The restitution is under a consent order issued by the Federal Reserve Board against the company, which is based Lawrence, Kan. According to the Fed, the practices violated section 5 of the Federal Trade Commission Act.
Peoples carried out the deceptive practices by telling borrowers they could lower their interest rates by paying an additional amount for discount points. Borrowers regularly paid thousands of dollars for discount points. However, many borrowers did not, in fact, receive a reduced rate.
The deceptive practices subject of the order relate to the company’s national mortgage business. According to the consent order, Peoples in March 2015 ceased the practice of charging borrowers such discount points. Peoples is in the process of winding down the business, which has ceased taking new applications. The company expects all mortgage operations to cease by year-end 2017.
Under the consent order, Peoples is required to pay about $2.8 million into an account as restitution for affected borrowers. Terms of the consent order provide that the company will refund all payments for discount points that did not lower interest rates. In addition, the company will avoid further violations of the same section of the Federal Trade Commission Act.
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Peoples Bank has agreed to pay about $2.8 million to borrowers affected by deceptive residential mortgage origination practices.