California Attorney General Rob Bonta announced on Friday that his office has reached a $4.6 million settlement with Select Portfolio Servicing, resolving allegations that the Utah-based subprime mortgage servicer mishandled borrowers seeking relief during the COVID-19 pandemic. The proposed final judgment would require SPS to pay $1.6 million in civil penalties and $3 million in consumer restitution, and to overhaul the way it communicates with distressed homeowners.
The action enforces California’s Homeowner Bill of Rights, but it carries direct relevance for the broader collections industry. The proposed injunction bars SPS from violating Section 1788.17 of the Rosenthal Fair Debt Collection Practices Act and Section 1692e of the federal FDCPA, alongside Regulation X loss mitigation requirements. The pairing of HBOR with both state and federal debt collection statutes underscores how state regulators increasingly treat servicing missteps as collection violations.
According to the state, SPS failed to give homeowners adequate information about forbearance exit options, sent mortgage statements that wrongly warned of late fees during forbearance, and did not provide the single points of contact that HBOR requires. The state also alleged the servicer blocked some borrowers from submitting loan modification applications within the timelines the law allows. SPS did not admit liability.
The injunctive terms are where servicers and collection operations should focus. SPS must assign borrowers a specific individual or designated team as their single point of contact rather than routing them through a general call center, maintain a dedicated email line for California borrowers, and offer a callback within one business day when hold times exceed 90 seconds. The company must acknowledge borrower emails within five business days, set SPOC caseload limits, train relevant staff annually, and conduct quarterly staffing and complaint reviews.
For three years, SPS must perform quarterly compliance reviews and file annual reports with the Attorney General’s Office. Payment is due within 14 days of entry, and restitution will flow automatically to borrowers already identified in the investigation, distributed through a third-party administrator. The release covers conduct from January 1, 2018 through October 8, 2024.
The settlement is a reminder that state attorneys general will fold federal collection law into their own enforcement theories, and that the operational details of borrower contact, from hold times to email response windows, now sit squarely within regulators’ view.
