On September 14, 2020, the CFPB announced a consent order against ClearPath Lending, Inc. (ClearPath), which includes a civil money penalty of $625,000 and requirements to prevent future violations. The consent order represents the CFPB’s eighth consent order since late July, 2020 against a mortgage company to settle allegations by the CFPB that the company engaged in false and misleading advertising to service members and veterans. In all of its announcements regarding the consent orders, the CFPB indicated that the orders originated from “an ongoing sweep” of CFPB investigations into companies allegedly using deceptive direct mail campaigns to advertise VA-guaranteed mortgages.
The ClearPath consent order follows consent orders discussed in previous blog posts against Service 1st Mortgage, Inc. (Service 1st), Hypotec, Inc. (Hypotec), and PHLoans.com, Inc. (PHLoans), as well as against Go Direct Lenders, Inc. (Go Direct), and against Sovereign Lending Group, Inc. (Sovereign) and Prime Choice Funding, Inc. (Prime Choice).
As in the first seven consent orders, the CFPB found violations of 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 ClearPath’s advertising of VA-guaranteed mortgages to service members and veterans. Significant findings in the ClearPath consent order include “false, misleading and inaccurate representations” about cost and other credit terms, and falsely representing an affiliation with the federal government.
The CFPB found that ClearPath’s advertisements misrepresented the terms actually available to consumers, misstated actual credit terms available, and disclosed inaccurate interest rate and APR combinations. For example, one advertisement sent to 260,000 consumers disclosed an interest rate of 2.25% with an APR of 3.17%. This APR was alleged to be inaccurate because it was not based on the reasonably current index at the time for the variable-rate period or the required discount points. According to the CFPB, the accurate APR, using the correct index and including discount points, was at least 3.516%. In another example cited by the CFPB as false and misleading, a ClearPath advertisement that was sent to over 80,000 consumers disclosed a loan with “NO Lender Fees” and an APR of 3.17% when, in fact, a loan with the disclosed APR would have required the payment of two discount points by the consumer.
As it did in the first seven consent orders, the CFPB found that ClearPath’s advertisements falsely represented that the company was affiliated with the VA. Similar to previous consent orders, the CFPB found that the use of certain phrases were misleading to consumers and misrepresented that ClearPath was affiliated with the VA. Some of the phrases cited by the CFPB in the consent order include “2017 – Eligibility Notification” and “Benefit Allotment” in the header of the advertisement and statements that ClearPath had “important information regarding your VA loan” or that ClearPath had “records” that the consumer had “yet to take advantage of programs sponsored by The Department of Veteran’s Affairs.” One letter that the CFPB cited stated “It is important that you call our VA Loan Service Center toll free (866) 284-9875 within 21 business days. By taking action now your next mortgage payment may not be due until April 2018.”
The continued CFPB focus in this area 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 to also review their advertisements for potential violations that have been the basis of the CFPB consent orders. The characteristics of the advertisements cited by the CFPB in the eight consent orders issued over the past eight weeks as the basis for its findings that the advertisements misrepresented a government affiliation deserve close attention because they indicate that the CFPB takes an expansive view of what constitutes such a misrepresentation. As in certain of the prior consent orders, the ClearPath consent order prohibits it to use various terms in advertisements, including the term “VA loan specialist.”
The full content of all eight consent orders can be viewed via the links below.