United States: CFPB Targets Mortgage Online Advertising: Lead Generation Lessons

The Consumer Financial Protection Bureau ("CFPB") has entered into a consent order under which, Amerisave Mortgage Corporation, an affiliate, and the owner of both companies, agreed to pay a total of $20.8 million to settle allegations of deceptive advertising and illegal lending practices.  The Consent Order reflects the CFPB's continued focus on mortgage lending and online advertising practices.  The order also provides a window into potential pitfalls to avoid when advertising mortgages online. 

CFPB's Investigation

The CFPB investigation of Amerisave covered activities from 2010-2014.  Amerisave advertised its interest rates and terms using online banner ads and searchable rate tables on third-party websites.  The CFPB alleged that the lender posted inaccurate rates on these banner ads and rate tables, inducing consumers to pursue a mortgage with Amerisave.  Moreover, the CFPB alleged that when consumers were directed to the lender's own website, the lender gave consumers quotes based on an 800 FICO score, even where consumers provided lower self-reported scores on the third-party website that led them to the lender.  According to the CFPB this resulted in Amerisave offering many consumers misleadingly low quotes.  In addition, the CFPB alleged that the lender required payment authorization before receiving a Good Faith Estimate and referred appraisal orders to an affiliated company without disclosure.

The CFPB found:

• Deceptively advertised low interest rates that were not available.  In its Consent Order, the CFPB found that this practice was deceptive under the Consumer Financial Protection Act ("CFPA") and the Mortgage Acts and Practices ("MAP") Rule.
• Locked consumers in with costly up-front fees in violation of the Truth in Lending Act ("TILA") and the Real Estate Settlement Procedures Act ("RESPA").
• Failed to properly disclose its affiliate relationship in violation of RESPA.
• Charged unfairly inflated prices for services through its affiliate in violation of the CFPB.

The CFPB's Consent Order requires Amerisave, its affiliate, and its principal to take the following actions:

• Pay $14.8 million in consumer refunds.
• Stop advertising unavailable mortgage rates.  The order requires that the lender:
  • Ensure that it will not engage in deceptive mortgage advertising practices.  Those practices include, but are not limited to, advertising unavailable rates on third-party searchable rate tables, advertising deceptive rates in its banner ads, and giving consumers mortgage quotes based on an undisclosed 800 credit score. 
  • If the majority of consumers who applied for loans with the lender during the previous calendar quarter would not qualify for the rate and discount point combination advertised in display and banner ads, then it is required to make specific disclosures of parameters related the advertised rates.
  • Implement a quality control program and retain an independent consultant to review its advertising practices
• No longer charge illegal fees.
• Pay $6 million in fines to the CFPB's Civil Penalty Fund.

Third-party marketers, including online lead generators, and mortgage lenders and brokers need to be prepared to respond to increased scrutiny.

A copy of the CFPB's Consent Order is available here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.