Among the accusations against Capital City Mortgage Corp. were claims that the company added phony charges to borrowers' monthly statements.
But after seven years since it was first accused of predatory lending, Capital City has finally settled the charges with the government agency that levied them.
The settlement will cost the Washington, D.C.-based lender and servicer at least $750,000, The Federal Trade Commission announced last week.
The company is additionally required to maintain a $350,000 performance fund to be available to the commission or any borrower in case it fails to comply, according to the settlement.
The agency said the agreement settles charges that Capital City "deceptively induced consumers into taking loans secured by their homes, overcharged borrowers, and, in some instances, caused consumers to lose their homes."
The settlement puts an end to litigation the FTC initiated in January 1998, when it filed a complaint against Capital City and its president Thomas K. Nash alleging the company deceived borrowers about various loan terms and caused them serious injury. Fixed- or low-income consumers were allegedly targeted with offers for loans secured by home equity, rather than their creditworthiness.
The FTC accused the lender of tacking on phony charges to borrowers' monthly statements and loan balances. Additionally, the complaint alleged the lender forced borrowers to make monthly payments for the entire loan amount while withholding some loan proceeds, foreclosed on borrowers even though they complied with loan obligations, and failed to release liens after the loans were paid, the announcement said.
During the seven-year litigation period, the FTC amended its complaint to include Eric J. Sanne, Capital City's former general counsel. In May 2004, Sanne agreed to pay $20,000 and was booted from the debt collection business after settling charges that he sent letters to borrowers in which he misrepresented himself as a third-party debt collector, rather than as an employee of Capital City, and sought to collect money that was not owed. After Nash died in 2002, the complaint was re-amended to substitute his estate as a defendant and add relief defendants.
The lender is barred from originating and, or, servicing any home secured loans in the future, according to the stipulated order. Among other things, the order contains standard recordkeeping and reporting requirements to assist the FTC in monitoring Capital City's compliance, and it prohibits the lender from violating the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Debt Collection Practices Act.
The stipulated final order for permanent injunction was filed Wednesday for approval in the U.S. District Court for the District of Columbia, the FTC said.
It was approved by U.S. District Judge Gladys Kessler, the Washington Post reported Friday.
The FTC noted that the settlement did not constitute an admission of a law violation by Capital City.
Lawyer for Predatory D.C. Firm Fined by FTC
The Federal Trade Commission has fined the legal counsel of a mortgage company for his roll in collecting payments on loans the FTC considers predatory. In addition to the fine, the attorney has been booted from the debt collection business.