Mortgage Daily Logo
mortgage news from industry experts

Calif Sues Long Beach for Interest Overcharges

Calif Sues Long Beach for Interest Overcharges

WaMu subsidiary faces $9 million lawsuit from Department of Corporations

January 14, 2003

By MortgageDaily.com staff

California’s investment and financing authority has sued a Washington Mutual, Inc. subsidiary for allegedly overcharging subprime borrowers even two years after the authority warned the lender that it was in violation of state law.

The California Department of Corporations filed the suit in the Superior Court of Sacramento County and is seeking $9 million in civil penalties against Long Beach Mortgage Company, Washington Mutual’s subprime lending branch, a department announcement said.

Under California law, mortgage lenders cannot charge interest on a loan until one day before the loan closes. In 1999, the state department found that Long Beach was overcharging its borrowers by beginning interest charges too early, the announcement said. The state department instructed Long Beach to pay back its borrowers the overcharged interest and stop the overcharging practice.

After a review of loans that Long Beach originated between Dec. 14, 1999, and Jan. 31, 2002, the department said it still finds the lender in noncompliance even after Long Beach claimed to have implemented safeguards to correct the problem.

In addition, Long Beach admitted to overcharging its customers on almost 24%, or of loans during that time period, for an overcharge total of $625,000, the department said. The total number of loans that were overcharged was 3,618.

“As the Department demonstrated with our suit against Household Finance, the nickel and diming of financially disadvantaged Californians by multimillion dollar consumer lenders will not be tolerated,” said commissioner Demetrios A. Boutris.

The amount of time that interest was overcharged ranged from one to 201 days, and the amounts borrowers were overcharged ranged from $4.19 to $3,248.24, the announcement said. The department required Long Beach to pay back these amounts to its overcharged borrowers in June, and is now attempting to level monetary civil penalties against the lender.

Washington Mutual representatives did not respond to MortgageDaily.com’s requests for comment, and Long Beach’s representatives could not be reached for comment.

“With faith in the financial-services marketplace continuing to fall, major players like Washington Mutual should be doing more than ever to treat their customers fairly,” Boutris said.

Also, Davis’ administration announced Friday that the department sued Wells Fargo Financial California, Inc. for allegedly overcharging its “instant loan check” recipients. The department is seeking civil penalties of up to $38.8 million. The department worked with Sen. Jim Costa last year on drafting and passing legislation that added consumer protections for instant loan checks, the department said.

The department reports to the state’s Business, Transportation, and Housing Agency and to Governor Gray Davis.

Long Beach reported a total current balance of $12.96 billion in its loan portfolio as of September.

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

THE TRUSTED PROVIDER OF ACCURATE RATES AND FINANCIAL INFORMATION