It sounds like such a good idea. The "Interest Minimizer" program that's heavily promoted by Nationwide Biweekly Administration, Inc., claims that homeowners are "guaranteed to save money" by using the program.
It's pretty simple, really. Instead of sending in your mortgage payment once a month, you pay Nationwide Biweekly every other week. This supposedly reduces your interest expense because you wind up making one extra payment per year.
But the Consumer Financial Protection Bureau (CFPB) says the claims are false, and today it sued the company, an affiliated firm and their owner, Daniel Lipsky.
“These companies and their owner, Daniel Lipsky, took advantage of consumers with false promises of savings on their mortgage,” said CFPB Director Richard Cordray. “Homeowners deserve accurate information in the financial marketplace. Today we are taking action to end these illegal and deceptive practices, and to hold these companies accountable for their actions.”
Fees add up
The CFPB noted that most consumers who enroll in the Interest Minimizer pay a setup fee of up to $995 and go on to pay from $84 to $101 in payment processing fees each year they remain enrolled.
The company's ads promise consumers that "soon you will be . . . saving thousands of dollars in unnecessary payments.” But the CFPB's suit alleges that consumers wind up paying more in fees than they save in interest and that most consumers will leave the program without saving any money at all.
In a video on Nationwide’s website, Lipsky states: “you’re not increasing your payment. You’re just switching to a smaller biweekly or weekly amount.” In fact, says the CFPB, consumers in the program pay processing fees for each biweekly payment and the initial setup fee to Nationwide, plus the equivalent of one additional monthly payment each year.
Some consumers, like Tammy of St. Louis, have also complained that glitches in the program resulted in their being hit with late fees.
"I am requesting for my January late fee to be waived. I am in the Nationwide Biweekly program and because of their fault my payment was not processed on time," she said in a ConsumerAffairs review.
The suit charges that Nationwide collected about $49 million in setup fees between 2011 and 2014. It seeks compensation for consumers, a civil penalty and an injunction to stop the allegedly misleading claims.