investigation, the CFPB said Seterus was sold and its entire mortgage servicing portfolio was transferred to Nationstar Mortgage LLC, doing business as Mr. Cooper, the CFPB said.
Failure to Review
The Bureau found Seterus, which used automated processes for handling loss mitigation applications, committed unfair acts and practices in violation of the CFPA by systematically failing to accurately review, process, track, and communicate to borrowers information regarding their applications.
The Bureau further found Seterus also engaged in deceptive acts and practices in violation of the CFPA by sending numerous borrowers acknowledgment notices regarding their applications that misrepresented the status of borrower documents and provided inaccurate due dates for submission of borrower documents.
The Bureau additionally said it found Seterus violated Regulation X, which implements the Real Estate Settlement Procedures Act, by sending numerous acknowledgment notices that failed to state the additional documents and information borrowers needed to submit to complete their loss mitigation applications or failed to provide a reasonable due date for submission of borrower documents.
The Bureau also found that Seterus violated Regulation X by not exercising reasonable diligence in obtaining documents and information necessary to complete borrowers’ loss mitigation applications and by failing to properly evaluate borrowers who submitted complete loss mitigation applications for all loss mitigation options available to the borrower.
Consumer Denied Opportunities
As a result of Seterus’s violations, the CFPB said some borrowers were delayed or deprived of a reasonable opportunity to get their loss mitigation applications completed and evaluated, and were delayed in receiving or deprived of the protections against prohibited foreclosure activities to which they were entitled under Regulation X. Some borrowers suffered improper foreclosure activity as a result. Borrowers also incurred injuries such as negative credit reporting, additional late fees, and additional interest as a result of defective acknowledgment notices that delayed or impaired their ability to obtain the benefits of a loss mitigation option, the agency said.
To read the consent order click here.
Bogus Threats to Sue Consumers, MLA Violations
In addition the CFPB issued a consent order against RAB Performance Recoveries, LLC for threatening to sue and suing consumers to collect debts where it did not have a legally required license to do so, the agency said.
Through 2012, RAB, a New Jersey company, purchased and collected consumer debts from debt brokers, and through August 2014, it used collections law firms to obtain judgments against consumers. RAB has continued to collect on those judgments against consumers as well as on a handful of payment agreements it obtained from debtors, the agency said.
The Bureau found that during the period that RAB was obtaining judgments against consumers, RAB threatened to sue, sued, and demanded payment from consumers in Connecticut, New Jersey, and Rhode Island even though RAB did not hold the licenses that those states required to sue to collect debts.
“Thus, RAB was not legally entitled to take the actions that it threatened to take against consumers in those states,” the CFPB said.
Other Misrepresentations
The Bureau found that RAB misrepresented that it had a legally enforceable right to recover payments from consumers in these states through the judicial process in violation of the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act of 2010 (CFPA).
The consent order prohibits RAB from collecting on the judgments against, or payment agreements from, consumers it obtained in Connecticut, New Jersey, and Rhode Island when RAB did not hold a required debt-collection license in those states. It also requires RAB to take all necessary steps to vacate those judgments and suspend collection of those judgments and to notify consumers with payment agreements that they have been satisfied. The consent order also requires RAB to pay a $204,000 civil money penalty.
A copy of the consent order is available here.
Violations of MLA
Finally, saying it is continuing its efforts to shut down lenders that are violating the Military Lending Act (MLA), the CFPB filed a lawsuit against LendUp Loans, LLC.
The Bureau alleges that LendUp violated the Military Lending Act (MLA) in connection with its extensions of credit. LendUp, which has its principal place of business in Oakland, is an online lender that offers single-payment and installment loans to consumers.
The Bureau’s complaint, filed in the United States District Court for the Northern District of California, seeks an injunction, as well as damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of civil money penalties.
The latest action is part of a broader Bureau sweep of investigations of multiple lenders that may be violating the MLA. The MLA puts in place protections in connection with extensions of consumer credit for active-duty servicemembers and their dependents, who are defined as “covered borrowers.”
These protections include a maximum allowable annual percentage rate of 36%, known as a Military Annual percentage Rate (MAPR), a prohibition against required arbitration, and certain mandatory loan disclosures, the CFPB explained.
Additional Allegations
The Bureau alleges that since October 2016, LendUp has made over 4,000 single-payment or installment loans to over 1,200 covered borrowers in violation of the MLA. The Bureau specifically alleges that LendUp’s violations of the MLA include extending loans with an MAPR that exceeds the MLA’s 36% cap, extending loans that require borrowers to submit to arbitration, and failing to make certain required loan disclosures, including a statement of the applicable MAPR.
A copy of the complaint filed in federal district court in the Northern District of California is available here.