Articles Posted in UDAAP ADVERTISING & MARKETING

The CFPB announced on Feb. 12, 2015 another consent order for issues involving a lender mortgage origination advertising practices. Flagship Financial Group, LLC was alleged to have made material misrepresentations in commercial communications that improperly suggested that Flagship Financial was affiliated with a United States government entity and Flagship made material misrepresentations that it was endorsed or sponsored by a governmental program. This consent order is very similar to the American Preferred Lending consent order.

The Consumer Financial Protection Bureau alleged that Flagship disseminated advertisements promoting FHA streamline refinance loans and that the format & design of these advertisements looked like a government notice and implied that a governmental agency was the source of the advertisement.

The FHA streamline refinance mailers contained the heading “PURSUANT TO THE FEDERAL HOUSING ADMINISTRATION (FHA) HUD No. 12-045,” and “United States Housing and Urban Development 12-045 Program,” and instructed consumers to call their “assigned FHA loan specialist.” Flagships name appeared only on the back of the FHA streamline advertisement mailers in the disclaimer section that Flagship was not an agency of the federal government and wasn’t affiliated with the borrower’s current lender.

The Consumer Financial Protection Bureau has been sending strong messages across the real estate industry lately with its aggressive campaign against companies who they believe have made material misrepresentations which improperly suggested the lender was affiliated with a United States governmental entity or the company advertising its mortgage products was endorsed, sponsored by, or affiliated with a governmental program to consumers. The first consent order is American Preferred Lending.

On Feb. 12, 2015 the CFPB entered into a consent order with American Preferred Lending, Inc. whereby the bureau deemed American Preferred Lending violated Regulation N, 12 C.F.R. 1014.3(n) and UDAAP. The consent order found that American Preferred Lending disseminated direct-mail mortgage loan advertisements that improperly suggested that American Preferred Lending was affiliated with a governmental agency, and misrepresented that the advertised mortgage loan products were endorsed, sponsored by, or affiliated with a governmental program. The CFPB said the direct mail pieces appeared as if they were United States government notices.

The CFPB noted that “the overall format of the advertisements, including the use of plain text in labeled boxes and the title ‘Payment’ Reduction Notice,’ evoked a government form.” The advertisements were also not clearly marked so consumers could see they came from American Preferred and not the Government.