The Office of the Comptroller of the Currency (OCC) recently entered into a consent order with The Federal Savings Bank in Chicago, Illinois (Bank) to settle allegations of false or misleading statements regarding cash-out mortgage refinance loans guaranteed by the Department of Veterans Affairs (VA). The consent order includes typical allegations of improper marketing of VA cash-out loans, although the remedy provisions have drawn the ire of at least one consumer group.

As previously reported, the CFPB has entered into consent orders with lenders to settle allegations of false and misleading advertising to servicemembers and veterans regarding VA refinance loans. The allegations made by the CFPB in the prior consent orders are similar to certain of the allegations made by the OCC in the recent consent order.

The OCC consent order addresses the Bank’s VA refinance loan activity between 2022 and 2024. Among other allegations, which the Bank neither admitted nor denied, the OCC asserts that:

• “The Bank sent consumers millions of deceptive advertisements that stated the consumer had “available funds” and instructed the consumer to contact the Bank. In reality, the advertisement was a solicitation for a VA cash-out refinance loan and a new loan was required to access the funds.” No copies of the advertisements are included, and no other details of the advertisements are provided in the consent order.
• “Certain Bank employees made deceptive statements to consumers indicating that the Bank maintained a special relationship with the VA.” No details of the statements are provided in the consent order.
• “Certain Bank employees made deceptive statements to consumers regarding the terms of the VA cash-out refinance loans that created the impression that the consumer’s interest rate or monthly payment would significantly decrease within a defined time period. However, the cash-out refinance loan was a permanent loan with a fixed interest rate and mortgage payment, and the Bank could not in fact guarantee that the consumers would be able to refinance their loans with the lower interest or monthly payments as stated or implied by Bank employees.”
• “The Bank’s deceptive statements induced consumers to obtain VA cash-out refinance loans, which resulted in certain consumers paying significant origination fees and receiving refinanced mortgage loans with significantly increased interest rates and monthly payments.”

The OCC observes that the “Bank is taking corrective actions to remedy the deficiencies identified in” the consent order.

The consent order does not provide for a specific dollar amount of remediation or any type of penalty. Rather, the consent order provides that within 30 days of the order, and thereafter within 30 days after the end of each quarter, the Bank’s board of directors must submit to the Assistant Deputy Comptroller a written progress report setting forth in detail:

(a) a description of the corrective actions needed to achieve compliance with the order, (b) the specific corrective actions undertaken to comply with the order and (c) the results and status of the corrective actions.

Additionally, within 30 days of the consent order the Bank must submit to the OCC the name of a proposed independent, third-party consultant to plan and oversee the payment of restitution to eligible consumers. Within 60 days of the OCC making a written determination of no supervisory objection to the restitution consultant, the Bank must engage the consultant and submit to the OCC, for review and prior written determination of no supervisory objection, a written methodology prepared by the consultant to identify eligible consumers. The methodology must define the scope of the eligible consumers to be identified by the consultant and include a proposed timeline for the commencement and the completion of the identification of eligible consumers.

After the consultant provides a written report to the Bank that identifies eligible consumers, the Bank must submit to the OCC, for review and prior written determination of no supervisory objection, a written methodology prepared by the consultant to determine the appropriate amount of restitution and to pay restitution to eligible consumers. The methodology may take into consideration any amounts the Bank has previously paid in restitution, apparently referring to the corrective actions already undertaken by the Bank. The methodology must include a proposed timeline for the commencement and completion of the restitution of eligible consumers, and the Bank must pay restitution to eligible consumers in accordance with the methodology, following its receipt of the OCC’s written determination of no supervisory objection.

The OCC expressly reserves its right to assess civil money penalties or take other enforcement actions if the OCC determines that the Bank has continued, or failed to correct, the violations described in the consent order, or that the Bank otherwise is violating or has violated the consent order.

The fact that the OCC and Bank will privately establish the amount and details of the consumer remediation was criticized by the National Consumer Law Center (NCLC). According to a report by LAW360, NCLC senior attorney Andrew Pizor stated “I don’t think there’s any legitimate reason for this level of secrecy,” and that “[w]e have a right to know that the agencies are doing their job, and if everything they do is secret, we have no way of knowing whether they’re upholding the law.” According to the report Pizer also stated that disclosing aggregate restitution amounts and methodologies “lets other industry players know the consequences for wrongdoing.” The report adds that, addressing the Trump Administration’s approach to regulation, Pizer stated that “[t]here’s just been a pattern of very weak consumer protection, which basically sends a message to most of the financial services industry that they can get away with a lot, and no one’s looking over their shoulder.”

Interestingly, the CFPB VA refinance loan consent orders noted above occurred during the first Trump Administration. While the CFPB in its recent Workforce Reduction Plan stated that providing redress to servicemembers, veterans and their families is a priority, which is a common theme of the second Trump Administration, whether the CFPB will engage in the same oversight of VA loan refinance activity that it did in the first Trump Administration remains to be seen.