Listen to this post

On February 23, the CFPB issued a consent order penalizing an auto finance company for allegedly violating the financial rights of military families and other consumers in providing auto title loans. The CFPB found that the company violated the Military Lending Act by extending prohibited title loans and charging interests rates nearly three times greater than the 36% annual interest rate cap. Pursuant to the consent order, the company is required to provide redress payments to consumer in the amount of $5.5 million, implement and maintain robust internal controls to prevent repeat offenses, and pay a $10 million fine.

Similarly, on February 27, the CFPB announced that it had taken enforcement action against a California mortgage broker which allegedly engaged in a pattern of deceptive mortgage advertising practices, including sending advertisements to military families that led the recipients to believe the company was affiliated with the U.S. government. Specifically, the CFPB alleged that the mortgage broker engaged in the following illegal activities:

  • Tricked military families about the government’s role in sending the advertisements or providing the loans by misrepresenting that it was affiliated with the VA or the FHA.
  • Deceived borrowers about interest rates, illegally advertised unavailable credit terms, and used the name of the homeowner’s current lender in a misleading way.
  • Falsely misrepresented loan requirements and lied about projected savings from refinancing.

Pursuant to a consent order, the mortgage broker is permanently barred from engaging in activities relating to the mortgage lending industry and must pay a $1 million penalty. The CFPB noted that the severity of the sanction was in part a result of the mortgage broker continuing to engage in the allegedly illegal activities despite being the subject of a similar order back in 2015.

Putting it into Practice: These enforcement actions highlight the CFPB’s continuing concern regarding deceptive advertising practices targeting military service members and their families, as evidenced by various warnings the CFPB has issued to consumers regarding VA home loan scams dating back to July of 2021. More broadly, these enforcement actions underscore concerted regulatory efforts to deter government and business impersonator scams, such as recent rulemaking by the FTC. The CFPB also recently proposed a registry to detect repeat offenders in the financial marketplace. Companies advertising loans and other financial services to consumers should be aware that federal regulators are acutely focused on, and willing to hand down severe penalties for, any repetitive or otherwise deceptive practices targeting military families.