FEB 18, 2014 1:03pm ET

Prospect Mortgage Reaches $3M Settlement on Overcharges

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Prospect Mortgage, one of the nation’s largest independent mortgage lenders, entered a $3.1 million settlement with California regulators for overcharging mortgage borrowers per diem interest over a seven-year period.

The California Department of Business Oversight said Friday that the Sherman Oaks, Calif., mortgage lender had agreed to refund $1.3 million to more than 12,000 borrowers who were overcharged per diem interest from mid-2006 to mid-2013. California has a unique statute that prohibits mortgage lenders from charging interest on a loan for more than one day before the disbursement of loan proceeds.

Prospect also agreed to pay $1.8 million to the Department of Business Oversight in return for not having its residential mortgage license suspended.

In Virginia, Prospect Mortgage earlier this month won a jury trial by applying the outside sales exemption to a loan officer suing Prospect for minimum wage and overtime.

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