Fairbanks Capital settles Md. overcharges

Refunds due homeowners to be determined by audit

November 20, 2003|By Trif Alatzas | Trif Alatzas,SUN STAFF

Maryland homeowners overcharged by mortgage servicing company Fairbanks Capital Corp. will receive refunds within three months under a settlement signed yesterday with state regulators.

Under the consent agreement with Maryland's Office of Financial Regulation, Fairbanks no longer will charge fees that the state believes were excessive or unauthorized.

The company, which manages about 500,000 mortgage payments nationally for homeowners with riskier credit histories, was accused of harassing scores of customers by adding hundreds of dollars in unjustified late charges and other costs to their accounts and threatening to foreclose on their homes.

Charles W. Turnbaugh, state commissioner of financial regulation, said Fairbanks would audit the accounts of its 13,000 to 14,000 Maryland customers and provide refunds where necessary by Feb. 29. Copies of the audits will be sent to commissioner two weeks after they are completed.

Fairbanks also has agreed to pay the legal fees of homeowners who contested the overcharges.

The company has already placed caps on service charges to homeowners and established a process for addressing complaints.

Turnbaugh said he did not know how much the settlement would cost Fairbanks. About 300 Fairbanks customers in Maryland complained to state regulators about overcharges since the state began its investigation early this year. Under the agreement, Fairbanks also will pay the state $90,000 to reimburse investigation costs.

"I'm very pleased with it because ... homeowners are going to have their accounts reviewed and receive automatic refunds," said Diane Cipollone, director of research and policy for the Community Law Center in Baltimore, which has tracked complaints about the company.

Fairbanks, based in Salt Lake City, admitted no violation of Maryland law in the consent agreement. Haidee Schwartz, a Fairbanks spokeswoman, declined comment yesterday.

Some customers complained of being charged almost $2,000 for homeowners' insurance even though they already were insured. When they refused to pay that cost, the customers said they were charged monthly late fees that continued to pile up.

During a conference call with reporters last week, James H. Ozanne, Fairbanks' new chief executive officer who is charged with turning the company around, said the firm was working with seven states that were looking into its practices. Maryland is the first state to settle with the company.

The Maryland settlement comes a week after Fairbanks agreed to pay $40 million to settle U.S. claims that it overcharged borrowers. That investigation was conducted by the Federal Trade Commission and the Department of Housing and Urban Development.

The Maryland settlement likely will provide refunds earlier than the federal case because FTC officials said last week they didn't expect to begin making payments for about 10 months. The FTC is administering the refunds from Fairbanks.

Yesterday's agreement does not close Maryland's criminal investigation into former Fairbanks' executives and the practices involved in collecting fees. Turnbaugh said current Fairbanks' executives were cooperating with the investigation.

Turnbaugh said he hopes the settlement forces other mortgage service companies to refrain from charging excessive fees. The industry has faced a variety of complaints during the past few years from customers who allege they paid their bills on time but were charged late fees and other costs.

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