CFPB Fines 3 Lenders for Implying Government Affiliation

Three mortgage lenders are facing civil action for false and misleadingrnadvertising.  The three were identifiedrnin a joint Consumer Financial Protection Bureau (CFPB) and Federal TradernCommission (FTC) sweep of about 800 newspaper and internet ads and U.S. mailrnsolicitations.  Most of the ads werernrandomly selected for review although some came to the agencies’ attention fromrnconsumer complaints.</p

The three are all accused of misleading consumers with advertisementsrnimplying U.S. government approval of their products.  All Financial Services is being sued in thernU.S. District Court for Maryland and administrative consent orders have beenrnfiled against Flagship Financial Group, and American Preferred Lending.</p

The most serious charges are levied against All Financial Services, arnmortgage broker and lender operating in Maryland, New Jersey, Pennsylvania, andrnWashington, DC.  All Financial offersrnseveral kinds of mortgages but its alleged infractions center on its promotionrnof reverse mortgages.  CFPB says thatrnfrom November 2011 to December 2012 the company misrepresented its advertisingrnas coming from or affiliated with a government entity.  In one example CFPB said that company sent outrn200,000 mailers carrying an eagle resembling the Great Seal of the UnitedrnStates and headlined “Government Lending Division” and “Housing and RecoveryrnAct of 2008 Eligibility Notice.”  </p

Consumers were also told that the FHA program was time-limited, that nornmonthly payments “whatsoever” would be required “as long as you and your spousernlive in the home.”  Both pieces ofrninformation were, at the time, untrue.</p

CFPB’s complaint is seeking a civil fine and a permanent injunction to haltrnAll Financial’s alleged illegal activities.</p

In the consent order with Utah-based FlagshiprnFinancial Group CFPB states that from August 2011 to December 2012 the companyrnsent mailings implying that its VA loans were endorsed or sponsored by the U.S.rnDepartment of Housing and Urban Development (HUD).  Over one million missives were mailed claimingrnthe company was “HUD-Approved” and including text about federal legislation andrnthat “HUD-Approved Flagship Financial Group has been directed to get VArnhomeowners instant relief by lowering their monthly payments.”  </p

 The companyrnalso sent tens of thousands of mailers advertising mortgage credit productsrnthat looked like a government notice. For example, one mailing had a heading,rn”PURSUANT TO THE FEDERAL HOUSING ADMINISTRATION (FHA) HUD No. 12-045,” and instructedrnconsumers to call their “assigned FHA loan specialist,” and obscured therncompany’s name as the source of the advertisements.</p

With today’s action, the company, whichrnis licensed as a mortgage broker or lender in 35 states, will be prohibitedrnfrom falsely implying a government affiliation in future advertisements. Itrnwill also pay a civil penalty of $225,000.</p

Similar charges were made in thernconsent order with American Preferred Lending, a mortgage lender and broker inrnCalifornia and loan originator in Florida. rnCFPB says that from August 2011 to February 2013 the company sent outrnmore than 100,000 mailings with an FHA-approved lending institution logo,rnobscuring the company as the source of the mail, and referring consumers to thernwebsite FHAdept.us. These factors combined gave the impression that the adsrnwere from the U.S. government, or an entity affiliated with the government.rnAlthough the company is authorized to originate VA and FHA loans, it is not anrnagent of, or affiliated with, the U.S. government.</p

Under the consent order AmericanrnPreferred will be prohibited from falsely implying a government affiliation inrnfuture ads and will pay a civil penalty of $85,000, an amount CFPB saidrnreflected the financial condition of the lender.  </p

“Each of these companies has misledrnconsumers with false advertising,” said CFPB Director Richard Cordray. “ThernU.S. government is very serious about stopping companies from falsely claimingrnfederal authority, and we are particularly concerned about false or deceptivernstatements made in advertisements about reverse mortgages that target olderrnAmericans.”

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