The Board of Governors of the Federal Reserve System recently issued a Consent Order against Peoples Bank, based in Lawrence, Kansas, to settle claims of deceptive residential mortgage origination practices that arose from the bank's charging of fees in mortgage originations. The Federal Reserve alleged that Peoples told mortgage borrowers that certain additional fees that the borrowers paid as discount points would lower the borrowers' interest rates. The Federal Reserve's investigation determined that many borrowers did not, in fact, receive a reduced interest rate. The Federal Reserve alleged this practice violated Section 5 of the Federal Trade Commission Act ("FTC Act").
The Consent Order requires Peoples to pay approximately $2.8 million into an account to be used to provide restitution to the borrowers. Additionally, Peoples must develop a plan that provides for restitution to each borrower who, in the course of obtaining a mortgage loan from Peoples, paid discount points that did not reduce the borrowers' interest rate. The Consent Order also requires Peoples to avoid any future violation of Section 5 of the FTC Act.
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