Government cracking down on misleading mortgage ads
It’s almost a daily occurrence. My mailbox is stuffed with offers to lower my mortgage interest rate. Many of the mailers indicate I’m already approved, or that the offer is coming directly from the government, or my existing lender.
Then I get my glasses and read the fine print. As you might expect, none of the claims are true. The mailers are cleverly designed to deceive. As I have stated in previous columns, the art of stretching the truth in mortgage advertising is a time-honored tradition.
But the newly-created Consumer Financial Protection Bureau (CFPB) has taken the position that, contrary to time-honored tradition, it’s not OK to attempt to fool the public.
On April 9, the CFPB took action against a California-based mortgage lender for their deceptive practices. According to the agency, Majestic Home Loans mailed print ads to more than 100,000 consumers using the logos and names of the Department of Veterans Affairs and the Federal Housing Administration in a way that implied the FHA or VA either sent the ads or endorsed the company’s products. The CFPB ordered them to cease those practices and pay a civil penalty of $250,000.
“Deceptive advertising has no place in the mortgage marketplace, and the Bureau will continue to take action against companies that mislead consumers with false claims of government affiliation”, said CFPB Director Richard Cordray. “Today’s action sends a clear message that misleading consumers is illegal, unacceptable, and will not be tolerated.”
Among the consumers who received the ads were “tens of thousands” of veterans and service members, according to the CFPB. The ads instructed customers to call the “VA Interest Rate Reduction Department” at a phone number that actually belonged to Majestic Home Loans. According to the CFPB, the company also lied about interest rates, and whether the loans were fixed or adjustable. When consumers called, Majestic employees stated that the company was endorsed by the FHA or VA.
Based on my experience, Majestic’s ads and practices were pretty typical. Perhaps they got nailed only because someone bothered to bring it to the CFPB’s attention.
I’ve not always been a fan of the CFPB. They’ve caused our industry a lot of grief with their draconian rules. But I am in agreement with them on this. It started me thinking about the fact that we are immersed in a sea of (for want of a better term) BULL**** when it comes to advertising claims. It’s so rampant that we don’t EXPECT truth or accuracy. That’s a sad state of affairs.
Shouldn’t we start challenging the status quo and DEMANDING fair and accurate advertising? I applaud the CFPB for taking a stand (although I realize that scammers will ignore the rules or find loopholes through which they can squeeze. But it’s a start).
So if you ever get mailers that represent:
1. that the sender is affiliated with any governmental entity,
2. that the product relates to a government benefit, or is endorsed, sponsored by, or affiliated with a government program,
3. That uses formats, symbols, or logos that resemble those of such entity, organization or program,
4. That the offer is being made on behalf of your current mortgage lender,
5. That you have been pre-approved or guaranteed for any product
6. That there are no costs or fees
Remember that all of those statements are illegal.
I frankly don’t recall EVER receiving a mortgage solicitation that didn’t make illegal statements. In the past, I just tossed them in the recycling bin. But if we want to discourage bad behavior, we must have consequences for the worst offenders. I have never been victimized by deceptive mortgage advertising, but I would bet that we all know people who have. The unhappy truth is that deceptive advertising and predatory practices are effective, at least in the short run. That’s why companies keep doing it. And seniors seem too often to be the victims.
I invite you to send some of the solicitations YOU receive in the mail or email, and just for fun, I’ll highlight every violation they make. We’ll pick the worst offender, and send them to the CFPB!