CFPB Moves Against Three Lenders for Falsely Implying Government Representation

The Consumer Financial Protection Bureau (CFPB) announced Thursday that it has taken action against three mortgage lenders for falsely implying U.S. government endorsement of their products, according to an announcement from CFPB.

The Bureau announced it is suing reverse mortgage lender All Financial Services with the intent to halt the lender's illegal activities and has imposed civil fines on both Flagship Financial Group and American Preferred Lending. The latter two companies were ordered to cease their false advertising in addition to paying civil fines.

"Each of these companies has misled consumers with false advertising," CFPB Director Richard Cordray said. "The U.S. government is very serious about stopping companies from falsely claiming federal authority, and we are particularly concerned about false or deceptive statements made in advertisements about reverse mortgages that target older Americans."

CFPB claims that all three institutions violated the 2011 Mortgage Acts and Practice Advertising Rule, which prohibits misleading claims in mortgage advertising. The three companies involved, which are all private lenders, are not affiliated with the U.S. government even though some loans issued by private lenders are insured by government agencies such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA). An investigation conducted by the Bureau revealed that the three lenders implied an affiliation with the U.S. government in their advertising materials despite not being affiliated with the government.

The Bureau found that Maryland-based All-Financial Services claimed in its advertisements from November 2011 to December 2012 that the advertisements were sourced by a government entity and falsely implied that the FHA-insured reverse mortgage program was time-limited or had a deadline. CFPB said the company also falsely advertised that borrowers were not required to make monthly payments under a reverse mortgage "as long as you and your spouse live in the home." The Bureau is seeking a civil fine and an injunction to prevent future violations in the U.S. District Court for the District of Maryland.

A CFPB investigation revealed that Utah-based Flagship Financial Group, a licensed broker or lender in 35 states, implied in mailings from August 2011 to December 2012 that VA loans it originated were endorsed by the U.S. Department of Housing and Urban Development (HUD). The company also sent tens of thousands of mailers with the heading that began "Pursuant to the Federal Housing Administration," according to CFPB. The Bureau ordered Flagship Financial to pay a civil penalty of $225,000 and to cease falsely implying government affiliation in future advertisements.

The California-based American Preferred Lending, which originates mortgage credit products that include FHA and VA residential loans, was found to have implied in more than 100,000 mailings that the mailings came from the U.S. government. According to CFPB, the mailings included an FHA-approved lending institution logo and referenced a Web address, www.FHAdept.us. For its actions, American Preferred Lending was ordered to pay a civil penalty of $85,000 and is prohibited from falsely implying an affiliation with the government in future advertising materials.