The Consumer Financial Protection Bureau is taking action against All Financial Services, Flagship Financial Group and American Preferred Lending for misleading consumers with advertisements implying U.S. government approval of their products.
“Each of these companies has misled consumers with false advertising,” said CFPB Director Richard Cordray. “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.”
Under the 2011 Mortgage Acts and Practices Advertising Rule, misleading claims in mortgage advertising, including implying a government affiliation are prohibited.
The CFPB alleges that mailings by All Financial Services, American Preferred Lending and Flagship Financial Group imitated U.S. government notices.
While government programs insure or guarantee certain mortgages, the private lenders that make these loans are not government entities and are not affiliated with the U.S. government.
All Financial Services
The Maryland-based lender offers several kinds of mortgages, including reverse mortgages.
The CFPB alleges that from November 2011 to December 2012, All Financial Services used advertisements that were deceptive. The Bureau alleges that the company misrepresented that the source of the advertisements was, or was affiliated with, a governmental entity. They also misrepresented that the FHA-insured reverse mortgage program was time-limited or had a deadline.
The bureau is seeking a civil fine and a permanent injunction to prevent future violations.
Flagship Financial Group
Flagship Financial Group, headquartered in Utah, originates conventional loans and VA loans. It also brokers FHA loans on behalf of other originators.
The CFPB investigation discovered that from August 2011 to December 2012 the company sent mailings implying that its VA loans were endorsed or sponsored by the U.S. Department of Housing and Urban Development. The company claimed, in more than one million mailers, that it was “HUD-Approved.”
Under the action, the company will be prohibited from falsely implying a government affiliation in future advertisements. It will also pay a civil penalty of $225,000.
American Preferred Lending
American Preferred Lending is headquartered in California and originates mortgage credit products, including FHA and VA residential loans.
CFPB’s investigation revealed that American Preferred Lending, from August 2011 to February 2013, sent mailings to potential consumers that appeared as if they were U.S. government notices, obscuring that they were actually from American Preferred Lending.
The company will be prohibited from falsely implying a government affiliation in future advertisements. It will also pay a civil penalty of $85,000. The civil penalty amount reflects, in part, the company’s financial condition, and will be paid with funds contributed to the company by its owners.
This action is part of a joint sweep, a review conducted by the CFPB and the Federal Trade Commission of about 800 randomly selected mortgage-related ads across the country, including ads for mortgage loans, refinancing and reverse mortgages. The agencies looked at public-facing ads in newspapers, on the Internet, and on mail solicitations. Others came to the attention of the CFPB and the FTC from consumer complaints.
This is the second action the CFPB has taken this week. On Tuesday, the CFPB took action against NewDay Financial for deceptive mortgage advertising and kickbacks, making the lender pay a $2 million civil money penalty for its actions.