A federal judge in California upheld his ruling in favor of the Consumer Financial Protection Bureau (CFPB) in its case claiming that the founder of a mortgage services company and its affiliates orchestrated a misleading marketing campaign for a mortgage payment option. The Judge’s ruling prevents the mortgage services company from avoiding the $7.93 million penalty and related injunction.
Defendants, Nationwide Biweekly Administration Inc., its founder Daniel Lipsky, and subsidiary Loan Payment Administration LLC, had collectively asked U.S. District Judge Richard Seeborg to reconsider his prior holding as alleged new evidence indicated that they were unable to pay the civil penalty and that Judge’s ruling would result in an inequitable outcome. Judge Seeborg found that the Defendants had failed to prove that the purported new evidence provided the necessary legal basis to justify eliminating the civil penalty.
The CFPB filed its initial suit in May 2015, in which it claimed Nationwide and its co-defendants were deceptive in marketing a bi-weekly principal payment program where consumers would generally make 13 mortgage payments annually instead of the typical 12 monthly payments.
Following a bench trial, Judge Seeborg held that the CFPB had established that several, but not all of the Defendants’ marketing statements were false or misleading. While the CFPB requested that Nationwide be required to repay $73.9 million in fees to 126,000 consumers, Judge Seeborg issued the lowest tier of penalty available instead — amounting to a $7.93 million fine as punishment for Nationwide’s four years of engaging in misleading marketing practices.
The penalty also enjoined Nationwide from conducting specific marketing schemes, including labeling its subsidiary as “Loan Payment Administration” or any similar trade name that implies the organization is a department of the customer’s bank or mortgage provider.
The Defendants requested that the court entirely remove the civil penalty and injunction, claiming that the ruling was unjust and premised on factual and legal errors. Several of those supposed errors focused on the CFPB’s allegedly vague application of the term “deceptive.” Nationwide argued that while the Bureau claimed the term should be understood per the definition supplied by Federal Trade Commission Act (FTC) precedent, the CFPB refused to apply the FTC’s procedural guidelines in handling other aspects of the Nationwide suit.
Judge Seeborg rebuffed Nationwide’s arguments, saying that they were insufficient to justify the relief requested by the company. Judge Seeborg also clarified that the fact that FTC precedent was utilized to provide meaning for a term did not require the application of FTC law to every aspect of the present case. He also rejected the Defendants’ contention that the injunction was overly burdensome and would inhibit the company’s competitive ability due to the marketing injunction. Judge Seeborg emphasized that the marketing restrictions were necessary consumer safeguards in light of Nationwide’s past transgressions.