CFPB Consent Order Permanently Bans Lender from Mortgage Lending Business
The CFPB recently entered into a Consent Order with a mortgage lender, alleging a series of repeat offenses in the lender’s advertising practices, including violations of a 2015 Consent Order and violations of the CFPA, Regulation N, and Regulation Z. The mortgage lender, which did not admit or deny the allegations, has been permanently banned from the mortgage lending business and is required to pay a $1 million civil money penalty.
The 2015 Consent Order was based on numerous advertisements disseminated by the mortgage lender that allegedly contained deceptive representations in violation of the CFPA and Regulation N, including advertisements sent to U.S. military servicemembers and veterans that allegedly falsely implied that the advertisements were sent by the VA or FHA, as well as advertisements that allegedly misrepresented the loan’s interest rates and monthly payments. The CFPB also found that numerous advertisements violated Regulation Z by allegedly failing to include certain required disclosures about the advertised interest rates and payments. The 2015 Consent Order required the lender to pay a $250,000 civil penalty and imposed conduct provisions on the lender, prohibiting the lender from violating certain specified sections of the CFPA, Regulation N, and Regulation Z.
The CFPB found that the lender violated the 2015 Consent Order by disseminating millions of mortgage advertisements that allegedly made false or misleading representations or contained inadequate or impermissible disclosures, reflecting the same types of deceptive and other unlawful advertising practices that were expressly prohibited by the 2015 Consent Order. The CFPB also found violations of the CFPA for advertisements containing allegedly deceptive representations about government affiliation and involvement, time limits on VA and FHA loan benefits, the consumers’ ability or likelihood to obtain the advertised mortgage or credit term, and the cost of the advertised loans. Moreover, the CFPB found that many, if not all, of these unlawful practices occurred at the direction of the mortgage lender’s previous Chief Executive Officer and sole owner or, at a minimum, with his knowledge, despite the concerns and objections expressed by mortgage lender’s compliance vendor and compliance officer that the advertisements were deceptive or otherwise violated Federal consumer financial laws.
The Order also asserts violations of Regulation N for alleged misrepresentations about fees and costs associated with mortgage credit products; the existence, nature, or amount of cash available to the consumer; government affiliation or involvement; and the consumers’ ability or likelihood to obtain credit terms or refinancing. Additionally, the CFPB found that the lender violated Regulation Z by allegedly advertising unavailable credit terms, using the consumers’ current lender’s name in misleading ways, and making improper disclosures of interest rates and payment terms.
CFPB Director Rohit Chopra stated that the Consent Order reflects the CFPB’s commitment “to weed out repeat offenders.” This commitment is also reflected in the CFPB’s recently proposed registry to detect repeat offenders, discussed in a previous WBK article.