Firm slapped with $150k fine for false, misleading ads about guaranteed loans for veterans

Mailing advertisements with false, misleading and inaccurate statements about guaranteed loans for veterans will cost a California company $150,000 in fines, the federal consumer financial protection agency said Friday.

The civil money penalty announced by the Consumer Financial Protection Bureau (CFPB) against Go Direct Lenders, Inc., of Sherman Oaks, Calif., was contained in a consent order issued by the agency.

According to a release from the CFPB, Go Direct sent consumers in 11 states more than 700,000 mailers for Veterans Administration (VA)-guaranteed mortgages that CFPB said “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 mailers were sent from March 2017 to April 2019. The mailings stopped in 2019, the agency said, after the bureau issued a civil investigative demand (CID) in April of that year.

In describing the actions Go Direct took, the agency said the 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 advertising a lower annual percentage rate than it was prepared to offer.

“Go Direct also made misrepresentations about the applicable fees in connection with the advertised mortgage,” the bureau stated. “Go Direct advertisements misleadingly described variable-rate loans as ‘fixed’ rate loans, when in fact the rate was adjustable and could increase over time. Go Direct advertisements falsely stated or implied that an appraisal, assets, and income documentation were not required to qualify for certain loans and that consumers with FICO scores as low as 500 would qualify for the advertised rates.”

The bureau said the advertisements also falsely represented that Go Direct had records showing that the value of the consumer’s property had increased over the past year by a specific percentage. It said the advertisements “created the false impression that Go Direct was affiliated with the government by using words, phrases, images, or design characteristics that are associated with the VA or the Internal Revenue Service. Further, Go Direct advertisements failed to properly disclose, when required by Regulation Z, credit terms for the advertised mortgage, such as the consumer’s repayment obligations over the full term of the loan.”

In addition to the CMP, the bureau said the consent order imposes injunctive relief to prevent future violations. That includes requiring Go Direct 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 Go Direct to comply with certain enhanced disclosure requirements to prevent future misrepresentations.”

In its release, the bureau made a point of noting that the action against Go Direct is the third taken by the agency against mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages. The agency said it took actions in July against Sovereign Lending Group, Inc., and Prime Choice Funding, Inc., both California corporations.

Consent order against Go Direct