The CFPB continues to crack down on deceptive conduct by mortgage lenders, as evidenced by a recent action against California-based RMK Financial Corporation. According to an April 8, 2015 consent order issued by Richard Cordray, Director of the Consumer Financial Protection Bureau, RMK Financial sent print mailers to more than 100,000 consumers, falsely implying that its advertised mortgages were endorsed or sponsored by the U.S. Department of Veterans Affairs (VA) and the Fair Housing Administration (FHA). Director Cordray noted that, among other things, the mailers contained VA and FHA names, logos, and seals; listed telephone numbers for the “VA Interest Rate Reduction Department” and the “FHA Streamline Department” – departments that did not actually exist within RMK Financial; and referred to its FHA mortgages as a “distinctive program offered by the U.S. Government.” In addition, the outside of the VA mailers cited the U.S. Code, threatening fines and imprisonment for tampering, and the outside of the FHA mailers announced “FHA Benefits” and contained an image of the Statue of Liberty.
The CFPB also concluded that RMK Financial’s misrepresentations violated sections 1031 and 1036 of the Consumer Financial Protection Act of 2010, section 626 of the Omnibus Appropriations Act of 2009, and its implementing regulation, Regulation N, also known as the Mortgage Acts and Practices Rule (MAP Rule). The CFPB also found that the mailers, besides containing deceptive misrepresentations, also failed to disclose four elements required by the Truth in Lending Act (TILA) and its implementing rule, Regulation Z: (1) the fact that the advertised products were adjustable rate mortgages; (2) the applicable variable interest rates over the life of the loan and the periods of time when those interest rates would apply; (3) the amount of each payment that would apply over the term and the period of time during which each payment amount would apply; and (4) the fact that the estimated payment amount did not include any taxes or insurance that would apply. Besides being ordered to cease its deceptive advertising, RMK Financial was ordered to pay a civil penalty of $250,000. In addition, RMK Financial must submit a “comprehensive compliance plan,” including “detailed steps for addressing each action” required by the Order and “specific timeframes and deadlines” for implementing those steps, and must submit a report next year, demonstrating its compliance with the Order.
A copy of the April 8 Order is available at http://www.consumerfinance.gov/f/201504_cfpb_consent-order_rmk-financial-corporation.pdf.