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The CFPB’s Sweep of Investigations Related to VAGuaranteed Mortgage Advertisements
THE CFPB’S SWEEP OF INVESTIGATIONS RELATED TO VA-GUARANTEED MORTGAGE ADVERTISEMENTS
By Troy Garris, Garris Horn LLP
On September 19, 2020, the Consumer Financial Protections Bureau (CFPB) published a press release citing a newly issued consent order to a mortgage broker/lender, the eighth delivered by the Bureau in under two months related to deceptive loan advertisements sent to servicemembers and veterans. The series of investigations is in response to concerns about potentially unlawful advertising in the market that the VA identified.
In each instance, the principal means of advertising VA-guaranteed loans is through direct-mail advertisements sent primarily to United States military servicemembers and veterans. The Bureau found that these companies mailed consumers advertisements for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or lacked required disclosures, in violation of the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts and practices, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. The consent orders require the companies to pay civil money penalties and impose requirements to prevent future violations, such as “bolster their compliance functions by designating an advertising compliance official who must review their mortgage advertisements for compliance with mortgage advertising laws prior to their use; prohibiting misrepresentations similar to those identified by the Bureau; and requiring the companies to comply with certain enhanced disclosure requirements to prevent them from making future misrepresentations.”
Further details regarding the eight actions are as follows, including civil money penalties:
• Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer. • Advertisements misleadingly described an advertised introductory interest rate as a “fixed” rate, when in fact the rate was adjustable and could increase over time. • Advertisements created the false impression that they were affiliated with the government by using words, phrases, images, or designs that are associated with the VA or the
Internal Revenue Service. • Advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing their own names
and the fact that they were not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z. The company made false claims about consumers’ existing loans, and falsely implied that consumers could address these problems by obtaining a loan from the company. Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan and the period during which certain interest rates would apply.
• Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer. Advertisements misleadingly described an advertised introductory interest rate as a “fixed” rate, when in fact the rate was adjustable and could increase over time. Advertisements created the false impression that they were affiliated with the government by using words, phrases, images, or designs that are associated with the VA or the Internal Revenue Service. Advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing their own names and the fact that they were not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z. Advertisements also failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the
consumer’s repayment obligations over the full term of the loan and the period during which certain interest rates would apply. Advertisements created the false impression that they contained a property assessment as well as misleading comparisons between hypothetical credit terms and the terms of the advertised product.
• Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including advertising a lower annual percentage rate than it was prepared to offer. • The company made misrepresentations about the applicable fees in connection with the advertised mortgage. • Advertisements misleadingly described variable-rate loans as “fixed” rate loans, when in fact the rate was adjustable and could increase over time. • Advertisements falsely stated or implied that an appraisal, assets, and income documentation were not required to qualify for certain loans and that consumers with
FICO scores as low as 500 would qualify for the advertised rates. • Advertisements falsely represented that it had records showing that the value of the consumer’s property had increased over the past year by a specific percentage. • Advertisements created the false impression that the company was affiliated with the government by using words, phrases, images, or design characteristics that are associated with the VA or the Internal
Revenue Service. Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan.
• Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the payment amount applicable to the advertised mortgage and the nature or amount of cash available to the consumer in connection with the advertised mortgage. • The company made misrepresentations about the existence and amount of fees or costs to the consumer in connection with the advertised mortgage. • Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan.
• The company advertised specific credit terms, such as interest rates, APRs, and hypothetical payment amounts that it was not prepared to offer, or that it could only offer for an introductory period but advertised as if they were permanent loan terms. • Advertisements also used phrasing and formatting that falsely represented or implied that the company was affiliated with the government, including the VA, that the advertised product was endorsed, sponsored by, or affiliated with the United
States government, or that the United
States government was the source of the advertisements. In advertisements mailed between June 2016 and January 2019, the company stated that it would pay an estimated escrow refund of a specific amount if the consumer refinanced through the company, even though the advertised escrow refund amount was calculated using a method that would not yield an actual estimate for that consumer, and customers were required to fund escrow accounts upon generating a new loan. Advertisements falsely stated: “the Economic Stimulus Program will end soon. There is currently no plan to extend the Stimulus Program.” Advertisements included claims or terms that require additional disclosures, but the company failed to make these disclosures.
• The company advertised specific credit terms, such as APRs and hypothetical payment amounts, that it was not prepared to offer, or that it could only offer for an introductory period but advertised as if they were permanent loan terms. • The company used terms in millions of its advertisements that falsely represented or implied that the company was affiliated with the government, including the VA, that the advertised product was endorsed, sponsored by, or affiliated with the United
States government, or that the United
States government was the source of the advertisements. • In advertisements mailed between April 2016 and May 2017, the company stated that it would pay an estimated escrow
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refund of a specific amount if the consumer refinanced through the company, even though the advertised escrow refund amount was calculated using a method that would not yield an actual estimate for that consumer, and in cash-out transactions the “refund” was actually added to the principal of the consumer’s loan. The company sent advertisements between December 2015 and April 2017 representing that a consumer could “[s]kip two payments” or “miss” two payments by refinancing with the company, but it did not disclose the limitations on this option, or that the skipped or missed payments would be added to the principal balance of the consumer’s loan. Advertisements stated: “the Economic Stimulus Program will end soon. There is currently no plan to extend the Stimulus Program,” which was untrue. Advertisements included claims or terms that require additional disclosures, but the company failed to make these disclosures.
• Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the interest rate or payment amount applicable to the advertised mortgage and the nature or amount of cash available to the consumer in connection with the advertised mortgage. • The company made misrepresentations about the existence or amount of fees or costs to the consumer in connection with the advertised mortgage. • Advertisements created the false impression that the company was affiliated with the government by using words, phrases, images, or designs that are associated with the VA,
Internal Revenue Service, or Federal Deposit
Insurance Corporation. Advertisements falsely represented that the consumer’s access to mortgage-refinance benefits through VA-guaranteed loans was time-limited. Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the annual percentage rate of the advertised mortgage or the consumer’s repayment obligations over the full term of the loan.
Advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer, including misrepresenting the annual percentage rate applicable to the advertised mortgage. The company misleadingly advertised rates or payments as fixed, even though the advertised mortgage was an adjustable-rate mortgage or the payment was not fixed for the indicated duration.
The company misrepresented the existence, nature, or amount of cash or credit available to the consumer, and the existence or amount of fees or costs to the consumer, in connection with the advertised mortgage. Advertisements created the false impression that the company was affiliated with the VA. Advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the number and time period of payments associated with the consumer’s repayment obligations over the full term of the loan.
Advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing the company’s name and the fact that it was not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z. MBM
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Brian Vieaux, CMB President Finlocker Christopher Griffith Founder Vetted VA
INTRODUCTION
Vetted VA is an online community where Veterans can ask real estate and mortgage questions and receive answers from a network of Vetted Financial Professionals without being solicited. Vetted VA founder, Christopher Griffith was seeking additional financial tools to assist Veterans in achieving their financial goals.
FinLocker was identified as a partner to deliver Veterans new financial health and wellness tools with its custom-branded financial super-app that focuses on all aspects of the homeownership journey. In March 2020, Vetted VA partnered with FinLocker to deploy the Vetted VA Go Bag, the financial planning and monitoring tool for Veterans.
The CHALLENGE
Veterans have lacked a comprehensive financial preparedness solution, especially one focused on real estate finance. This is made painfully clear once many leave active service and are no longer supported, instead they are seen as a specialized market that are easy to target and solicit. This solicitation tends to prey on their status as a Veteran by offering specialized services and programs which do not actually provide anything of lasting financial value to the Veteran. The common issue is a lack of understanding and transparency throughout.
“Prior proper planning prevents piss-poor performance,” says Christopher Griffith, Marine Veteran and Founder of Vetted VA. “Both active duty and discharged Veterans understand this saying. With debt specifically, those who cannot plan for the debt they will accrue end up only saving a little money and relying on hope. This isn’t the military way - yet it has been the standard until now.”
The SOLUTION
The Vetted VA Go Bag powered by FinLocker is a secure app where Veterans can safely store their financial data from other financial institutions. The app is built around the concept of consumer-permissioned data, so no financial institution will ever see a Veteran’s financial records until they give permission and share with a specific Vetted Professional. The Veteran has full control of what they store in the Vetted VA Go Bag, who they share the information with, and for what purpose. The Vetted VA Go Bag puts Veterans in control of their financial information.
The custom branded financial super-app provides Veterans with tools that include: • Credit report, credit score, credit monitoring, and alerts • Financial tools that enable spending analysis, budgeting, goal setting, and tracking • Access to an extensive library of homeownership and finance education • Ability to track value and equity of currently owned real estate • Search for properties for sale across the U.S. • Uploading financial documents they will need when they are ready to proceed with their real estate transaction • Direct connection to the Vetted
VA Professionals network for financial advice
Partnering this tool with professional oversight and counseling from Vetted VA Professionals means the Veteran is not only prepared before the conversation, but they have a safe and secure place to take action based on the consultation and, when ready, can take action to share their documents to the Vetted Professional to move the process forward.
Vetted VA focuses on keeping the Veteran in control of their financial future by providing freedom from solicitation, liberty of knowledge from trusted sources, and accountability to deliver what is promised through vetting. FinLocker has fulfilled its part of that vision by supporting the liberty and accountability of information.
