In announcing the Trustmark case, Garland also revealed a new DOJ program to combat what he called “modern day redlining.” Under the “Combating Redlining Initiative,” which will be run through the Civil Rights Division’s housing and civil enforcement section, will look for violations in concert with the states and other financial regulatory agencies, placing a renewed emphasis on non-depository lenders. “We will spare no resource to ensure federal fair lending laws are vigorously enforced,” the Attorney General said.
The Trustmark case is just the tip of the proverbial iceberg. Since Biden took up residence in the White House, federal regulators have been particularly active in the mortgage sphere. In one case, for example, the CFPB took action against the American Advisors Group for deceptively marketing reverse mortgages. Actor Tom Selleck may trust AAG, but the government does not.
According to an analysis by the Inside Mortgage Finance newsletter group, gripes against mortgage-related outfits by seniors increased by more than a third during the first half of this year. Those with issues about their reverse loans were up 12.3 percent. And if the charges against AAG are on the money, it’s no wonder complaints are up so significantly.
In its marketing materials, the company said it “makes every attempt to ensure the home’s value information provided is reliable.” But the CFPB says, in fact, AAG made no attempt to do so. Consequently, consumers were lured into negotiations with the Irvine, Calif.-based company on the basis of inflated value.
Not only that, but the CFPB also said AAG violated a 2016 administrative consent order that addressed the company’s deceptive advertising. A proposed consent order would prohibit AAG from future unlawful conduct, and require the company to pay $173,400 in consumer redress and a $1.1 million civil money penalty.
For what it’s worth, IMF also reported that complaints against the three major credit reporting companies – Equifax, Trans Union and Experian – topped the list of complaints to the CFPB in the third quarter. Squawks about credit reporting and credit repair services accounted for nearly two-thirds of all the complaints the agency took in during the period.
Meanwhile, lenders should hope they haven’t been doing business with Critical Resolution Mediation or Seed Consulting in collecting delinquent accounts. Both have come under the FTC’s eagle eye, CRM because it posed as police and attorneys to threaten consumers over fake debts – debts they didn’t owe -- and Seed for, among other things, opening multiple credit card accounts in the names of unwary consumers. Remember the old adage: You are known by the company you keep.
In Seed’s case, the outfit pitched training companies as a way to get funding to people who wanted to start a business or become real estate investors. But according to the FTC complaint, rather than provide any funds, the company charged people $3,000 or more to apply for numerous credit cards, a practice known as credit stacking. It told consumers they would make enough after they completed their training to pay off their cards, which they used to pay for the programs sold by the training companies.
This kind of thing smacks of how “fly-by-night” – in this case, they tend to advertise on late-night television – real estate gurus hawk their training programs; you know the ones that promise that you, too, can get rich quick by following our training program and investing in our how-to-do-it manuals. It also reminds this writer of a certain so-called university named after an ex-president who promised to teach you how he made it big in real estate. I don’t know whether TU actually used the tactics described above – it wasn’t charged with that that crime, so it probably didn’t – but I never saw a class on how to file for bankruptcy more than a few times. Ah, but I digress.
Speaking of the late-night hawkers who role out numerous “successful investors” who used their classes to score big in real estate, the FTC has taken what it calls “a big step” to make sure such endorsements are on the up-and-up by notifying more than 700 companies, advertisers, retailers, et al, that statements must reflect actual experience and opinions of real people. Any deceptive practice can be fined up to $43,792 per violation.
The FTC has sent a similar notice to for-profit institutions of higher learning, but the warning also applies to lenders, agents, brokers and anyone else in the housing and mortgage business who used paid spokespersons. “Fake reviews and other forms of deceptive endorsements cheat consumers and undercut honest businesses,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Advertisers will pay a price if they engage in these deceptive practices.”
The watchdog agency also updated its rules recently regarding the data safeguards financial institutions muct put in place to protect their customers’ data in case of a breach or cyberattack. The updated Safeguards Rule requires non-banking financial institutions such as mortgage brokers, motor vehicle dealers and payday lenders to develop, implement and maintain a comprehensive security system to keep their customers’ information safe. Entitites which collect consumer information “have a responsibility” to protect it, Levine said.
At the same time, the FTC adopted largely technical changes to its authority under a separate Gramm-Leach Bliley Act rule which requires financial institutions to inform customers about their information-sharing practices and allow customers to opt out of having their information shared with certain third parties.
Servicers also are coming under increased examination. The OCC has sanctioned Cenlar, the nation’s second largest, for “unsafe or unsound” practices that do not support the scope of its $900 billion sub-servicing portfolio. Under the consent order, the New Jersey outfit cannot take on any new sub-servicing clients with the OCC’s explicit approval.
The consent order, to which Cenlar voluntarily agreed, reads in part: “The bank has failed to take timely corrective actions to remediate its deficiency and unsafe or unsound practices.” The agency requested that the federal savings bank develop efficient default operations and IT control programs, and the institution said it is working with the OCC to do so.
Even Department of Housing and Urban Development and some states are getting in on the act. And fintech lenders aren’t immune from examination, either.
HUD has reached an agreement with the owner of a Phoenix apartment complex that failed to provide an adequate language services for a resident from Chad with limited English skills. The project receives funding from HUD, which said “having access to important information related to federally-financed housing, such as details about application procedures and the terms of lease agreements, shouldn’t depend on being fluent in English.”
Meanwhile, New York has joined Illinois and Massachusetts is subjecting non-depositories to state-mandated Community Reinvestment Act requirements. And Chicago-based Enova International says the CFPB is having another look at its payday and consumer loan business. In 2019, the company paid $3.2 million to settle with the CFPB after it debited some customers bank accounts without their authorization and failed to honor some approved credit extensions.