CFPB Orders Mortgage Company To Pay $2M Penalty For Deceptive Advertising & Kickbacks
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The CFPB announced today that it took action against the Maryland-based company that allegedly deceived consumers about a veterans’ organization’s endorsement of their products and participated in a scheme to pay kickbacks for customer referrals.
According to the CFPB complaint [PDF], the company’s primary business is originating refinance mortgage loans guaranteed by the Veterans Benefits Administration.
The loans are available exclusively to servicemembers, veterans, and their surviving spouses and are mainly advertised through direct mail campaigns.
The CFPB alleges that between July 2011 and July 2014, NewDay sent over 50 million mortgage solicitations by postal and electronic mail to members of a veterans’ organization that the company had agreed to pay “lead generation fees” to.
NewDay also paid a $15,000 monthly licensing fee to the broker company that facilitated the agreement with the veterans’ organization. As part of this arrangement, NewDay was named the “exclusive lender” of the veterans’ organization.
NewDay stated in the mailings that this title was based on its high standards for service and excellent value and did not disclose its financial relationship with the organization.
The CFPB charges that the company’s failure to disclose the relationship constituted a deceptive act or practice, which violates the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
Under the CFPB’s enforcement action, NewDay must end its deceptive marketing practices, cease deceptive endorsement relationships and end kickbacks.
The company must also pay a $2 million civil penalty to the CFPB’s Civil Penalty Fund.
CFPB Takes Action Against NewDay Financial for Deceptive Mortgage Advertising and Kickbacks [CFPB]
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