Today, the Consumer Financial Protection Bureau (Bureau) issued a consent order against ClearPath Lending, Inc. (ClearPath), a California corporation that is licensed as a mortgage broker or lender in about 22 states. ClearPath offers and provides mortgage loans guaranteed by the United States Department of Veterans Affairs (VA).
ClearPath’s principal means of advertising VA-guaranteed loans is through direct-mail advertisements sent primarily to United States military servicemembers and veterans. The Bureau found that ClearPath sent consumers mailers for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or that lacked required disclosures, in violation of the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts and practices, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. The consent order requires ClearPath to pay a civil money penalty and imposes requirements to prevent future violations.
Today’s action is the eighth case stemming from a Bureau sweep of investigations of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages. The Bureau commenced this sweep in response to concerns about potentially unlawful advertising in the market that the VA identified. This ongoing sweep of investigations reflects the Bureau’s commitment to enforcing the laws that ensure the financial marketplace is fair and accurate for all consumers, including servicemembers, veterans, and surviving spouses whom VA-guaranteed mortgages are designed to benefit.
The Bureau found that ClearPath disseminated advertisements that contained false, misleading, and inaccurate statements or that failed to include required disclosures.
For example, ClearPath 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, including misrepresenting the annual percentage rate applicable to the advertised mortgage.
ClearPath also misleadingly advertised rates or payments as fixed, even though the advertised mortgage was an adjustable-rate mortgage or the payment was not fixed for the indicated duration.
ClearPath also misrepresented the existence, nature, or amount of cash or credit available to the consumer, and the existence or amount of fees or costs to the consumer, in connection with the advertised mortgage.
The Bureau also found that ClearPath advertisements created the false impression that ClearPath was affiliated with the VA.
ClearPath advertisements also failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the number and time period of payments associated with the consumer’s repayment obligations over the full term of the loan.
Finally, the Bureau found that ClearPath advertisements used the name of the consumer’s lender in a misleading way by not adequately disclosing ClearPath’s name and the fact that it was not associated with, or acting on behalf of, the consumer’s current lender, as required by Regulation Z.
The consent order against ClearPath requires ClearPath to pay a civil penalty of $625,000. The consent order also imposes injunctive relief to prevent future violations, including requiring ClearPath to bolster its compliance functions by designating an advertising compliance official who must review its mortgage advertisements for compliance with mortgage advertising laws prior to their use; prohibiting misrepresentations similar to those identified by the Bureau; and requiring ClearPath to comply with certain enhanced disclosure requirements to prevent future misrepresentations.