Customers of Abington Savings Bank were among those receiving mailed biweekly payment offers from AAA Financial Corp., although the bank itself had not sanctioned the solicitations.
An offer mailed to local banking customers claiming to save them money reputedly is a scam meriting a cease-and-desist order from the state Division of Banks.
Customers of several Massachusetts banks have recently received letters from AAA Financial Corp., which has a Bellbrook, Ohio, mailing address. The company, which has no affiliation with the American Automobile Association, according to the association’s Southern New England region president, is offering to help customers pay off their mortgages early by converting to a biweekly, rather than monthly, payment system.
Several items contained within the letter connote an unfair and deceptive manner of doing business under Massachusetts general laws, according to a cease-and-desist letter written by Thomas J. Curry, commissioner of banks to the Bellbrook address.
AAA charges a fee of $195 to set up the biweekly payments. By paying their mortgages on a biweekly basis, consumers often can save money on interest charges and pay off a mortgage more quickly. However, the AAA Financial system does not benefit consumers, according to the cease-and-desist letter, because the payments are held by AAA and paid once a month to the bank. An additional charge of $3.50 is added to each payment, according to the solicitation.
That’s part of the deception here, said James P. McDonough, president and chief executive officer of the $717 million-asset Abington Savings Bank, whose customers are among those receiving the mailings.
The fact is, virtually any community bank is willing to work out extra principal payments with its borrowers both on an informal and contractual basis, but you don’t need to pay extra money and fees in order to work out those arrangements with your local bank, said McDonough.
But that isn’t the only problem local banks have with the offer.
Comments made within the solicitation seem to indicate the customer’s bank has endorsed the offer. That is done by placing the bank’s name at the top left corner of the letter, immediately above the customer’s name and address. In the case of solicitations sent to customers of Abington Savings and other local banks, however, bank officials initially were unaware the solicitations were being mailed out and did not endorse them. While the last lines of small print on the page contain a disclaimer, local officials and bank executives believe customers will be misled. Already, McDonough has received numerous calls from customers inquiring about Abington’s offer.
Ironically, the solicitations reached one local banking customer, Kevin F. Kiley, who’s also the executive vice president and chief operating officer of the Massachusetts Bankers Association.
There’s no question. Our concern is that our customers are being deceived and misled and it would appear to be that this solicitation is filled with attempts to deceive, said McDonough.
The solicitation mailing states, AAA Financial is licensed and bonded by the Banking and Finance Department … All biweekly payments are held in a trust account which is fully FDIC [Federal Deposit Insurance Corp.]-insured.
The [bank] commissioner clearly states in his letter that the only benefit of FDIC insurance is if they’re a bank or if the money is being held in the consumer’s name at a federally insured bank. It would appear from the solicitation that that’s not the case, said McDonough.
AAA Financial is not a licensed bank or mortgage lender in the commonwealth.
We do not have, in Ohio, a company licensed by the name of AAA Financial Corp., according to Dennis Ginty, spokesman for the Ohio Department of Commerce, the financial regulating authority in that state. Additionally, while AAA Financial does not hold articles of incorporation in Ohio, according to a spokesman at the Ohio Secretary of State’s Office, a company using the name of Nationwide Mortgage Protection Services, listing Daniel Lipsky as president, does exist. According to the Better Business Bureau database, Lipsky is named as president of Nationwide, which also does business as AAA Financial.
The Bellbrook address for AAA has no phone number listed, according to Ohio directory assistance. But when the Springfield, Ohio, customer service number was called, Lipsky referred all media inquiries to his Cincinnati attorney, Barbara Bison Jacobson. She did not return repeated calls and e-mails from Banker & Tradesman.
Additionally, the solicitation claims AAA Financial was listed in Inc. 500’s list of the fastest-growing companies in America. While it is listed, the magazine names a Coral Gables, Fla., address for the company. Better Business Bureau information lists David J. and Deborah DiNatale as presidents of the Florida AAA Financial, not Lipsky. While both companies have satisfactory records with the BBB, DiNatale’s business is listed as a financial mortgage and escrow company while Lipsky’s is listed as providing life insurance and mortgage protection services.
DiNatale did not return Banker & Tradesman’s call to determine if there was an affiliation between the two companies.
The BBB has processed only two complaints in the last 36 months against Nationwide.
When Abington Savings officials were first alerted to the solicitations they notified the Massachusetts Bankers Association, which then wrote a letter to the DOB. On Dec. 13, the DOB issued a consumer alert regarding biweekly mortgage solicitations. The cease-and-desist order was issued on Dec. 7. Steven L. Antonakes, senior deputy commissioner of administration and policy at the DOB, said he couldn’t discuss the matter as it was still under discussion and legal review.
We’ve talked to bankers about it and they are pleased the commissioner has taken the steps that he has, said Kiley. We’ve had some conversations with people on [Beacon Hill] about whether there might be some future legislative avenues to address some of the concerns we’ve had. Clearly we’d like to almost preclude them from utilizing a bank name if they’re going to start engaging in these types of practices, he said.
In most instances, the customer information is obtained from electronic files or data that’s available through the registries of deeds, said Kiley.
I would say [the solicitations were] pretty widespread because I’ve heard from four or five other banks that their customers were receiving it, said Kiley.
‘No Affiliation’
By using the name AAA Financial, the company has also piqued the interest of the American Automobile Association, which has developed a trusted brand as AAA. Mark Shaw, recently appointed president of AAA Southern New England, said although the auto club does provide financial services to its 44 million members, it has no affiliation whatsoever with AAA Financial.
The automobile association’s national headquarters is concerned AAA customers will confuse the two companies, said Shaw: We’re constantly battling trademark violations. We’ve been very successful in the past. I don’t think we’ve had as much success with this company, for whatever reasons I don’t know, but perhaps this negative publicity will help us with some legal battles because we have one of the best reputations of any company. Shaw added that although the trademark covers anything to do with automobiles, travel and insurance, it doesn’t cover the financial arena.
Although Shaw said that thus far no customers have asked AAA whether it has an affiliation with AAA Financial, the company did approach the auto club in the past requesting an affiliation.
We declined. The concept of paying your mortgage more frequently than once a month has been around for a long time. We were just believers that it was something that should perhaps be done with the institution that your mortgage is with, rather than through some other independent company, said Shaw.
Shaw, who attended the meeting with AAA Financial, said he had concerns regarding the protection of consumer’s payments so the conversation never went beyond the first meeting.
But I did not realize at the time that they were operating under the name AAA Financial, he said.
People ought to be thinking about how to accelerate mortgage payments, said McDonough. That’s not a bad thing, but to do that you don’t need a third party. You don’t need to pay someone else. Contact your local community bank and work out the arrangements with them.
