On August 21, 2020, the CFPB announced the issuance of a consent order against Go Direct Lenders, Inc. (Go Direct). This follows consent orders discussed in a previous blog post, that were announced on July 24, 2020 against Sovereign Lending Group, Inc. (Sovereign) and Prime Choice Funding, Inc. (Prime Choice). The CFPB indicated in the Go Direct announcement that the consent order is the third to originate from a number of CFPB investigations into companies allegedly using deceptive direct mail campaigns to advertise VA-guaranteed mortgages. Like the consent orders with Sovereign and Prime Choice, the most recent consent order provides for civil money penalties, with Go Direct ordered to pay $150,000.
As it did in the Sovereign and Prime Choice consent orders, the CFPB finds in the Go Direct consent order that Go Direct violated Regulation Z and the Mortgage Acts and Practices—Advertising Rule (the “MAP Rule” or Regulation N), and Title X of the Dodd-Frank Act (the Consumer Financial Protection Act) in its advertising of VA-guaranteed mortgages to service members and veterans. The consent order addresses advertisements sent to consumers between March 2017 and April 2019. Major themes of the violations that were the basis of the Sovereign and Prime Choice orders carried through to the Go Direct order. These include findings of “false, misleading and inaccurate representations” about credit terms and inadequate disclosures, the inability of consumers to obtain the advertised terms, and falsely representing an affiliation with the federal government. New to the Go Direct consent order is a finding of false representations about increases in property values.
As in the Sovereign and Prime Choice consent orders, in the Go Direct consent order the CFPB cites several examples in support of its finding that Go Direct made false, misleading and inaccurate representations of costs and terms in direct mail advertisements. For example, in the Go Direct consent order, the CFPB found that an advertisement sent to 30,000 consumers misrepresented and under-disclosed the APR on an advertised mortgage loan because it did not take into account the required discount points for the disclosed interest rate in the calculation of the disclosed APR. The CFPB found that by under-disclosing the APR based on the actual loan terms, Prime Choice did not disclose terms actually available to the consumers. Additionally, the CFPB found that this same advertisement stated in large font on the front page “FICO scores as low as 500,” but in fine print indicated that the advertised interest rate and APR were only available to consumers with a credit score of 740 or higher, misleading consumers about their ability to qualify for the advertised mortgage. The CFPB found that, in reality, a borrower with a FICO score below 660 may have been required to pay even more discount points, resulting in the advertisement further under-disclosing the APR.
The CFPB also found that numerous direct mail advertisements sent by Go Direct misrepresented the existence and amount of fees or costs to consumers. As an example, the CFPB found that one mailer, which was delivered to 30,000 consumers in November 2017, stated there was “No Application or Processing Fee” without any stipulations. However, the CFPB found that almost all consumers who obtained mortgage loans in a three-month period after Go Direct sent the direct mail advertisement paid a processing fee, and therefore this statement was false and misleading.
As in the Prime Choice and Sovereign consent orders, in the Go Direct consent order the CFPB found that advertisements were often missing additional terms that are required by Regulation Z when an interest rate or payment is disclosed. As an example, the CFPB found that an advertisement that stated the loan repayment period as a “15-year term in an amount up to $453,100” did not disclose the repayment obligations over the full term of the loan. The CFPB also gives examples of advertisements that it found were missing terms that are required by Regulation Z when an interest rate or period of repayment is disclosed.
New in the Go Direct consent order are findings that the advertisements made false representations about an increase in property value. The CFPB found that Go Direct disseminated over 460,000 advertisements to consumers asserting that its “records indicate” property value increases specific to the consumers’ property of between 21% and 23% throughout the country without tailoring the property value appreciation amounts to any particular property, city, state, or region and without records to support the appreciation claims.
As in the Sovereign and Prime Choice consent orders, the CFPB found in the Go Direct consent order that Go Direct’s advertisements either “directly or by implication” represented that the company was affiliated with the federal government through the use of formatting, text boxes, and form numbers that caused the advertisements to resemble IRS forms. Additionally, the CFPB found that certain Go Direct advertisements sent to consumers used language and phrases that despite fine print stating “[t]his is an advertisement” strongly implied that the mailing originated from the VA or IRS. Some of these phrases included that the advertisement was a “NOTICE” about “VA ELIGIBILITY” or about a “2018 – VA Policy Change Advisory.”
Unlike advertisements that were the subject of other consent orders, the specific characteristics of Go Direct’s advertisements on which the CFPB based its conclusion that the advertisements misrepresented a government affiliation do not clearly support that conclusion. (The same holds true for the advertisements at issue in the Sovereign and Prime Choice consent orders.) This reinforces the need for lenders to carefully review their advertisements to avoid a violation of the MAP Rule’s prohibition of lender misrepresentations about a government affiliation and should also review their advertisements for potential violations that have been the basis of other CFPB consent orders involving advertisements.
The full content of all three consent orders can be viewed via the links below.