An Atlanta-based Internet mortgage company, its owner and an affiliate have been hit with a $19.3 million penalty for what the Consumer Financial Protection Bureau (CFPB) said was a bait and switch mortgage scheme.  Amerisave Mortgage Corporation, its affiliate Novo Appraisal Management Company, and Patrick Markert the owner of both companies were found by the Bureau to have lured customers by advertising misleading interest rates and then locked them in with costly up-front fees, failed to honor the advertised rates, and illegally overcharged them for third-party services without disclosing the affiliated relationship.

Under terms of a consent order announced on Tuesday Amerisave and Novo will refund $14.8 million to consumers harmed by the scheme and will pay a $4.5 million penalty into the Bureau's Civil Penalty Fund.    Markert as an individual, will pay an additional $1.5 million fine.  

Amerisave advertises and lends nationwide.  CFPB contends that between mid-2011 and 2014 the company used online banner ads and searchable rate tables on third-party websites, posted inaccurate rates on these ads, and when consumers followed the ads to the Amerisave website were given rate quotes based on a FICO score of 800 regardless of the score the consumer provided in a questionnaire.   Consumers were required to order and authorize payment for an appraisal before Amerisave would provide a Good Faith Estimate and the company did not tell consumers until later that appraisal orders were being referred to Novo, its affiliated company. 

At closing customers were charged for "appraisal validation" reports also provided (and undisclosed to the consumer) by Novo which marked up the cost of the reports by as much as 900 percent after Amerisave had informed customers they had arranged for a "special deal" for the reports.    

In addition to the financial penalties the consent agreement requires that Amerisave stop advertising the unavailable mortgages rates, no longer charge illegal fees or make referral to its affiliates without proper disclosures, implement a quality control program, and retain an independent consultant to review its advertising practices.   

"Amerisave lured consumers in with deceptive advertising, trapped them with costly upfront fees, and then illegally overcharged them for services from an undisclosed affiliate," said CFPB Director Richard Cordray. "By the time consumers could have discovered the advertised low rates were too good to be true, they had already committed to pay hundreds of dollars to Amerisave. Today's action puts an end to Amerisave's unacceptable bait-and-switch scheme and holds Patrick Markert personally responsible for his illegal actions."