The Consumer Financial Protection Bureau often provides subtle clues as to where they may be headed on the enforcement front and on November 6, 2013 they addressed the topic on their website about online Lead Generation and consumer safety involving payday loans. The topic "Is applying for a payday loan online safe?"
The CFPB stated that anytime a consumer gives out sensitive personal and financial information on the Internet there are risks involved to the consumer. They warned consumers that if a consumer applies online for a payday loan online, the consumer could be increasing their risk significantly. The CFPB stated the reason for this is because many websites that advertise payday loans are not lenders. They are businesses known as "lead generators" which make money primarily by finding customers for lenders.
The Bureau expressed concern that the online application or form that consumers filled out could be sold to a lender who offers to make the consumer a loan. The Bureau also indicated they have concerns as well that multiple lenders or other service providers could pay for this information causing the them to contact or email the consumer.
"Lead generators might not find you the lowest cost loans, and you should be cautious of sites that promise they will. Many consumers can also be confused about who actually made the loan, which makes getting help when the you [the consumer] need it harder."
They even provided a tip to consumers on what to look out for "Key phrases can help you spot a lead generator. It can be hard to tell if the website you click on is a lead generator or an actual lender. Lead Generators might disclose that they are not lenders somewhere on their site, but this information can be hard to find. In addition, look for phrases like "matching you with lenders," "connecting you with a network of participating lenders," or "something similar, as an indication that you [the consumer] is on a lead generator's site."
The CFPB also dropped another hint as to payday loan lead generators which should bear careful examination to everyone in the residential lending industry who is purchasing leads from an lead generation company. Another CFPB webpage titled "What is the difference between an online payday lender and one with a storefront?" said consumers need to make sure the online website is licensed to do business in the consumer's state and whether they follow the state's payday lending laws.
If the CFPB starts looking at online Lead Generation industry involving residential mortgage loans will they apply an even stricter standard to those lead generation companies who solicit mortgage information or a mortgage conversation from consumers and sell it or even pass it on to a lender? Will the CFPB take the position that the Lead Generation companies are violating the SAFE Act if they aren't licensed in the state they are operating in? And if they are licensed under the SAFE will they be violating the broadly defined Loan Officer Compensation Rule?
Will the Bureau deem website statements like "We can help you find a mortgage, call us!" by a Lead Generation company to be a advertising and soliciting a mortgage conversation from a consumer? In a number of states this could be considered a violation of the SAFE act even if no payment is made by the lender or loan officer to the Lead Generation company because this type of solicitation would trigger a license.
Even if the Lead Generation is properly licensed under a particular state's SAFE Act if they sell that lead to an unlicensed lender in that state then the CFPB could pursue an action against the Lead Generation company because the Lead Generation company assisted or facilitated a consumers information to be sold to an unlicensed entity under the various third party vendor management bulletins.
Some states already require Lead Generation companies collecting information be licensed as "mortgage brokers" such as Arizona and Virginia. Most of the payday lenders in Ohio for example have become Mortgage Brokers under the SAFE Act as it takes them out of the state usury statute for payday lenders.
What types of online Lead Generation companies could be issues of concern?
(1) those unlicensed lead generation companies who tell the consumer whether they are "Qualified for a Loan or Not";
(2) those online Lead Generation companies who collect any sort of non-public data (the definition of what non-public data is varies from state to state) and who fail to inform and obtain the consumers consent that their information will be shared with a third party; and
(3) those online Lead Generation companies where the lead generation company has spoken directly with the consumer and then transfers the "Live Handoff" over to the lender or Loan Officer (especially if the Lead Generation company is not licensed) If they act a "sub-mortgage broker" then it may be best to stay away because this could violate the Loan Officer Qualifying Rule effective Jan. 1, 2014.
Additionally, the CFPB has broad authority to enforce the Fair Lending Laws, Telemarketing Sales Rule, Mortgage Lending and Regulations, Mortgage Acts and Practices Advertising Rule, and the most important law the Unfair, Deceptive or Abuses Act or Practices (UDAAP).
So what might the CFPB examine if a lender or loan officer uses a lead generation company? They will look to see if the relationship is properly disclosed; review privacy and how the consumers data was shared; identify whether party is a third party provider or not; review the lead generation website or advertising portal itself; and they could to review all fees, terms, and conditions associated with the lead generation process.
So is the CFPB investigating Lead Generation companies involving residential loans? The answer is YES they are and any companies involved in the lead generation business should be on alert and actively assess the compliance risks associated with the online lead generation industry.
Sometimes the past provides a good glimpse of the future so remember the name Steven Antonakes when it comes to online Lead Generation and CFPB enforcement. Mr. Antonakes was the former Commissioner of the Massachusetts Department of Banks. He is also on the governing board for the Nationwide Mortgage Licensing System (NMLS). When he was the Commissioner of Banks in Massachusetts he was involved number consent orders with unlicensed online Lead Generation companies.
Where is Steven Antonakes now? He is the Deputy Director of the Consumer Financial Protection Bureau whose responsibility is supervision, enforcement, and fair lending.