CFPB Settles with Mortgage Lenders on Deceptive Loan Advertisements

On September 14th, the Consumer Financial Protection Bureau (CFPB) announced the eighth in a series of consent orders with mortgage lenders after investigations uncovered alleged deceptive advertising directed to military service-members and veterans.

The CFPB began the investigations in response to a notification about the issue from the Veterans Administration (VA).

Most of the advertisements were direct mail to service-members and veterans. The CFPB’s allegations included advertisement of credit terms that were not actually available, failure to disclose the repayment terms over the entire term of the loan advertised as required by Reg Z, and misrepresentations that the advertisement was affiliated with the borrower’s current lender or the VA. For example, one advertisement prominently stated ‘FICO scores as low as 500’ along with an interest rate and APR, while only the fine print noted that the advertised rate and APR were only available to those with a credit score of 740 or higher. The advertised rate was generally only available with a lower credit score, along with the payment of additional discount points that were not noted in the disclosure of rate and APR. Two lender advertisements included the statement that ‘the Economic Stimulus Program will end soon,’ implying a false urgency to respond to the advertisement.

These consent orders underline the importance for lenders to review their advertisements carefully for compliance with regulatory requirements as well as for potential misrepresentations, not just those directed at service-members and veterans, but for advertisements to all consumers.

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In this blog post concerning legal and regulatory matters of interest to the mortgage industry, Sandler Law Group (SLG) provides general information and industry observations that are not motivated by or concerned with a particular past occurrence or event, or a specific existing legal problem of which SLG is aware. Nothing published herein is intended to constitute legal advice and the use of the blog post by a reader shall not give rise to an attorney-client relationship with SLG. SLG expressly disclaims any representation of accuracy or reliability as to the content of this blog post, as well as any obligation to maintain such content over time or to ensure it is free from errors. Brad Cope is the attorney responsible for the SLG content of this blog post. Unless otherwise noted, the attorneys of SLG are not certified by the Texas Board of Legal Specialization.

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