By Jonathan Stempel
(Reuters) - A U.S. regulator on Monday sued a company that has claimed to help hundreds of thousands of American homeowners lower their monthly mortgage payments, but charged millions of dollars in setup fees it knew would more than offset the savings.
The U.S. Consumer Financial Protection Bureau accused Nationwide Biweekly Administration Inc and its president, Daniel Lipsky, of falsely promising savings from their "Interest Minimizer" program. It was advertised online, via direct mail and in a 2014 TV infomercial on the Lifetime network.
According to a complaint filed in San Francisco federal court, the defendants from August 2011 to September 2014 collected $49 million in setup fees, some as high as $995, from more than 100,000 consumers who enrolled and charged $84 to $101 in annual processing fees.
The CFPB said most enrollees divided their monthly mortgage payments in half and remitted them every two weeks to Nationwide, which paid their lenders or servicers. It said this caused enrollees to make the equivalent of an extra monthly payment each year.
Nationwide, its Loan Payment Administration unit, and Lipsky misled enrollees by promising they would "soon" save thousands of dollars in payments, when in fact most savings would not occur until the last years of the loans, the CFPB said.
"These companies and their owner, Daniel Lipsky, took advantage of consumers with false promises of savings on their mortgage," CFPB Director Richard Cordray said in a statement. "We are taking action to end these illegal and deceptive practices."
The lawsuit seeks civil fines, restitution and other remedies. Nationwide Biweekly is based in Xenia, Ohio.
Helen Mac Murray, a lawyer for the defendants, did not immediately respond to requests for comment. The defendants did not immediately respond to a similar request. Lifetime is not a defendant in the case.
According to Nationwide Biweekly's website, "Interest Minimizer is helping hundreds of thousands of Americans save billions of dollars in interest charges."
The case is Consumer Financial Protection Bureau v. Nationwide Biweekly Administration Inc et al, U.S. District Court, Northern District of California, No. 15-02106.
(Reporting by Jonathan Stempel in New York)