QUESTION
I
have heard of recent CFPB’s enforcement actions involving deceptive advertising
claims. Can you provide me with more
detail?
ANSWER
Recently,
the CFPB (or “Bureau”) filed a lawsuit against one mortgage lender for false and
misleading reverse mortgage advertisements. [United States District Court for
the District of Maryland, Baltimore Division on February 12, 2015 (CFPB v. All
Financial Services, Inc.)]
Two
other mortgage lenders have consented to the issuance of a Consent Order which,
among other things, obligates the lenders to file compliance plans with the
CFPB, pay significant civil monetary penalties and report certain of their actions
to the CFPB. [Administrative Proceeding File No. 2015-CFPB-0005 dated February
10, 2015 (In the Matter of American Preferred Lending Inc.); Administrative
Proceeding File No. 2015-CFPB-0006 dated February 11, 2015 (In the Matter of
Flagship Financial Group, LLC)]
In
the lawsuit against All Financial Services, the Bureau alleged, among other
things, that the lender misrepresented the source of its advertisement by
including an eagle resembling the Great Seal of the United States with the
headers, “Government Lending Division” and “Housing and Recovery Act of 2008
Eligibility Notice.” Further, the Bureau claimed that the lender advertising a
reverse mortgage payment as having “no monthly payments” is misleading, since a
borrower is still responsible for taxes and insurance.
In
one of the Consent Orders (supra, Flagship Financial), the Bureau took issue
with mailings that included the header, “Pursuant to the Federal Housing
Administration (FHA) HUD No. 12-045” and that the mailer directed consumers to
contact their “assigned FHA loan specialist.” In the other Consent Order
(supra, American Preferred Lending), the CFPB objected to mailings that included
the FHA-approved lending institution’s logo, along with reference to a FHA
website, while obscuring the source of the advertisement. The CFPB deemed this
to be misleading to a consumer as it provides the impression that the lender is
in some way affiliated with the government.
Based
on these recent enforcement actions, the Bureau is focusing attention on
preventing not only false but also misleading advertisements. Residential mortgage
loan originators must be particularly cautious in how they market their
products and services. The lawsuit and Consent Orders referred to above make it
clear that misleading claims of federal authority or affiliation will not be
tolerated.
Michael
Barone
Director/Legal
& Regulatory Compliance
Lenders Compliance Group
