ClearPath Lending, Inc.
Documents in this case
- Consent order · · 52 p.
- Stipulation · · 5 p.
Case summary
On September 14, 2020, the Consumer Financial Protection Bureau (Bureau) issued a consent order against ClearPath Lending, Inc. (ClearPath), a California corporation that is licensed as a mortgage broker or lender in about 22 states. ClearPath offers and provides mortgage loans guaranteed by the United States Department of Veterans Affairs (VA). ClearPath’s principal means of advertising VA-guaranteed loans is through direct-mail campaigns sent primarily to United States military servicemembers and veterans. The Bureau found that ClearPath sent consumers mailers for VA-guaranteed mortgages that 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. Specifically, ClearPath sent consumers numerous advertisements for VA-guaranteed mortgages that, among other things, misrepresented the credit terms of the advertised mortgage and failed to include disclosures required by Regulation Z. The consent order requires ClearPath to pay a $625,000 civil money penalty and imposes requirements to prevent future violations.
This action stems from a Bureau sweep of investigations of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages.
On July 24, 2020, the Bureau announced consent orders against Sovereign Lending Group, Inc., and Prime Choice Funding, Inc.; on August 21, 2020, the Bureau announced a consent order against Go Direct Lenders, Inc.; on August 26, 2020, the Bureau announced a consent order against PHLoans.com, Inc.; on September 1, 2020, the Bureau announced consent orders against Hypotec, Inc. and Service 1st Mortgage, Inc.; and on September 2, 2020, the Bureau announced a consent order against Accelerate Mortgage, LLC for similar violations. The Bureau commenced this sweep in response to concerns about potentially unlawful advertising in the market that the VA identified.
Press release
Consumer Financial Protection Bureau Settles with Eighth Mortgage Company to Address Deceptive Loan Advertisements Sent to Servicemembers and Veterans
Important documents
Consent order
Stipulation
Case docket
View case filing
Consent order ()
PDF of this document (52 pages)
Page 2
UNITED STATES OF AMERICA BUREAU OF CONSUMER FINANCIAL PROTECTION ADMINISTRATIVE PROCEEDING File No. 2020-BCFP- 0015 In the Matter of:
CONSENT ORDER ClearPath Lending, Inc.
The Bureau of Consumer Financial Protection (Bureau) has reviewed certain direct-mail mortgage advertising activities of ClearPath Lending, Inc. (ClearPath or Respondent, as defined below) and identified violations of § 1026.24 of Regulation Z, 12 C.F.R. § 1026.24, the implementing regulation of the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601–1667f; § 1014.3 of the Mortgage Acts and Practices—Advertising Rule (MAP Rule or Regulation N), 12 C.F.R. § 1014.3; and §§ 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536. Under §§ 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, the Bureau issues this Consent Order. 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 1 of 52
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I.
Overview 1.
ClearPath is a mortgage broker and lender that offers and provides mortgages guaranteed by the United States Department of Veterans Affairs (VA). Occasionally, it has acted as the creditor, providing loans itself; in other situations, it has acted as a broker, arranging for another creditor to provide loans.
2.
ClearPath advertises these mortgage products to consumers through directmail advertising campaigns targeted primarily at United States military servicemembers and veterans.
3.
ClearPath has sent consumers millions of advertisements that violate federal law because of misleading and deceptive statements and inadequate disclosures.
4.
The Bureau brings this action to stop ClearPath from distributing advertisements with misleading and deceptive statements and inadequate disclosures to servicemembers, veterans, and other consumers. II.
Jurisdiction 5.
The Bureau has jurisdiction over this matter under §§ 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565; § 108 of the Truth in Lending Act, 12 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 2 of 52
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U.S.C. § 1607; and § 626 of the Omnibus Appropriations Act of 2009, as amended by § 1097 of the CFPA, 12 U.S.C. § 5538. III.
Stipulation 6.
Respondent has executed a “Stipulation and Consent to the Issuance of a Consent Order,” dated August 27, 2020 (Stipulation), which is incorporated by reference and is accepted by the Bureau. By this Stipulation, Respondent has consented to the issuance of this Consent Order by the Bureau under §§ 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, without admitting or denying any of the findings of fact or conclusions of law, except that Respondent admits the facts necessary to establish the Bureau’s jurisdiction over Respondent and the subject matter of this action. IV.
Definitions 7.
The following definitions apply to this Consent Order: a.
“Advertising Compliance Official” means an individual designated by Respondent as the person responsible for performing the tasks and duties required under Paragraph 107. The Advertising Compliance Official must be a director or senior-level executive (e.g., president, 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 3 of 52
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chief executive officer, chief financial officer, chief operating officer, chief information officer, senior vice president, or managing member) of Respondent, or an individual who reports directly to the president, chief executive officer, managing member, or board of directors of Respondent.
b.
“Clearly and Prominently” means the disclosure must be in a font size of at least 10 points; on the same side of the page as the term, if any, that triggers the disclosure; in print that contrasts with the background on which it appears; presented before the consumer incurs any financial obligation; in an understandable language and syntax; and with nothing contrary to, inconsistent with, or in mitigation of the disclosures used in any communication with the consumer. c.
“Effective Date” means the date on which the Consent Order is issued.
d.
“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Bureau of Consumer Financial Protection, or his or her delegate.
e.
“Exemplar” means an example of an advertisement fully populated with the terms contained in the advertisement as sent, posted, published, or disseminated to a consumer.
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f.
“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against Respondent based on substantially the same facts as described in Section V of this Consent Order.
g.
“Relevant Period” includes from July 1, 2017, to the Effective Date. h.
“Respondent” means ClearPath Lending, Inc., and its successors and assigns.
V.
Bureau Findings and Conclusions The Bureau finds the following:
8.
ClearPath is a California corporation with its principal place of business in Irvine, California.
9.
ClearPath is licensed as a mortgage broker or lender in about 22 states. 10.
ClearPath is a “person,” as defined in the CFPA, 12 U.S.C. § 5481(19), Regulation Z, 12 C.F.R. § 1026.2(a)(22), and the MAP Rule, 12 C.F.R. § 1014.2, because it is a corporation.
11.
During the Relevant Period, ClearPath has been a “covered person” under the CFPA, 12 U.S.C. § 5481(6)(A), because it is a person that engages in offering and providing residential-mortgage loans, which are “consumer 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 5 of 52
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financial product[s] or service[s]” under the CFPA. 12 U.S.C. § 5481(5), (6), (15)(A)(i).
12.
During the Relevant Period, ClearPath has been subject to the MAP Rule because it is a person over which the Federal Trade Commission has jurisdiction under the Federal Trade Commission Act, 15 U.S.C. §§ 41‒58. 12 C.F.R. § 1014.1. The MAP Rule is a Federal consumer financial law. 12 U.S.C. § 5481(14).
13.
ClearPath provides “mortgage credit product[s],” as that term is defined in the MAP Rule. 12 C.F.R. § 1014.2.
14.
ClearPath’s mortgage advertisements are “commercial communications” regarding a term of a “mortgage credit product,” as those terms are defined in 12 C.F.R. § 1014.2.
15.
During the Relevant Period, ClearPath has offered “closed-end credit” in the form of mortgage loans to “consumers,” as those terms are defined in Regulation Z. 12 C.F.R. § 1026.2(a)(10) & (11). 16.
ClearPath’s mortgage advertisements are advertisements for “closed-end credit,” as that term is defined in Regulation Z. 12 C.F.R. § 1026.2(a)(10). 17.
ClearPath offers consumer mortgages, including mortgages guaranteed by the VA.
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18.
ClearPath’s principal means of advertising VA-guaranteed mortgages is through direct-mail advertisements sent to veterans and servicemembers. 19.
Since July 2017, ClearPath has mailed millions of mortgage advertisements to veterans and servicemembers in at least 22 states. 20.
Hundreds of thousands of consumers have received at least one of ClearPath’s direct-mail advertisements, and thousands of consumers have obtained mortgages through ClearPath.
False, Misleading, and Inaccurate Representations
21.
Federal consumer financial law contains numerous provisions banning the use of misleading and deceptive statements in mortgage advertisements. 22.
Despite those prohibitions, ClearPath was responsible for both the content of, and the dissemination of, numerous mortgage advertisements during the Relevant Period that contained false, misleading, and inaccurate statements, as described below.
False, Misleading, and Inaccurate Representations About Cost and Other Credit Terms
23.
Most of ClearPath’s mortgage advertisements stated specific credit terms, such as an interest rate, annual percentage rate (APR), a payment amount, or closing costs.
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24.
By stating specific credit terms in its advertisements, ClearPath represented, expressly or by implication, that it arranged or offered a mortgage with those credit terms.
25.
In fact, ClearPath did not arrange or offer mortgages with the specific credit terms stated in many of those advertisements. 26.
In numerous instances, ClearPath misrepresented the actual credit terms applicable to the mortgages that it would arrange or offer. 27.
Numerous ClearPath mortgage advertisements described mortgages with a simple interest rate and APR combination that, on the date of the advertisement, ClearPath was not actually prepared to offer or arrange. 28.
For example, ClearPath advertisements sent to around 260,000 consumers in November and December 2017 advertised a variable-rate mortgage with a fixed interest of 2.25% for the first three years and an APR of 3.17%. 29.
In fact, the advertised APR was not correct because it did not take into account a reasonably current index for the variable-rate period and required discount points.
30.
The actual APR for this loan, calculated in accordance with Regulation Z and taking into account a reasonably current index and required discount points, was at least 3.516%.
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31.
Accordingly, ClearPath misrepresented the actual APR for loans offered in these advertisements.
32.
Numerous ClearPath mortgage advertisements misrepresented the existence and amount of fees or costs to the consumer. 33.
In another example, ClearPath advertisements sent to around 80,600 consumers in July 2017 stated “NO Lender Fees” in bold font in a box titled “Closing Costs,” along with an advertised APR of 3.17%. 34.
In fact, consumers could not obtain a loan from ClearPath with an APR of 3.17% without paying two discount points at closing. Therefore, the statement “NO Lender Fees” was false.
35.
Certain ClearPath mortgage advertisements misleadingly advertised rates or payments as “fixed” rates or payments, although the mortgage advertised was an adjustable-rate or variable-rate mortgage. 36.
For example, ClearPath advertisements sent to consumers in or around January 2018 used the phrase “30 Year Loan / 3 Year Fixed” next to the advertised payment on the front. In these advertisements, the phrase “Adjustable-Rate Mortgage,” “Variable-Rate Mortgage,” or “ARM” did not appear before the first use of the word “fixed,” nor was it at least as conspicuous as any use of the word “fixed” in the advertisements. 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 9 of 52
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37.
In these advertisements, despite stating in fine print on the reverse side that the offer was for an “adjustable-rate mortgage,” the use of the word “fixed” to refer to a rate or payment was not accompanied by an equally prominent and closely proximate statement of the fact that the rate may vary or the payment may increase after the first three years. 38.
In another example, ClearPath advertisements sent to consumers in or around January 2018 contained a box on the top portion of the advertisement that stated an amount described as “Payment for Next 12 Months” and directly below that box, another box that stated “30 year Fixed” in bold font. The phrase “30 year Fixed” referred to that stated payment amount. 39.
In fact, the payment amount disclosed was not the same for 30 years. The payment amount for the first 12 months included a discounted principal and interest payment plus taxes and insurance and the payment amount for the remaining 348 months would include full principal and interest plus taxes and insurance.
40.
In these advertisements, the phrase “30 year Fixed” was not accompanied by an equally prominent and closely proximate statement of the fact that the payment would increase to a higher fixed amount after the first 12 months. 41.
Numerous ClearPath mortgage advertisements misrepresented the existence, nature, or amount of cash or credit available to the consumer in connection 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 10 of 52
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with the mortgage.
42.
Specifically, ClearPath advertisements sent to around 80,600 consumers in July 2017, advertised both a “VA Streamline” mortgage (also known as an Interest Rate Reduction Refinance Loan) and a “Cash-Out” refinance mortgage. The advertisements stated, “No Equity Required.” The positioning of that statement on these advertisements implied that it applied to both of the advertised products, as shown below.
43.
The “No Equity Required” representation was not accompanied by any statement indicating that it did not apply to both products. 44.
In fact, while equity in the property may not be required to obtain an Interest Rate Reduction Refinance Loan, the consumer must have equity in the property to obtain a cash-out refinance mortgage. 45.
Consumers who received the advertisements described in Paragraphs 27–44 were likely to be misled by them.
46.
The advertisements were also likely to affect consumers’ conduct or decisions with regard to obtaining a loan. PIN Number I Depanment Phone Number l Home Value (866) 328-5957 No Appraisal Required Loan Option otice Regarding Subject Cash-Out with Appra isa I Your Mortgage Rate Reduction Closing Cilsts $20,522 VA treamline o Lender Fees Rate New Monthly Payment Property Address 2.25% $784.45 (3.17% APR') o Equity Required 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 11 of 52
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Misrepresentations About an Affiliation with the Government
47.
Numerous ClearPath mortgage advertisements falsely represented that the sender of the advertisements and the provider of the mortgage product described in the advertisements was, or was affiliated with, the VA. These advertisements were written in the form of a notification letter addressed to the consumer, informing the consumer of his entitlement to and eligibility for certain VA loan benefits—namely, the purported lower payment and rate on a 30-year loan identified in the letter. The letter included the phrases “2017 – Eligibility Notification” and “Benefit Allotment” in its header, and assigned a “VA Loan ID Number” to the consumer’s existing VA loan. The letter stated that ClearPath had “important information regarding your VA loan,” that “records” from the consumer’s city indicated that the consumer had “yet to take advantage of programs sponsored by The Department of Veterans Affairs,” and that the consumer was “entitled to a payment and rate reduction through VA eligibility lending programs.” The letter further stated, “It is important you call our VA Loan Service Center toll free (866) 284- 9875 within 21 business days. By taking action now your next mortgage payment may not be due until April 2018.”
48.
The form of the communication—a notification letter—and the phrases and characteristics described in paragraph 47 implied that the sender of the letter 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 12 of 52
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was the VA or an entity affiliated with the VA and that the purported lower payment and rate listed in the letter were benefits or entitlements being provided directly by the VA or an entity affiliated with the VA, for which the consumer was being notified of his or her entitlement and eligibility. 49.
Those representations were false because ClearPath—the sender of the advertisements and the provider of the mortgage product described in the advertisements—was not affiliated with the VA or any other governmental entity.
50.
Consumers who received the advertisements described in Paragraphs 47–49 were likely to be misled by them.
51.
The advertisements were also likely to affect consumers’ conduct or decisions with regard to obtaining a loan.
Inadequate Disclosures 52.
Most of ClearPath’s mortgage advertisements stated a period of repayment, payment amount, or simple annual rate of interest. Under certain sections of Regulation Z, including § 1026.24(c), (d) and (f), the use of these terms triggers specific disclosure requirements. Many of the advertisements did not include the other disclosures that are required, or did not include them in the manner required.
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53.
Numerous ClearPath mortgage advertisements stated a simple annual interest rate more conspicuously than the APR. 54.
Specifically, ClearPath advertisements described in paragraphs 28–31 stated a simple annual rate of 2.25% in bold font, but the APR was stated below the simple rate in a smaller font with weaker bolding. 55.
Numerous ClearPath mortgage advertisements stated the period of repayment or the amount of a payment, but did not state the number and time period of payments associated with the consumer’s repayment obligations over the full term of the loan.
56.
Specifically, ClearPath advertisements for a variable-rate mortgage sent to around 80,600 consumers in July 2017 stated a payment amount for the first three years of the loan that was based on a discounted, introductory fixed rate of 2.25%, but after the first three years, the payment amount would be based on a variable rate that would adjust annually based on an index and margin, with annual adjustments capped at 1% per year. While the payment amount would likely be higher during the variable-rate period than in the fixed-rate period, these advertisements did not state the number and time period of payments for the variable-rate period. 57.
Numerous ClearPath mortgage advertisements stated a simple annual rate of interest for a loan for which more than one interest rate would apply, but: 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 14 of 52
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(A) for variable-rate transactions, failed to state a rate determined by adding an index and margin, based on a reasonably current index and margin; (B) failed to clearly and conspicuously state the period during which each simple annual rate of interest would apply; or (C) failed to state an accurate APR for the loan because the stated APR was not based on a reasonably current index, and thus, was not correctly calculated under Regulation Z, 12 C.F.R. §§ 1026.17(c) and 1026.22.
58.
For example, ClearPath advertisements for a variable-rate mortgage described in Paragraph 56 stated a simple rate of interest but failed to disclose the rate that would apply to the variable-rate period, as determined by adding a reasonably current index and margin. 59.
Moreover, because these advertisements disclosed an APR that was calculated using an index that was not reasonably current, they failed to disclose an APR that complied with the accuracy standards set forth in 12 C.F.R. § 1026.22(a)(2) and (4).
60.
Numerous ClearPath mortgage advertisements stated the amount of a payment, but failed to state clearly and conspicuously the amount of each payment that would apply over the term of the loan (e.g., for variable-rate mortgages, payments based on the application of the sum of a reasonably current index and margin); the period during which each payment would 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 15 of 52
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apply; or the fact that the advertised payments did not include amounts for taxes and insurance premiums, if applicable, and that the actual payment obligation would be greater.
61.
For example, ClearPath advertisements for a variable-rate mortgage described in Paragraph 56 stated a payment amount based on an introductory rate of 2.25% that would apply for the first three years, but for the variablerate period of the loan, did not disclose a payment amount based on a reasonably current index and margin.
62.
In another example, ClearPath advertisements sent to consumers in 2018 stated a monthly payment amount in large bold font on the front but did not contain an equally prominent and closely proximate statement of the period during which each payment amount would apply. 63.
In another example, over 1.6 million ClearPath advertisements sent to consumers from March 2018 to September 2019 failed to state, clearly and conspicuously, that the payments did not include amounts for taxes and insurance premiums, if applicable, and that the actual payment obligation would be greater.
64.
Numerous ClearPath mortgage advertisements used the name of the consumer’s current lender without disclosing with equal prominence the name of the person making the advertisement and without including a clear 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 16 of 52
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and conspicuous statement that the person making the advertisement was not associated with or acting on behalf of the consumer’s current lender. 65.
For example, ClearPath advertisements sent to consumers in or around January 2018 stated the name of the consumer’s current lender in bold font on the upper left of the advertisement, and in bold and all caps on the envelope. While ClearPath’s name appeared on the envelope and on the front of the advertisements, it was in much smaller font than the current lender’s name. The advertisements also failed to include a clear and conspicuous statement that the person making the advertisement was not associated with or acting on behalf of the consumer’s current lender. VIOLATIONS OF REGULATION Z Unavailable Credit Terms, 12 C.F.R. § 1026.24(a) 66.
Under 12 C.F.R. § 1026.24(a), “[i]f an advertisement for credit states specific credit terms, it shall state only those terms that actually are or will be arranged or offered by the creditor.”
67.
ClearPath violated § 1026.24(a) because, as described in Paragraphs 23–44, numerous ClearPath advertisements for credit stated specific credit terms other than those terms that actually were or would be arranged or offered by the creditor.
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Interest Rates Other than the APR, 12 C.F.R. § 1026.24(c) 68.
Under 12 C.F.R. § 1026.24(c):
If an advertisement states a rate of finance charge, it shall state the rate as an “annual percentage rate,” using that term. If the annual percentage rate may be increased after consummation, the advertisement shall state that fact.… If an advertisement is for credit secured by a dwelling, the advertisement shall not state any other rate [other than the APR], except that a simple annual rate that is applied to an unpaid balance may be stated in conjunction with, but not more conspicuously than, the [APR].
69.
ClearPath violated § 1026.24(c) because, as described in Paragraphs 53–54, numerous ClearPath mortgage advertisements stated a simple annual interest rate more conspicuously than the APR.
Terms of Repayment, 12 C.F.R. § 1026.24(d) 70.
Under 12 C.F.R. § 1026.24(d)(1), if an advertisement sets forth any of the four specified triggering terms (the amount or percentage of any downpayment, the number of payments or period of repayment, the amount of any payment, or the amount of any finance charge), the advertisement must also state, among other things, “[t]he terms of repayment, which reflect the repayment obligations over the full term of the loan, including any balloon payment.” 12 C.F.R. § 1026.24(d)(1), (2)(ii). 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 18 of 52
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71.
ClearPath violated § 1026.24(d) because, as described in Paragraphs 55–56, numerous ClearPath mortgage advertisements set forth the period of repayment or the amount of any payment, which are triggering terms under § 1026.24(d)(1)(ii) and (iii), but failed to state the repayment obligations over the full term of the loan, pursuant to § 1026.24(d)(2)(ii). Inadequate Disclosure of Rates, 12 C.F.R. § 1026.24(f)(2)(i) 72.
Under 12 C.F.R. § 1026.24(f)(2)(i), if a direct-mail mortgage advertisement: states a simple annual rate of interest and more than one simple annual rate of interest will apply over the term of the advertised loan, the advertisement shall disclose in a clear and conspicuous manner:
(A) Each simple annual rate of interest that will apply. In variable-rate transactions, a rate determined by adding an index and margin shall be disclosed based on a reasonably current index and margin;
(B) The period of time during which each simple annual rate of interest will apply; and (C) The [APR] for the loan. If such rate is variable, the [APR] shall comply with the accuracy standards in §§ 1026.17(c) and 1026.22.
73.
ClearPath violated § 1026.24(f)(2)(i) because, as described in Paragraphs 57–59, numerous ClearPath direct-mail mortgage advertisements for a loan for which more than one interest rate would apply stated a simple annual rate of interest, but did not include one or more of the disclosures required 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 19 of 52
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pursuant to § 1026.24(f)(2)(i)(A) through (C), or did not disclose them clearly and conspicuously, as defined in § 1026.24(f)(2)(ii). Inadequate Disclosure of Payment Terms, 12 C.F.R. § 1026.24(f)(3)(i) 74.
Under 12 C.F.R. § 1026.24(f)(3)(i), a direct-mail mortgage advertisement that “states the amount of any payment” must disclose, in a clear and conspicuous manner:
(A) The amount of each payment that will apply over the term of the loan, including any balloon payment. In variable-rate transactions, payments that will be determined based on the application of the sum of an index and margin shall be disclosed based on a reasonably current index and margin;
(B) The period of time during which each payment will apply; and
(C) In an advertisement for credit secured by a first lien on a dwelling, the fact that the payments do not include amounts for taxes and insurance premiums, if applicable, and that the actual payment obligation will be greater.
75.
ClearPath violated § 1026.24(f)(3)(i) because, as described in Paragraphs 60–63, numerous ClearPath direct-mail mortgage advertisements stated the amount of a payment but did not include one or more of the disclosures required pursuant to § 1026.24(f)(3)(i)(A) through (C), or did not disclose them clearly and conspicuously, as defined in § 1026.24(f)(3)(ii).
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Misleading Use of the Word “Fixed,” 12 C.F.R. § 1026.24(i)(1) 76.
Under 12 C.F.R. § 1026.24(i)(1), mortgage advertisements may not: Us[e] the word “fixed” to refer to rates, payments, or the credit transaction in an advertisement for variable-rate transactions or other transactions where the payment will increase, unless:
(i) In the case of an advertisement solely for one or more variable-rate transactions,
(A) The phrase “Adjustable-Rate Mortgage,” “Variable-Rate Mortgage,” or “ARM” appears in the advertisement before the first use of the word “fixed” and is at least as conspicuous as any use of the word “fixed” in the advertisement; and
(B) Each use of the word “fixed” to refer to a rate or payment is accompanied by an equally prominent and closely proximate statement of the time period for which the rate or payment is fixed, and the fact that the rate may vary or the payment may increase after that period.
(ii) In the case of an advertisement solely for non-variablerate transactions where the payment will increase (e.g., a stepped-rate mortgage transaction with an initial lower payment), each use of the word “fixed” to refer to the payment is accompanied by an equally prominent and closely proximate statement of the time period for which the payment is fixed, and the fact that the payment will increase after that period; or
(iii) In the case of an advertisement for both variable-rate transactions and non-variable-rate transactions,
(A) The phrase “Adjustable-Rate Mortgage,” “Variable-Rate Mortgage,” or “ARM” appears in the 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 21 of 52
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advertisement with equal prominence as any use of the term “fixed,” “Fixed-Rate Mortgage,” or similar terms; and
(B) Each use of the word “fixed” to refer to a rate, payment, or the credit transaction either refers solely to the transactions for which rates are fixed and complies with paragraph (i)(1)(ii) of this section, if applicable, or, if it refers to the variable-rate transactions, is accompanied by an equally prominent and closely proximate statement of the time period for which the rate or payment is fixed, and the fact that the rate may vary or the payment may increase after that period.
77.
ClearPath violated § 1026.24(i)(1) because, as described in Paragraphs 35– 40, numerous ClearPath mortgage advertisements for variable-rate transactions or other transactions where the payment will increase used the word “fixed” to refer to rates, payments, or the credit transaction and did not comply with the requirements of § 1026.24(i)(1)(i) through (iii). Misleading Use of the Current Lender’s Name, 12 C.F.R. § 1026.24(i)(4) 78.
Under 12 C.F.R. § 1026.24(i)(4), mortgage advertisements may not: Us[e] the name of the consumer’s current lender in an advertisement that is not sent by or on behalf of the consumer’s current lender, unless the advertisement:
(i) Discloses with equal prominence the name of the person or creditor making the advertisement; and
(ii) Includes a clear and conspicuous statement that the person making the advertisement is not associated with, or acting on behalf of, the 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 22 of 52
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consumer’s current lender.
79.
ClearPath violated § 1026.24(i)(4) because, as described in Paragraphs 64– 65, numerous ClearPath mortgage advertisements, which were not sent by or on behalf of the consumer’s current lender, used the name of the consumer’s current lender and did not (1) disclose with equal prominence the name of the person or creditor making the advertisement, as required by § 1026.24(i)(4)(i); or (2) include a clear and conspicuous statement that the person making the advertisement was not associated with, or acting on behalf of, the consumer’s current lender, as required by § 1026.24(i)(4)(ii). VIOLATIONS OF THE MAP RULE (REGULATION N)
Misrepresentations About Rates, 12 C.F.R. § 1014.3(b) 80.
Under 12 C.F.R. § 1014.3(b), it is a violation for any person subject to the MAP Rule to make any misrepresentation, directly or indirectly, expressly or by implication, in any commercial communication, about “[t]he annual percentage rate, simple annual rate, periodic rate, or any other rate” applicable to a mortgage credit product. Under 12 C.F.R. § 1014.3, such a misrepresentation is specifically prohibited and is therefore material. 81.
ClearPath violated § 1014.3(b) because, as described in Paragraphs 27–31, numerous ClearPath mortgage advertisements contained misrepresentations about the APR applicable to a mortgage credit product. 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 23 of 52
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Misrepresentations About Fees or Costs, 12 C.F.R. § 1014.3(c) 82.
Under 12 C.F.R. § 1014.3(c), it is a violation for any person subject to the MAP Rule to make any misrepresentation, directly or indirectly, expressly or by implication, in any commercial communication, about “[t]he existence, nature, or amount of fees or costs to the consumer associated with the mortgage credit product, including but not limited to misrepresentations that no fees are charged.” Under 12 C.F.R. § 1014.3, such a misrepresentation is specifically prohibited and is therefore material. 83.
ClearPath violated § 1014.3(c) because, as described in Paragraphs 32–34, numerous ClearPath mortgage advertisements contained misrepresentations about the existence, nature, or amount of fees or costs to the consumer associated with a mortgage credit product.
Misrepresentations Using the Word “Fixed,” 12 C.F.R. § 1014.3(g) 84.
Under 12 C.F.R. § 1014.3(g), it is a violation for any person subject to the MAP Rule to make any misrepresentation, directly or indirectly, expressly or by implication, in any commercial communication, about “[t]he variability of interest, payments, or other terms of the mortgage credit product, including but not limited to misrepresentations using the word 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 24 of 52
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‘fixed.’” Under 12 C.F.R. § 1014.3, such a misrepresentation is specifically prohibited and is therefore material.
85.
ClearPath violated § 1014.3(g) because, as described in Paragraphs 35–40, numerous ClearPath mortgage advertisements contained misrepresentations about the variability of interest, payments, or other terms of a mortgage by using the word “fixed” to describe a variable-rate mortgage credit product. Misrepresentations About Cash Available, 12 C.F.R. § 1014.3(j) 86.
Under 12 C.F.R. § 1014.3(j), it is a violation for any person subject to the MAP Rule to make any misrepresentation, directly or indirectly, expressly or by implication, in any commercial communication, about “[t]he existence, nature, or amount of cash or credit available to the consumer in connection with the mortgage credit product, including but not limited to misrepresentations that the consumer will receive a certain amount of cash or credit as part of a mortgage credit transaction.” Under 12 C.F.R. § 1014.3, such a misrepresentation is specifically prohibited and is therefore material. 87.
ClearPath violated § 1014.3(j) because, as described in Paragraphs 41–44, numerous ClearPath mortgage advertisements contained misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product, including misrepresentations 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 25 of 52
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that the consumer would receive a certain amount of cash as part of a mortgage credit transaction.
Misrepresentations About Government Affiliation, 12 C.F.R. § 1014.3(n) 88.
Under 12 C.F.R. § 1014.3(n), it is a violation for any person subject to the MAP Rule to make any misrepresentation, directly or indirectly, expressly or by implication, in any commercial communication, about: the association of the mortgage credit product or any provider of such product with any other person or program, including but not limited to misrepresentations that:
(1) The provider is, or is affiliated with, any governmental entity or other organization; or
(2) The product is or relates to a government benefit, or is endorsed, sponsored by, or affiliated with any government or other program, including but not limited to through the use of formats, symbols, or logos that resemble those of such entity, organization, or program.
Under 12 C.F.R. § 1014.3, such a misrepresentation is specifically prohibited and is therefore material. 89.
ClearPath violated § 1014.3(n) because, as described in Paragraphs 47–49, numerous ClearPath mortgage advertisements contained misrepresentations that the provider of the advertised mortgage credit product was or was affiliated with the government.
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VIOLATIONS OF THE CFPA
90.
Under the CFPA, it is unlawful for any covered person or service provider to engage in a deceptive act or practice in connection with any transaction with a consumer for a consumer-financial product or service, or the offering of a consumer-financial product or service. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). 91.
An act or practice is deceptive if it involves a material misrepresentation or omission that is likely to mislead consumers acting reasonably under the circumstances.
92.
Information that is likely to affect a consumer’s choice of, or conduct regarding, a product or service is material to consumers. Deceptive Representations About Credit Terms 93.
In numerous instances, as described in Paragraphs 23–46, ClearPath’s mortgage advertisements represented, expressly or by implication, that specific credit terms were available or would be arranged or offered by the creditor, including representations about specific APRs, the variable or fixed nature of rates or payments, lender fees, and required equity, when in fact those specific credit terms were not available or were not terms that ClearPath was actually prepared to arrange or offer. 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 27 of 52
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94.
ClearPath’s misrepresentations about the availability of the advertised credit terms of the advertised mortgage were likely to mislead consumers acting reasonably under the circumstances.
95.
ClearPath’s misrepresentations about the credit terms of the advertised mortgage were material because they were likely to affect the conduct or decisions of consumers.
96.
Therefore, ClearPath engaged in deceptive acts and practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Misrepresentations About Government Affiliation 97.
In numerous instances, as described in Paragraphs 47–51, ClearPath’s mortgage advertisements represented, expressly or by implication that ClearPath was or was affiliated with the VA or that the advertisement was sent by or on behalf of the VA.
98.
In fact, ClearPath was not affiliated with the VA and the advertisements were not sent by or on behalf of the VA.
99.
ClearPath’s misrepresentations about government affiliation were likely to mislead consumers acting reasonably under the circumstances. 100. ClearPath’s misrepresentations about government affiliation were material because they were likely to affect the conduct or decisions of consumers. 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 28 of 52
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101. Therefore, ClearPath engaged in deceptive acts and practices in violation of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B). Violations of the CFPA Based on Violations of Regulation Z and the MAP Rule 102. Under the CFPA, a covered person’s violation of a Federal consumer financial law, which includes enumerated consumer laws and rules thereunder, violates the CFPA. 12 U.S.C. §§ 5536(a)(1)(A), 5481(14). 103. Regulation Z and the MAP Rule are Federal consumer financial laws. 104. ClearPath’s violations of Regulation Z and the MAP Rule, described in Paragraphs 66–89, constitute violations of § 1036(a)(1)(A) of the CFPA. 12 U.S.C. § 5536(a)(1)(A).
CONDUCT PROVISIONS VI.
Mortgage Advertising Prohibitions and Disclosure Requirements
IT IS ORDERED, under §§ 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563, 5565, that:
105. Respondent and its officers, agents, servants, employees, and attorneys who have actual notice of this Consent Order, whether acting directly or indirectly, may not violate 12 C.F.R. § 1014.3 and 12 C.F.R. § 1026.24, and 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 29 of 52
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in connection with the advertising, marketing, promotion, or offering for sale of any mortgage credit product, are restrained from: a.
Misrepresenting, or assisting others in misrepresenting, expressly or by implication:
1.
Any fact material to consumers regarding a mortgage credit product, including but not limited to the following: the total costs; any material restrictions, limitations, or conditions; or any material aspect of its performance, efficacy, nature, or central characteristics; or 2.
The availability of an advertised or offered mortgage to any consumer.
b.
Including or using any words, phrases, images, or design characteristics that falsely state or imply that: 1.
The source of the advertisement is the government or the consumer’s current lender or is affiliated with the government or the consumer’s current lender; or 2.
The advertisement is anything other than an advertisement for a mortgage;
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c.
Including or using any of the following words, phrases, images, or design characteristics:
1.
“Benefit announcement”
2.
“Eligibility advisory”
3.
“Eligibility notice”
4.
“Eligibility status”
5.
“Expiration notice”
6.
“Pending authorization”
7.
“VA loan department”
8.
“VA loan representative”
9.
“VA loan specialist”
10.
“VA program customer support”
11.
“VA specialist”
12.
“Waiting period”
13.
The IRS signature year style (two digits in white or outlined text and the other two digits in black text); 14.
The format of an IRS form, including Form W-2, or a substantially similar format; or 15.
Any VA or United States Department of Defense (DOD) logo, or a logo, emblem, or other representation that resembles—or 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 31 of 52
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that a consumer could reasonably interpret as—a VA or DOD logo;
d.
Stating the name of the consumer’s current or prior lender, unless the current or prior lender is ClearPath, or unless stating the name of the current or prior lender is otherwise required by law. 106. Respondent and its officers, agents, servants, employees, and attorneys who have actual notice of this Consent Order, whether acting directly or indirectly, in connection with the advertising, marketing, promotion, or offering for sale of any mortgage credit product, must take the following affirmative actions:
a.
Respondent must have prior substantiation for all express and implied claims made in Respondent’s mortgage advertisements. b.
In any direct-mail mortgage advertisement, if the advertisement includes more than one credit product, the terms, features, characteristics, and benefits of each product must be grouped together and labeled with a statement Clearly and Prominently indicating the specific product to which those terms, features, characteristics, or benefits apply.
c.
If a mortgage advertisement includes the amount or percentage of any downpayment, the number of payments or period of repayment, the 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 32 of 52
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amount of any payment, or the amount of any finance charge, the advertisement must also include, at a minimum: 1.
The amount or percentage of the downpayment; 2.
The term of the loan in either months, years, or number of monthly payments;
3.
The amount of each payment that will apply over the term of the loan, including any balloon payment. In variable-rate transactions, payments that will be determined based on the application of the sum of an index and margin shall be disclosed based on a reasonably current index and margin; 4.
The period during which each payment will apply; 5.
The fact that the payments do not include amounts for taxes and insurance premiums, if applicable, and that the actual payment obligation will be greater;
6.
The loan amount upon which the disclosures are based; and 7.
The “annual percentage rate,” using that term, and, if the rate may be increased after consummation, that fact.
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d.
In any direct-mail advertisement for an adjustable rate mortgage, Respondent must:
1.
State, Clearly and Prominently, that the product is an “adjustable rate mortgage,” using those words. The advertisement may not use the term “hybrid” before the first use of the phrase “adjustable rate mortgage”; 2.
For each simple annual rate of interest disclosed that is based on an index and margin, base the rate on an index value in effect on the date of the advertisement or within 60 days prior, and disclose the index and margin; and 3.
State that more information about adjustable rate mortgages is available at https://files.consumerfinance.gov/f/201401 cfpb booklet charm.pdf.
e.
Any disclosure in a direct-mail mortgage advertisement that must be made with “equal prominence and in close proximity” under Regulation Z, 12 C.F.R. § 1026.24, must be: 1.
In the same type size as the advertised rates or payments triggering the required disclosures; 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 34 of 52
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2.
Located immediately next to or directly above or below the advertised rates or payments triggering the required disclosures, without any intervening text or graphical displays; and 3.
Otherwise compliant with Regulation Z, as applicable. VII.
Advertising Review
IT IS FURTHER ORDERED that:
107. Respondent, whether acting directly or indirectly, must take the following affirmative actions:
a.
Respondent’s Advertising Compliance Official must review each mortgage advertisement template before any advertisement based on that template is disseminated to a consumer to ensure that it is compliant with TILA, Regulation Z, the MAP Rule, the CFPA, and this Consent Order. This review must encompass any envelope or mailer and all enclosures. This review includes reviewing all claims made in the advertisement, expressly or by implication, to ensure that they are accurate and substantiated.
b.
Before any set of direct-mail advertisements based on a template is mailed to consumers, the Advertising Compliance Official must review an Exemplar of those advertisements—including any 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 35 of 52
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envelope, mailer, and enclosures—to ensure that it is compliant with TILA, Regulation Z, the MAP Rule, the CFPA, and this Consent Order. This includes reviewing all claims made in the advertisement, expressly or by implication, to ensure that they are accurate and substantiated. All specific credit terms stated in the Exemplar must be available and based on a reasonably current index rate, if applicable, at the time the advertisement is disseminated. This requirement applies whether the set is mailed as a single set or in multiple sets or subsets. It also applies whether the set is mailed out at a single time or over a period.
c.
The Advertising Compliance Official must document in writing his or her review of each advertisement template or Exemplar. That documentation must include a copy of the advertisement, the date of the review, and documents sufficient to substantiate all claims made in the advertisement, expressly or by implication. If the advertisement includes specific rates, that documentation must also include a rate sheet showing the availability of the advertised rate(s). If the advertisement states an APR, that documentation must include a copy of a worksheet showing the calculation of the APR, including all inputs assumed when calculating that number. If the advertisement 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 36 of 52
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states an amount of cash that a borrower might receive, the documentation must state the method of arriving at that number and include any materials used to determine the availability of that amount.
d.
The Advertising Compliance Official and any employees with responsibilities related to designing, developing, or approving the content of Respondent’s mortgage advertisements must participate in annual training on TILA, Regulation Z, the MAP Rule, and the CFPA, as those laws apply to mortgage advertising. VIII.
Compliance Plan
IT IS FURTHER ORDERED that:
108. Within 30 days of the Effective Date, Respondent must submit to the Enforcement Director for review and determination of non-objection a comprehensive compliance plan designed to ensure that Respondent’s mortgage advertising complies with all applicable Federal consumer financial laws and the terms of this Consent Order (Compliance Plan). The Compliance Plan must include, at a minimum: a.
Detailed steps for addressing each action required by this Consent Order; and 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 37 of 52
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b.
Specific timeframes and deadlines for implementation of the steps described above.
109.
The Enforcement Director will have the discretion to make a determination of non-objection to the Compliance Plan or direct Respondent to revise it. If the Enforcement Director directs Respondent to revise the Compliance Plan, Respondent must make the revisions and resubmit the Compliance Plan to the Enforcement Director within 15 days.
110.
After receiving notification that the Enforcement Director has made a determination of non-objection to the Compliance Plan, Respondent must implement and adhere to the steps, recommendations, deadlines, and timeframes outlined in the Compliance Plan. MONETARY PROVISIONS IX.
Order to Pay Civil Money Penalty IT IS FURTHER ORDERED that:
111.
Under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law described in Section V of this Consent Order, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Respondent must pay a civil money penalty of $625,000 to the Bureau. 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 38 of 52
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112. Within 10 days of the Effective Date, Respondent must pay the civil money penalty by wire transfer to the Bureau or to the Bureau’s agent in compliance with the Bureau’s wiring instructions. 113. The civil money penalty paid under this Consent Order will be deposited in the Civil Penalty Fund of the Bureau as required by § 1017(d) of the CFPA, 12 U.S.C. § 5497(d).
114. Respondent, for all purposes, must treat the civil money penalty paid under this Consent Order as a penalty paid to the government. Regardless of how the Bureau ultimately uses those funds, Respondent may not: a.
Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Consent Order; or b.
Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Consent Order.
115. To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Respondent may not argue that Respondent is entitled to, nor may Respondent benefit by, any offset or reduction of any compensatory monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 39 of 52
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Bureau makes from the Civil Penalty Fund. If the court in any Related Consumer Action offsets or otherwise reduces the amount of compensatory monetary remedies imposed against Respondent based on the civil money penalty paid in this action or based on any payment that the Bureau makes from the Civil Penalty Fund, Respondent must, within 30 days after entry of a final order granting such offset or reduction, notify the Bureau, and pay the amount of the offset or reduction to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. X.
Additional Monetary Provisions IT IS FURTHER ORDERED that:
116. In the event of any default on Respondent’s obligations to make payment under this Consent Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable.
117. Respondent must relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law and no part of the funds may be returned to Respondent.
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118. Under 31 U.S.C. § 7701, Respondent, unless it already has done so, must furnish to the Bureau its taxpayer-identification numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Consent Order.
119. Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Respondent must notify the Enforcement Director of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Respondent paid or is required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid. COMPLIANCE PROVISIONS XI.
Reporting Requirements
IT IS FURTHER ORDERED that:
120. Respondent must notify the Bureau of any development that may affect compliance obligations arising under this Consent Order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Consent Order; the filing of any bankruptcy or insolvency 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 41 of 52
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proceeding by or against Respondent; or a change in Respondent’s name or address. Respondent must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 14 days after the development.
121.
Within 7 days of the Effective Date, Respondent must: a.
Designate at least one telephone number and email, physical, and postal addresses as points of contact, that the Bureau may use to communicate with Respondent;
b.
Identify all businesses for which Respondent is the majority owner, or that Respondent directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; and c.
Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales.
122.
Respondent must report any change in the information required to be submitted under Paragraph 121 at least 30 days before the change or as soon as practicable after the learning about the change, whichever is sooner. 123.
Within 90 days of the Effective Date, and again one year after receiving notice of non-objection to the Compliance Plan, Respondent must submit to 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 42 of 52
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the Enforcement Director an accurate written compliance progress report (Compliance Report) that has been approved by Respondent’s executive officers, sworn to under penalty of perjury, which, at a minimum: a.
Lists each applicable paragraph and subparagraph of the Consent Order and describes in detail the manner and form in which Respondent has complied with each such paragraph and subparagraph of the Consent Order;
b.
Describes in detail the manner and form in which Respondent has complied with the Compliance Plan;
c.
Describes in detail any instances in which Respondent has not complied with the Consent Order or Compliance Plan, with an explanation of why any such instances occurred; and d.
Attaches a copy of each Order Acknowledgment obtained under Section XII, unless previously submitted to the Bureau. XII.
Order Distribution and Acknowledgment IT IS FURTHER ORDERED that:
124. Within 7 days of the Effective Date, Respondent must submit to the Enforcement Director an acknowledgment of receipt of this Consent Order, sworn under penalty of perjury.
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125.
Within 30 days of the Effective Date, Respondent must deliver a copy of this Consent Order to each of its board members (if any) and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of the Consent Order.
126.
For 5 years from the Effective Date, Respondent must deliver a copy of this Consent Order to any business entity resulting from any change in structure referred to in Section XI, any future board members and executive officers, as well as to any managers, employees, service providers, or other agents and representatives who will have responsibilities related to the subject matter of the Consent Order before they assume their responsibilities. 127.
Respondent must secure a signed and dated statement acknowledging receipt of a copy of this Consent Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from all persons receiving a copy of this Consent Order under this Section.
128.
Within 90 days of the Effective Date, Respondent must provide the Bureau with a list of all persons and their titles to whom this Consent Order was delivered through that date under Paragraphs 125-126 and a copy of all 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 44 of 52
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signed and dated statements acknowledging receipt of this Consent Order under Paragraph 127.
XIII.
Recordkeeping IT IS FURTHER ORDERED that:
129.
Respondent must comply with the recordkeeping requirements of 12 C.F.R. § 1014.5, including but not limited to keeping, for a period of twenty-four months from the last date Respondent made or disseminated the applicable commercial communication regarding any term of any mortgage credit product, the following evidence of compliance with the MAP Rule: a.
Copies of all materially different commercial communications as well as sales scripts, training materials, and marketing materials, regarding any term of any mortgage credit product, that Respondent made or disseminated during the relevant time period; b.
Documents describing or evidencing all mortgage credit products available to consumers during the time period in which Respondent made or disseminated each commercial communication regarding any term of any mortgage credit product, including but not limited to the names and terms of each such mortgage credit product available to consumers; and 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 45 of 52
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c.
Documents describing or evidencing all additional products or services (such as credit insurance or credit disability insurance) that are or may be offered or provided with the mortgage credit products available to consumers during the time period in which Respondent made or disseminated each commercial communication regarding any term of any mortgage credit product, including but not limited to the names and terms of each such additional product or service available to consumers.
130.
Respondent must retain its mailing lists for direct-mail mortgage advertisements disseminated within 5 years of the Effective Date for at least 5 years after dissemination of the advertisement. 131.
Respondent must retain the documentation required by Paragraph 107(c) for at least 5 years after dissemination of the advertisement. 132.
Respondent must create or, if already created, must retain the following business records:
a.
All documents and records necessary to demonstrate full compliance with each provision of this Consent Order, including all submissions to the Bureau;
b.
Copies of all advertisements, websites, and other marketing materials, including any such materials used by a third party on Respondent’s 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 46 of 52
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behalf; and c.
All consumer complaints and refund requests (whether received directly or indirectly, such as through a third party), and any responses to those complaints or requests.
133.
Respondent must retain the documents identified in Paragraph 132 for at least 5 years after creation of the record. 134.
Respondent must make the documents identified in Paragraphs 129–133 available to the Bureau upon the Bureau’s request. XIV.
Notices IT IS FURTHER ORDERED that:
135.
Unless otherwise directed in writing by the Bureau, Respondent must provide all submissions, requests, communications, or other documents relating to this Consent Order in writing, with the subject line, “In re ClearPath Lending, Inc., File No. 2020-BCFP-0015,” and send them by overnight courier or first-class mail to the below address and contemporaneously by email to [email protected]: Assistant Director for Enforcement Bureau of Consumer Financial Protection ATTENTION: Office of Enforcement 1700 G Street, N.W.
Washington D.C. 20552 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 47 of 52
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XV.
Compliance Monitoring IT IS FURTHER ORDERED that:
136. Within 14 days of receipt of a written request from the Bureau, Respondent must submit additional Compliance Reports or other requested nonprivileged information, related to requirements of this Consent Order, which must be made under penalty of perjury; provide sworn testimony related to requirements of this Consent Order and Respondents’ compliance with those requirements; or produce non-privileged documents related to requirements of this Consent Order and Respondents’ compliance with those requirements.
137. For purposes of this Section, the Bureau may communicate directly with Respondent, unless Respondent retains counsel related to these communications.
138. Respondent must permit Bureau representatives to interview about the requirements of this Consent Order and Respondent’s compliance with those requirements any employee or other person affiliated with Respondent who has agreed to such an interview. The person interviewed may have counsel present.
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139. Nothing in this Consent Order will limit the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process.
XVI.
Modifications to Non-Material Requirements IT IS FURTHER ORDERED that:
140. Respondent may seek a modification to non-material requirements of this Consent Order (e.g., reasonable extensions of time and changes to reporting requirements) by submitting a written request to the Enforcement Director. 141. The Enforcement Director may, in his or her discretion, modify any nonmaterial requirements of this Consent Order (e.g., reasonable extensions of time and changes to reporting requirements) if he or she determines good cause justifies the modification. Any such modification by the Enforcement Director must be in writing.
XVII.
Administrative Provisions
IT IS FURTHER ORDERED that:
142. The provisions of this Consent Order do not bar, estop, or otherwise prevent the Bureau from taking any other action against Respondent, except as described in Paragraph 143. Further, for the avoidance of doubt, the 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 49 of 52
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provisions of this Consent Order do not bar, estop, or otherwise prevent any other person or governmental agency from taking any action against Respondent.
143. The Bureau releases and discharges Respondent from all potential liability for law violations that the Bureau has or might have asserted based on the practices described in Section V of this Consent Order, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. The Bureau may use the practices described in this Consent Order in future enforcement actions against Respondent and its affiliates, including, without limitation, to establish a pattern or practice of violations or the continuation of a pattern or practice of violations or to calculate the amount of any penalty. This release does not preclude or affect any right of the Bureau to determine and ensure compliance with the Consent Order, or to seek penalties for any violations of the Consent Order. 144. This Consent Order is intended to be, and will be construed as, a final Consent Order issued under § 1053 of the CFPA, 12 U.S.C. § 5563, and expressly does not form, and may not be construed to form, a contract binding the Bureau or the United States.
145. The requirements under Paragraphs 130-131 and 133-134 of this Consent Order will terminate when the specified recordkeeping periods have expired. 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 50 of 52
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All other requirements under this Consent Order will terminate 5 years from the Effective Date. The Consent Order will remain effective and enforceable until such times, except to the extent that any provisions of this Consent Order have been amended, suspended, waived, or terminated in writing by the Bureau or its designated agent.
146. Calculation of time limitations will run from the Effective Date and be based on calendar days, unless otherwise noted.
147. Should Respondent seek to transfer or assign all or part of its operations that are subject to this Consent Order, Respondent must, as a condition of sale, obtain the written agreement of the transferee or assignee to comply with all applicable provisions of this Consent Order.
148. The provisions of this Consent Order will be enforceable by the Bureau. For any violation of this Consent Order, the Bureau may impose the maximum amount of civil money penalties allowed under § 1055(c) of the CFPA, 12 U.S.C. § 5565(c). In connection with any attempt by the Bureau to enforce this Consent Order in federal district court, the Bureau may serve Respondent wherever Respondent may be found and Respondent may not contest that court’s personal jurisdiction over Respondent. 149. This Consent Order and the accompanying Stipulation contain the complete agreement between the parties. The parties have made no promises, 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 51 of 52
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representations, or warranties other than what is contained in this Consent Order and the accompanying Stipulation. This Consent Order and the accompanying Stipulation supersede any prior oral or written communications, discussions, or understandings. 150. Nothing in this Consent Order or the accompanying Stipulation may be construed as allowing Respondent, its officers, or its employees to violate any law, rule, or regulation.
IT IS SO ORDERED, this /'01\iay of September, 2020. ll!!td:f~::g~ Director Bureau of Consumer Financial Protection 2020-BCFP-0015 Document 1 Filed 09/14/2020 Page 52 of 52
Stipulation ()
PDF of this document (5 pages)
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UNITED STATES OF AMERICA BUREAU OF CONSUMER FINANCIAL PROTECTION File No. 2020-BCFP-0015 STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER In the matter of:
ClearPath Lending, Inc.
The Bureau of Consumer Financial Protection (Bureau) intends to initiate an administrative proceeding against ClearPath Lending, Inc. (Respondent), under 12 U.S.C. §§ 5563 and 5565, for its direct-mail mortgage advertising activities in violation of Regulation Z, 12 C.F.R. Part 1026, the implementing regulation of the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601–1667f; the Mortgage Acts and Practices—Advertising Rule (MAP Rule or Regulation N), 12 C.F.R. Part 1014; and the prohibition on deceptive acts or practices in the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531, 5536. Respondent, in the interest of compliance and resolution of the matter, consents to the issuance of a Consent Order substantially in the form of the one to 2020-BCFP-0015 Document 2 Filed 09/14/2020 Page 1 of 5
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which this Stipulation and Consent to the Issuance of a Consent Order is attached (Consent Order), and which is incorporated by reference. In consideration of the above premises, Respondent agrees to the following: Jurisdiction 1.
The Bureau has jurisdiction over this matter under §§ 1053 and 1055 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5563, 5565.
Consent 2.
Respondent agrees to the issuance of the Consent Order, without admitting or denying any of the findings of fact or conclusions of law, except that Respondent admits the facts necessary to establish the Bureau’s jurisdiction over Respondent and the subject matter of this action. 3.
Respondent agrees that the Consent Order will be deemed an “order issued with the consent of the person concerned” under 12 U.S.C. § 5563(b)(4), and agrees that the Consent Order will become a final order, effective upon issuance, and will be fully enforceable by the Bureau under 12 U.S.C. §§ 5563(d)(1) and 5565.
4.
Respondent voluntarily enters into this Stipulation and Consent to the Issuance of a Consent Order.
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5.
The Consent Order resolves only Respondent’s potential liability for law violations that the Bureau asserted or might have asserted based on the practices described in Section V of the Consent Order, to the extent such practices occurred before the Effective Date and the Bureau knows about them as of the Effective Date. Respondent acknowledges that no promise or representation has been made by the Bureau or any employee, agent, or representative of the Bureau, about any liability outside of this action that may have arisen or may arise from the facts underlying this action or immunity from any such liability.
6.
Respondent agrees that the facts described in Section V of the Consent Order will be taken as true and be given collateral estoppel effect, without further proof, in any proceeding before the Bureau to enforce the Consent Order, or in any subsequent civil litigation by the Bureau to enforce the Consent Order or its rights to any payment or monetary judgment under the Consent Order.
7.
The terms and provisions of this Stipulation and the Consent Order will be binding upon, and inure to the benefit of, the parties hereto and their successors in interest.
8.
Respondent agrees that the Bureau may present the Consent Order to the Bureau Director for signature and entry without further notice. 2020-BCFP-0015 Document 2 Filed 09/14/2020 Page 3 of 5
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Waivers 9.
Respondent, by consenting to this Stipulation, waives: a.
Any right to service of the Consent Order, and agrees that issuance of the Consent Order will constitute notice to Respondent of its terms and conditions;
b.
Any objection to the jurisdiction of the Bureau, including, without limitation, under § 1053 of the CFPA, 12 U.S.C. § 5563; c.
The rights to all hearings under the statutory provisions under which the proceeding is to be or has been instituted; the filing of proposed findings of fact and conclusions of law; proceedings before, and a recommended decision by, a hearing officer; all post-hearing procedures; and any other procedural right available under § 1053 of the CFPA, 12 U.S.C. § 5563, or 12 C.F.R. Part 1081; d.
The right to seek any administrative or judicial review of the Consent Order;
e.
Any claim for fees, costs or expenses against the Bureau, or any of its agents or employees, and any other governmental entity, related in any way to this enforcement matter or the Consent Order, whether arising under common law or under the terms of any statute, including but not limited to the Equal Access to Justice Act and the Small 2020-BCFP-0015 Document 2 Filed 09/14/2020 Page 4 of 5
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Business Regulatory Enforcement Fairness Act of 1996; for these purposes, Respondent agrees that Respondent is not the prevailing party in this action because the parties have reached a good faith settlement;
f.
Any other right to challenge or contest the validity of the Consent Order;
g.
Such provisions of the Bureau's rules or other requirements of law as may be construed to prevent any Bureau employee from participating in the preparation of, or advising the Director as to, any order, opinion, finding of fact, or conclusion of law to be entered in connection with this Stipulation or the Consent Order; and h.
Any right to claim bias or prejudgment by the Director based on the consideration of or discussions concerning settlement of all or any part of the proceeding.
CLEARPATH LENDING, INC. BY:
Amir Ali Omid Date President, ClearPath Lending, Inc.
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