$260,000 money penalty set against mortgage firm that targeted servicemembers, vets

A mortgage company licensed in California was hit with a $260,000 civil money penalty under a consent order Wednesday for allegedly deceptive loan advertisements targeting servicemembers and veterans, the consumer financial protection agency said.

In a release, the Consumer Financial Protection Bureau (CFPB) said the consent order names PHLoans.com, Inc., a California corporation that is licensed as a mortgage broker or lender in about 11 states. The bureau said the firm, known until at least April 2019 as Pacific Home Loans, offers and provides mortgage loans guaranteed by the United States Department of Veterans Affairs (VA). Its principal means of advertising VA-guaranteed loans is through direct-mail advertisements sent primarily to United States military servicemembers and veterans.

The bureau said the firm violated 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 bureau said that PHLoans:

  • misrepresented in its advertisements 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 the payment amount applicable to the advertised mortgage and the nature or amount of cash available to the consumer in connection with the advertised mortgage;
  • made misrepresentations about the existence and amount of fees or costs to the consumer in connection with the advertised mortgage;
  • failed in its advertisements 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 money penalty, the consent order imposes injunctive relief to prevent future violations. For example, it requires PHLoans 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; prohibits misrepresentations similar to those identified by the bureau; and requires PHLoans to comply with certain enhanced disclosure requirements to prevent future misrepresentations.

The CFPB said Wednesday’s action is the fourth case stemming from a bureau sweep of investigations of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages. “The Bureau commenced this sweep in response to concerns about potentially unlawful advertising in the market that the VA identified,” it said.

PHLoans consent order

Other recent orders:

Sovereign Lending Group, Inc.

Prime Choice Funding, Inc.

Go Direct Lenders, Inc.