On 7/24/2020, the CFPB issued consent orders against two California-based mortgage lenders: Sovereign Lending Group, Inc. (Sovereign) and Prime Choice Funding, Inc. (Prime Choice). According to the CFPB, both companies had violated UDAAP by mailing consumers advertisements for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or lacked required disclosures. The consent orders require the companies to pay civil money penalties and impose requirements to prevent future violations.
Specifically, the CFPB stated this regarding the consent orders for each company:
“The Bureau found that Sovereign and Prime disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures. For example, Sovereign and Prime Choice advertisements misrepresented the credit terms of the advertised mortgage loan by stating credit terms that the company was not actually prepared to offer to the consumer. Sovereign and Prime Choice advertisements misleadingly 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 Bureau 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, as required by Regulation Z. Sovereign advertisements made false claims about consumer’s existing loans, and falsely implied that the consumer could address these problems by obtaining a loan from Sovereign. Sovereign and Prime Choice advertisements also failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan and the period during which certain interest rates would apply. Further, Prime Choice advertisements created the false impression that they contained a property assessment as well as misleading comparisons between hypothetical credit terms and the terms of the advertised product.
The consent order against Sovereign requires Sovereign to pay a civil penalty of $460,000. The consent order against Prime Choice requires Prime Choice to pay a civil penalty of $645,000. The consent orders also impose injunctive relief to prevent future violations, including requiring the companies to bolster their compliance functions by designating an advertising compliance official who must review their mortgage advertisements for compliance with mortgage advertising laws prior to their use; prohibiting misrepresentations similar to those identified by the Bureau; and requiring the companies to comply with certain enhanced disclosure requirements to prevent them from making future misrepresentations.”
The full consent order against Sovereign can be found here.
The full consent order against Prime Choice can be found here.