John Zasada, Compliance Consulting Director, Financial Institutions Group

On October 26, 2020, the Consumer Financial Protection Bureau (CFPB) issued a Consent Order against Low VA Rates, LLC (Low Rates) for direct-mail mortgage advertising violations. Low Rates was ordered to pay a civil money penalty of $1,800,000. The 51-page consent order is similar to the previous eight consent orders issued to entities advertising VA-guaranteed mortgages. So far, $4.4 million in civil money penalties has been assessed for mortgage advertising compliance violations.

Low Rates’ advertisements promoted specific credit terms, such as a low APR, that it could not and would not ultimately offer to consumers. For example, Low Rates sent 1,141,690 mailers to consumers that prominently referred to a 1.75% fixed simple annual interest rate. The mailer used rhetorical questions to advertise a 1.75% fixed rate: “Does your VA loan have a fixed rate of over 1.75%?” and “Why stay at a rate that is higher than 1.75%?” and “These low rates can’t last long!” In fact, Low Rates was not prepared to offer a 1.75% fixed rate, which the mailer’s fine print confirmed: “we do not have fixed interest rates at 1.75% currently.”

Low Rates sent 151,675 mailers to consumers that advertised “cash-out” credit terms that Low Rates did not actually offer. The advertisement stated the borrower could “take $20,000 cash-out for only $87.48 per month!” In fact, obtaining any cash-out amount against the consumer’s home equity was possible only if the consumer had an existing mortgage and refinanced the entire amount owed on that mortgage as part of a cash-out refinance mortgage, resulting in a total monthly payment larger than $87.48.

Low Rates violated Regulation Z, as well. Their advertisements stated a period of repayment but failed to include required triggered disclosures.  They also stated simple annual interest rates more conspicuously than the APR.

If you have questions related to advertising compliance, contact Doeren Mayhew’s regulatory compliance specialists.