On September 19, 2020, the Consumer Financial Protections Bureau (CFPB) published a press release citing a newly issued consent order to a mortgage broker/lender, the eighth delivered by the Bureau in under two months related to deceptive loan advertisements sent to servicemembers and veterans.  The series of investigations is in response to concerns about potentially unlawful advertising in the market that the VA identified.

In each instance, the principal means of advertising VA-guaranteed loans is through direct-mail advertisements sent primarily to United States military servicemembers and veterans. The Bureau found that these companies mailed consumers advertisements for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or lacked required disclosures, in violation of the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts and practices, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. The consent orders require the companies to pay civil money penalties and impose requirements to prevent future violations, such as “bolster their compliance functions by designating an advertising compliance official who must review their mortgage advertisements for compliance with mortgage advertising laws prior to their use; prohibiting misrepresentations similar to those identified by the Bureau; and requiring the companies to comply with certain enhanced disclosure requirements to prevent them from making future misrepresentations.”

Further details regarding the eight actions are as follows, including civil money penalties:

July 24, 2020: CA Licensed Mortgage Broker/Lender                  $460,000

·        Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer.

·        Advertisements misleadingly described an advertised introductory interest rate as a “fixed” rate, when in fact the rate was adjustable and could increase over time.

·        Advertisements created the false impression that they were affiliated with the government by using words, phrases, images, or designs that are associated with the VA or the Internal Revenue Service.

·        Advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing their own names and the fact that they were not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z.

·        The company made false claims about consumer’s existing loans, and falsely implied that the consumer could address these problems by obtaining a loan from the company.

·        Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan and the period during which certain interest rates would apply.

July 24, 2020: CA Licensed Mortgage Broker/Lender                  $645,000

·        Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer.

·        Advertisements misleadingly described an advertised introductory interest rate as a “fixed” rate, when in fact the rate was adjustable and could increase over time.

·        Advertisements created the false impression that they were affiliated with the government by using words, phrases, images, or designs that are associated with the VA or the Internal Revenue Service.

·        Advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing their own names and the fact that they were not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z.

·        Advertisements also failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan and the period during which certain interest rates would apply.

·        Advertisements created the false impression that they contained a property assessment as well as misleading comparisons between hypothetical credit terms and the terms of the advertised product.

August 21, 2020: CA Licensed Mortgage Broker/Lender            $150,000

·        Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including advertising a lower annual percentage rate than it was prepared to offer.

·        The company made misrepresentations about the applicable fees in connection with the advertised mortgage.

·        Advertisements misleadingly described variable-rate loans as “fixed” rate loans, when in fact the rate was adjustable and could increase over time.

·        Advertisements falsely stated or implied that an appraisal, assets, and income documentation were not required to qualify for certain loans and that consumers with FICO scores as low as 500 would qualify for the advertised rates.

·        Advertisements falsely represented that it had records showing that the value of the consumer’s property had increased over the past year by a specific percentage.

·        Advertisements created the false impression that the company was affiliated with the government by using words, phrases, images, or design characteristics that are associated with the VA or the Internal Revenue Service.

·        Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan.

August 26, 2020: CA Licensed Mortgage Broker/Lender            $260,000

·        Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the payment amount applicable to the advertised mortgage and the nature or amount of cash available to the consumer in connection with the advertised mortgage.

·        The company made misrepresentations about the existence and amount of fees or costs to the consumer in connection with the advertised mortgage.

·        Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan.

September 1, 2020: FL Licensed Mortgage Broker                      $50,000

·        The company advertised specific credit terms, such as interest rates, APRs, and hypothetical payment amounts that it was not prepared to offer, or that it could only offer for an introductory period but advertised as if they were permanent loan terms.

·        Advertisements also used phrasing and formatting that falsely represented or implied that the company was affiliated with the government, including the VA, that the advertised product was endorsed, sponsored by, or affiliated with the United States government, or that the United States government was the source of the advertisements.

·        In advertisements mailed between June 2016 and January 2019, the company stated that it would pay an estimated escrow refund of a specific amount if the consumer refinanced through the company, even though the advertised escrow refund amount was calculated using a method that would not yield an actual estimate for that consumer, and customers were required to fund escrow accounts upon generating a new loan.

·        Advertisements falsely stated: “the Economic Stimulus Program will end soon. There is currently no plan to extend the Stimulus Program.”

·        Advertisements included claims or terms that require additional disclosures, but the company failed to make these disclosures.

September 1, 2020: MD Licensed Mortgage Broker                    $230,000

·        The company advertised specific credit terms, such as APRs and hypothetical payment amounts that it was not prepared to offer, or that it could only offer for an introductory period but advertised as if they were permanent loan terms.

·        The company used terms in millions of its advertisements that falsely represented or implied that the company was affiliated with the government, including the VA, that the advertised product was endorsed, sponsored by, or affiliated with the United States government, or that the United States government was the source of the advertisements.

·        In advertisements mailed between April 2016 and May 2017, the company stated that it would pay an estimated escrow refund of a specific amount if the consumer refinanced through the company, even though the advertised escrow refund amount was calculated using a method that would not yield an actual estimate for that consumer, and in cash-out transactions the “refund” was actually added to the principal of the consumer’s loan.

·        The company sent advertisements between December 2015 and April 2017 representing that a consumer could “[s]kip two payments” or “miss” two payments by refinancing with the company, but it did not disclose the limitations on this option, or that the skipped or missed payments would be added to the principal balance of the consumer’s loan.

·        Advertisements stated: “the Economic Stimulus Program will end soon. There is currently no plan to extend the Stimulus Program,” which was untrue.

·        Advertisements included claims or terms that require additional disclosures, but the company failed to make these disclosures.

September 2, 2020: DE Licensed Mortgage Broker/Lender          $225,000

·        Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the interest rate or payment amount applicable to the advertised mortgage and the nature or amount of cash available to the consumer in connection with the advertised mortgage.

·        The company made misrepresentations about the existence or amount of fees or costs to the consumer in connection with the advertised mortgage.

·        Advertisements created the false impression that the company was affiliated with the government by using words, phrases, images, or designs that are associated with the VA, Internal Revenue Service, or Federal Deposit Insurance Corporation.

·        Advertisements falsely represented that the consumer’s access to mortgage-refinance benefits through VA-guaranteed loans was time-limited.

·        Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the annual percentage rate of the advertised mortgage or the consumer’s repayment obligations over the full term of the loan.

September 14, 2020: CA Licensed Mortgage Broker/Lender          $625,000

·        Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the annual percentage rate applicable to the advertised mortgage.

·        The company misleadingly advertised rates or payments as fixed, even though the advertised mortgage was an adjustable-rate mortgage or the payment was not fixed for the indicated duration.

·        The company misrepresented the existence, nature, or amount of cash or credit available to the consumer, and the existence or amount of fees or costs to the consumer, in connection with the advertised mortgage.

·        Advertisements created the false impression that the company was affiliated with the VA.

·        Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the number and time period of payments associated with the consumer’s repayment obligations over the full term of the loan.

·        Advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing the company’s name and the fact that it was not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z.

For more information, contact Troy Garris at 301-461-8952 or troy@garrishorn.com.