RSSThe Consumer Financial Protection Bureau issued consent orders against Sovereign Lending Group, Inc., and Prime Choice Funding, Inc., over what the bureau called “deceptive” loan advertisements to servicemembers and veterans.
The pair of California companies offer and provide mortgage loans guaranteed by the United States Department of Veterans Affairs, largely marketing through direct mail to servicemembers and veterans.
These advertisements for VA-guaranteed mortgages contained false, misleading, and inaccurate statements or lacked required disclosures, the CFPB said, in violation of the Consumer Financial Protection Act’s prohibition against deceptive acts and practices, the Mortgage Acts and Practices – Advertising Rule (MAP Rule) and Regulation Z. The consent orders require the companies to pay civil money penalties and impose requirements to prevent future violations.
Sovereign and Prime disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures, according to the bureau. The ads misrepresented credit terms by listing credit terms that the company was not actually prepared to offer to the consumer. They also 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 advertisements also created the 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 CFPB also found that both Sovereign and Prime Choice advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing their own names and the fact that they were not associated with, or acting on behalf of, the consumer’s current lender (a requirement under Reg Z). In another Reg Z violation, the ads also failed to properly disclose credit terms, such as the consumer’s repayment obligations over the full term of the loan and the period during which certain interest rates would apply.
Other advertisements made false claims about consumer’s existing loans, the bureau said, and falsely implied that the consumer could address these problems by obtaining a loan from Sovereign. Prime Choice advertisements misrepresented the presence of a property assessment as well as misleading comparisons between hypothetical credit terms and the terms of the advertised product, the bureau said.
The settlements are part of a larger CFPB sweep against companies which engage in deceptive advertising for VA-guaranteed mortgages. Under the consent orders, Sovereign will pay a civil penalty of $460,000 and Prime Choice will pay a civil penalty of $645,000.
Sovereign is licensed as a mortgage broker or lender in about 44 states and the District of Columbia. Prime Choice is licensed as a mortgage broker or lender in about 35 states and the District of Columbia.
