Fairbanks Capital has reached a settlement with the Federal Trade Commission and the Department of Housing and Urban Development that will create a $40 million "redress fund" to reimburse consumers who were allegedly harmed by Fairbanks' loan servicing practices.The FTC will administer the fund. The settlement also provides insight into what the FTC and HUD consider appropriate guidelines and procedures for servicing subprime home loans. At a news conference in Washington, FTC Chairman Timothy Muris said the settlement brings to a close "deceptive practices" that forced consumers to pay hundreds of dollars in "phony charges" or face foreclosure. Specifically, Fairbanks was accused of failing to post payments in a timely fashion and then charging late fees, and of charging fees for services that were unnecessary or were not performed. "Those who service consumers' loans, no less than those who lend them the money, must treat consumers fairly and honestly," Mr. Muris said. Since consumers cannot voluntarily change loan servicing companies, compliance on the part of servicers is all the more important, he said. Fairbanks chairman Brad Shuster said in a statement that the settlement is a positive development and that the company "now has in place what we believe are leading-edge practices for nonprime consumer home loan servicing." The FTC can be found online at http://www.ftc.gov.
