Attorney General Bonta Announces Settlement with Mortgage Servicer over Failure to Properly Process Military Reservists’ Mortgage Deferment Requests

OAKLAND – California Attorney General Rob Bonta today announced a settlement with The Money Source, Inc. (TMS), resolving allegations that the company failed to properly process, and timely grant, mortgage deferment requests made by California military reservists called to active duty. Under the California Military and Veterans Code, including the California Military Families Financial Relief Act (CMFFRA), reservists called to active duty can defer payments on certain financial obligations — including their mortgage, credit cards, property taxes, car loans, utility bills, and student loans — if they submit a written request and a copy of their military orders to the lender or other appropriate entity. Last year, the California Department of Justice (DOJ) received a credible complaint alleging that TMS mishandled a reservist’s mortgage deferment request. Subsequently, DOJ launched an investigation into TMS’s processes for handling mortgage deferment requests. As part of today’s settlement, TMS will pay $58,000 in penalties, fully reimburse the affected reservists, and be subject to injunctive terms. 

“California is proud to have some of the strongest state military consumer protection laws in the country. Today, we are making clear that we won’t hesitate to enforce those protections,” said Attorney General Bonta. “Reservists face unique financial challenges when they are called to active duty and shouldn’t have to worry about mortgage payments as they put their lives on the line for us. Unfortunately, several reservists were still trying to resolve issues with their mortgage servicer, The Money Source, while they were deployed overseas — including to Iraq and Kuwait. I welcome The Money Source’s commitment to ensuring that this doesn’t happen again. One deploying service member who is denied his or her rights is one deploying service member too many.”

In 2018, DOJ sponsored AB 3212, which was authored by Assemblymember Jacqui Irwin (D-Thousand Oaks) and strengthened the CMFFRA upon becoming effective on January 1, 2019. Among other things, AB 3212 requires the prompt processing and response to requests for deferments, interest rate reductions, lease terminations, and other rights that California law provides service members. Any business or other covered person that receives a good faith request from a service member invoking one of these protections is required to provide a written response within 30 days of receiving the request if the business or other person believes the request is incomplete or insufficient or that the service member is not entitled to the relief requested. If that business or person fails to provide such a written response within the 30-day timeframe, the service member is automatically entitled to the relief requested. 

DOJ’s investigation revealed that TMS, on at least 10 occasions, delayed granting CMFFRA deferment requests, requested information for eligibility review beyond the 30-day timeframe to do so, and improperly denied CMFFRA deferment requests. In addition, TMS attempted to collect payment from certain borrowers during the requested deferral period by making collection calls and sending debt collection notices warning of foreclosure if payment was not made. TMS also wrongly imposed late fees or other fees against certain borrowers for the nonpayment of payments that should have been deferred and furnished inaccurate negative credit information to credit reporting agencies. On April 1, 2023, TMS transferred its servicing operations, including all loans, to Allied First Bank, S.B, which does business as Servbank.

Under the terms of the settlement:

• TMS has agreed to pay a total of $58,000 in civil penalties.
• TMS must remediate consumer harm. TMS has largely already addressed harm by retroactively applying the requested deferments, correcting any negative credit reporting, and reversing any fees or penalties. The settlement requires TMS to take any further actions needed to address consumer harm from the covered conduct.
• If TMS fails to request information from borrowers for purposes of eligibility review within 30 days of receiving a CMFFRA deferment request, TMS shall be prohibited from requesting such information from those borrowers, including proof of reduced income, and shall grant and apply the requested deferment no later than 45 days from receipt of the request.
• If TMS engages in mortgage-loan servicing, the company must create, implement, and maintain letter templates that are sent to borrowers regarding the status of their CMFFRA deferment request; and must create, implement, and maintain written policies and procedures that set forth practices sufficient to ensure compliance with the injunctive terms.
• If TMS engages in mortgage-loan servicing, the company must provide annual trainings to all customer-facing employees and employees who handle loans for military members regarding TMS’s obligation and the rights of borrowers under the CMFFRA and other state military consumer protection laws.
• TMS, must for the next three years, provide annual reports to our office documenting compliance with the injunctive terms. 

Attorney General Bonta reminds deploying reservists that they can get additional protections by seeking a court-ordered deferment under another provision of the California Military and Veterans Code. Further, Attorney General Bonta reminds businesses that they must follow the CMFFRA in addition to other state and federal military consumer protection laws. A business that receives a request from a reservist invoking protections provided by the California Military and Veterans Code may request additional information for eligibility review, but must do so within 30 days of receiving the request. If the business fails to do so within the 30-day timeframe, under the expanded protections provided by AB 3212, it waives any objection to the request and the service member is entitled to the requested relief.

California service members have important consumer protections under state and federal law. These protections are in place to ease the stress and burden of financial obligations at home, and to allow the service member to focus on performing their mission and coming home safely. If a service member believes their rights have been violated, they can ask the nearest military legal assistance office for help. For contact information, service members should ask their unit or use the U.S. Armed Forces Legal Services Locator. California National Guard personnel can also contact the office of the State Staff Judge Advocate for help. For more information about the resources available to military consumers, visit https://oag.ca.gov/consumers/general/military.

A copy of the complaint and judgment, which details the aforementioned settlement terms, can be found here and here.