CFPB enters into second settlement with reverse mortgage provider

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Last week, the CFPB simultaneously filed a lawsuit against American Advisors Group (AAG) in a California federal district court and a proposed stipulated final judgment and order to settle the lawsuit.  The lawsuit alleged that AAG inflated estimated home values in marketing its reverse mortgage product and made false representations about AAG’s effort to ensure home value information was reliable.

In 2016, the Bureau entered into a consent order with AAG to settle claims that AAG engaged in deceptive advertising in violation of the Mortgage Acts and Practices-Advertising Rule (Regulation N) and the Consumer Financial Protection Act.  In addition to requiring AAG to pay a civil money penalty of $400,000, the consent order contained a provision prohibiting AAG from violating the CFPA for five years, or until December 2021.

In its new complaint, the CFPB claimed that AAG’s alleged use of inflated home values and false representations about its efforts to ensure home value information is reliable constituted deceptive acts or practices in violation of the CFPA.  It also alleged that by engaging in such deceptive acts or practices, AAG violated the consent order.  The CFPB claimed that by violating the consent order, AAG violated federal consumer financial law because the consent order, as an order prescribed by the Bureau, constitutes a federal consumer financial law.

The proposed stipulated final judgment and order requires AAG to pay a $1.1 million civil money penalty and $173,400 in consumer redress to consumers who received mailers from AAG with estimated home values, paid for and received appraisals with property values lower that AAG’s estimates, and decided not to proceed in obtaining a reverse mortgage from AAG.  It also prohibits AAG from engaging in deceptive practices generally and, in connection with marketing its consumer financial products, it prohibits AAG from misrepresenting any fact material to consumers, including, but not limited to, home values.  Additionally, AAG must submit a compliance plan to the CFPB and include links to specific CFPB materials about reverse mortgages in its direct mail solicitations and in welcome communications to borrowers with newly-originated reverse mortgages.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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