CFPB Fines 3 Lenders for Implying Government Affiliation


Three mortgage lenders are facing civil action for false and misleading
advertising.  The three were identified
in a joint Consumer Financial Protection Bureau (CFPB) and Federal Trade
Commission (FTC) sweep of about 800 newspaper and internet ads and U.S. mail
solicitations.  Most of the ads were
randomly selected for review although some came to the agencies’ attention from
consumer complaints.

The three are all accused of misleading consumers with advertisements
implying U.S. government approval of their products.  All Financial Services is being sued in the
U.S. District Court for Maryland and administrative consent orders have been
filed against Flagship Financial Group, and American Preferred Lending.

The most serious charges are levied against All Financial Services, a
mortgage broker and lender operating in Maryland, New Jersey, Pennsylvania, and
Washington, DC.  All Financial offers
several kinds of mortgages but its alleged infractions center on its promotion
of reverse mortgages.  CFPB says that
from November 2011 to December 2012 the company misrepresented its advertising
as coming from or affiliated with a government entity.  In one example CFPB said that company sent out
200,000 mailers carrying an eagle resembling the Great Seal of the United
States and headlined “Government Lending Division” and “Housing and Recovery
Act of 2008 Eligibility Notice.” 

Consumers were also told that the FHA program was time-limited, that no
monthly payments “whatsoever” would be required “as long as you and your spouse
live in the home.”  Both pieces of
information were, at the time, untrue.

CFPB’s complaint is seeking a civil fine and a permanent injunction to halt
All Financial’s alleged illegal activities.

In the consent order with Utah-based Flagship
Financial Group CFPB states that from August 2011 to December 2012 the company
sent mailings implying that its VA loans were endorsed or sponsored by the U.S.
Department of Housing and Urban Development (HUD).  Over one million missives were mailed claiming
the company was “HUD-Approved” and including text about federal legislation and
that “HUD-Approved Flagship Financial Group has been directed to get VA
homeowners instant relief by lowering their monthly payments.”  

 The company
also sent tens of thousands of mailers advertising mortgage credit products
that looked like a government notice. For example, one mailing had a heading,
consumers to call their “assigned FHA loan specialist,” and obscured the
company’s name as the source of the advertisements.

With today’s action, the company, which
is licensed as a mortgage broker or lender in 35 states, will be prohibited
from falsely implying a government affiliation in future advertisements. It
will also pay a civil penalty of $225,000.

Similar charges were made in the
consent order with American Preferred Lending, a mortgage lender and broker in
California and loan originator in Florida. 
CFPB says that from August 2011 to February 2013 the company sent out
more than 100,000 mailings with an FHA-approved lending institution logo,
obscuring the company as the source of the mail, and referring consumers to the
website These factors combined gave the impression that the ads
were from the U.S. government, or an entity affiliated with the government.
Although the company is authorized to originate VA and FHA loans, it is not an
agent of, or affiliated with, the U.S. government.

Under the consent order American
Preferred will be prohibited from falsely implying a government affiliation in
future ads and will pay a civil penalty of $85,000, an amount CFPB said
reflected the financial condition of the lender. 

“Each of these companies has misled
consumers with false advertising,” said CFPB Director Richard Cordray. “The
U.S. government is very serious about stopping companies from falsely claiming
federal authority, and we are particularly concerned about false or deceptive
statements made in advertisements about reverse mortgages that target older

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