The agency has slapped two companies with fines following a sweeping investigation of VA mortgage companies
The Consumer Financial Protection Bureau has slapped two mortgage companies with fines for allegedly sending deceptive advertisements about VA loans to service members and veterans.
The CFPB issued consent orders against Sovereign Lending Group and Prime Choice Funding. Sovereign is a California company that is licensed as a mortgage broker or lender in 44 states and the District of Columbia. Prime Choice, also headquartered in California, is licensed in 35 states and the District of Columbia. Both companies offer VA loans.
Both Sovereign and Prime Choice advertise their VA loans primarily through direct mail sent to military members and their families. According to the CFPB, both companies mailed advertisements that contained false or misleading statements or lacked required disclosures.
According to the consent orders filed by the bureau, Sovereign sent “hundreds of thousands” of mailed advertisements, while Prime Choice sent “millions,” all of which contained false or misleading information.
“For example, Sovereign and Prime Choice advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer the consumer,” the CFPB said. “Sovereign and Prime Choice advertisements misleadingly described an advertised introductory interest rate as a ‘fixed’ rate, when in fact the rate was adjustable and could increase over time.”
Sovereign and Prime Choice also allegedly created a 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,” the bureau said.
Sovereign’s advertising also made false claims about the consumer’s existing loans, and falsely implied that obtaining a loan from Sovereign would address the problems, the CFPB said.
The consent order against Sovereign requires the lender to pay a civil penalty of $460,000. The order against Prime Choice includes a penalty of $645,000. Both orders require the companies to designate an advertising compliance official to review their advertisements for legal compliance. The CFPB has also ordered the companies to comply with “certain enhanced disclosure requirements” in order to prevent them from making future false statements.
The consent orders stem from a sweep of CFPB investigations into multiple mortgage companies that used deceptive mailers to tout their VA loan products.