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U.S. consumer watchdog sues mortgage companies over false ads
February 12, 2015 / 7:57 PM / 3 years ago

U.S. consumer watchdog sues mortgage companies over false ads

WASHINGTON, Feb 12 (Reuters) - The top U.S. consumer protection regulator filed charges against three mortgage companies on Thursday, accusing them of misleading the public through false advertisements that implied their products were government approved.

The Consumer Financial Protection Bureau said that its three enforcement actions stem from a joint compliance “sweep” with the Federal Trade Commission that looked at 800 randomly selected mortgage ads in newspapers, the Internet and direct mail solicitations.

The CFPB said that two of the lenders, Flagship Financial Group and American Preferred Lending, have agreed to settle the matter and pay $225,00 and $85,00 penalties, respectively.

A third lender that offers reverse mortgages, All Financial Services in Maryland, is fighting the charges in a federal court.

Representatives from All Financial Services and Flagship Financial Group of Utah could not be immediately reached for comment.

A man who answered the phone at American Preferred Lending in California said the company had no comment on the settlement.

“Each of these companies has misled consumers with false advertising,” said CFPB Director Richard Cordray, in a statement.

“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 Americans.”

A 2011 mortgage rule prohibits firms from making misleading claims in their ads.

In the case of All Financial Services, the CFPB alleges that between November 2011 and December 2012, it deceived potential customers by claiming the source of its ads was affiliated with a government entity.

The CFPB also said it sent mailers to about 200,000 consumers about its reverse mortgages that had an eagle resembling the Great Seal of the United States.

The CFPB said the other two companies also sent out mail with similar types of misleading information.

Flagship, for instance, advertised it was “HUD-approved.”

Reporting by Sarah N. Lynch; Editing by Cynthia Osterman

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