CFPB Fines Online Mortgage Company And Its Owner For Alleged Deceptive Rate Advertising

On August 12, the CFPB announced a consent order with a nonbank mortgage lender, its affiliated appraisal management company (AMC), and the individual owner of both companies to resolve allegations that the lender deceptively advertised mortgage rates to consumers, improperly charged fees before providing consumers with Good Faith Estimates (GFE), and failed to disclose its affiliation with the AMC while allowing the AMC to charge inflated fees.

Allegations

As explained in the consent order, the lender primarily conducts business online through its own website, and also advertises its mortgages through display ads on independent websites and the website of an unaffiliated third-party rate publisher. The CFPB asserts that, over a roughly two-year period, a “systemic problem” caused the lender to list on the rate publisher’s website lower rates for certain mortgages than the lender was willing to honor, and that the lender supplied other rates to the rate publisher that were unlikely to be locked for the majority of the lender’s borrowers. The CFPB claims that the lender failed to perform systematic due diligence or quality control to ensure the accuracy of listed rates, even though the lender was made aware through consumer complaints that certain rates were inaccurate. Read more…

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FTC Obtains Settlement Regarding Marketing of Mortgage Refinancing Services to Servicemembers; Announces First Settlements in “Cardholder Services” Robocalls Sweep

On June 27, the FTC announced that a mortgage broker will pay a $7.5 million civil penalty to resolve alleged violations of the agency’s Telemarketing Sales Rule (TSR) and Mortgage Acts and Practices – Advertising Rule (MAP Rule). The broker allegedly violated the TSR by calling more than 5.4 million telephone numbers listed on the National Do Not Call Registry to offer home loan refinancing services to current and former U.S. military consumers and by failing remove consumers from its call list upon demand. The broker also allegedly violated the MAP Rule by misleading consumers about its affiliation with the Department of Veterans Affairs and leading consumers to believe that it was offering low interest, fixed rate mortgages with no costs, when in reality it was offering adjustable rate mortgages with closing costs. In the same announcement, the FTC stated that it had obtained the first settlements in cases related to a 2012 sweep of telemarketers alleged to have placed automated calls to consumers to make deceptive “no-risk” offers to substantially reduce the consumers’ credit card interest rates in exchange for an upfront fee. According to the FTC, the telemarketers claimed to be calling from the consumers’ credit card company, or otherwise used the generic “Cardholder Services” title to suggest a relationship with a bank or credit card company.

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CFPB and FTC Warn Mortgage Companies about Potentially Misleading Advertisements

On November 19, the CFPB announced that it issued warning letters to about a dozen nonbank mortgage lenders and brokers regarding advertisements targeted towards older Americans and veterans that may violate the Mortgage Acts and Practices Advertising Rule (MAP Rule). The CFPB claims that certain companies’ ads may (i) make misrepresentations about government affiliation, (ii) provide inaccurate information about interest rates, (iii) make misleading statements about the costs of reverse mortgages, or (iv) misrepresent the amount of cash or credit available to a consumer. The letters do not make any determinations as to whether the ads at issue violate the law, and the letters provide the companies an opportunity to review and remedy any potential violations. However, the CFPB announcement also notes that the Bureau has initiated formal investigations of six companies for “serious violations of the law.” At the same time, the FTC announced that it sent letters to twenty real estate agents, home builders, and lead generators warning that certain advertisements may similarly violate the MAP Rule or section 5 of the FTC Act. The FTC also acknowledged that it has opened nonpublic investigations of other advertisers that may have violated federal law. This coordinated CFPB/FTC action resulted from a review of about 800 randomly selected mortgage-related ads from across the country, including ads for mortgage loans, refinancing, and reverse mortgages. BuckleySandler is representing one of the companies being investigated by the FTC in connection with this review.

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