Letter to the Hon. Kathleen Kraninger, Dir. of the Consumer Financial Protection Bureau - Schumer demands Feds immediately require full restitution & compensation for swindled New York veterans, servicemembers & their families; even in the midst of global and economic pandemic, Feds have done nothing to get reimbursements for vets & servicemembers who were bamboozled by deceptive mortgage lenders & marketing

Letter

Dear Director Kraninger:

We write to you regarding the Consumer Financial Protection Bureau (Bureau)'s recent public enforcement actions against mortgage originators offering Veterans Administration (VA)-guaranteed loans. We are deeply concerned by the Bureau's failure to obtain restitution for consumers who were targeted by these companies' deceptive marketing practices.

The VA helps servicemembers, veterans, and eligible surviving spouses become homeowners by guaranteeing a portion of home loans. VA home loans are provided by certain pre-approved private lenders, including banks and mortgage companies. By guaranteeing a portion of the loan, the VA enables the lender to provide servicemembers, veterans, and eligible surviving spouses with loan terms that are more favorable than would otherwise be available in the marketplace.

Unfortunately, because of extended travel and multiple relocations, often related to their service, servicemembers and veterans are particularly vulnerable to scams. The VA and the Bureau have long been aware of one such scam: direct-mail advertisements that contained inadequate disclosures or misleading and deceptive statements pertaining to VA home loans. For instance, in 2016, the Bureau released a snapshot of servicemember complaints and highlighted that veterans had reported receiving misleading advertisements. And in November 2017, the VA and the Bureau issued a "Warning Order" alerting servicemembers and veterans to offers of mortgage refinancing that contained deceptive or false advertising.

In response to the VA's continuing concerns about unlawful advertising in the market, the Bureau brought public enforcement actions against eight different mortgage lenders for deceptive and misleading advertising of VA mortgages. Between July 2020 and September 2020, the Bureau announced consent orders against Sovereign Lending Group, Inc., Prime Choice Funding, Inc., Go Direct Lenders, Inc., PHLoans.com, Inc., Hypotec, Inc., Service 1st Mortgage, Inc., Accelerate Mortgage, LLC, and ClearPath Lending Inc. In each case, the Bureau found that the originators' advertisements contained false, misleading, or inaccurate statements that violated the Consumer Financial Protection Act's prohibition against deceptive acts and practices, the Mortgage Acts and Practices Advertising Rule, and Regulation Z. In each case, violators were required to pay a civil penalty and follow guidelines to prevent future violations. The Bureau collected approximately $2.8 million in civil penalties from these eight violators, but did not require any of these companies to provide restitution to harmed consumers. However, the consent orders for at least one of the originators notes that "millions of advertisements" were sent to consumers, while another notes that "thousands of consumers" have obtained mortgages through the originator and the advertisements affected the decisions of many more, indicating that at least some consumers may have been victim to false advertising.

In these cases, like others under your and Mr. Mulvaney's leadership, it appears that the Bureau departed from the well-established operating procedure and the legal standard for restitution. The Ninth Circuit set forth the standard for restitution in Bureau cases in CFPB v. Gordon. As the court explained, restitution is ""a form of ancillary relief' that a court can order "[i]n the absence of proof of actual damages.'" Restitution is measured by "the full amount lost by consumers" or the amount that "reasonably approximates the defendants' unjust gains."

In prior cases involving deceptive advertising, the Bureau has obtained restitution for all consumers who enrolled in a service in response to a deceptive advertisement. If the Bureau is unable to determine the appropriate amount of restitution, then the Bureau can still seek disgorgement as a remedy--i.e., the companies have to return any profit they generated from the deceptive advertisements. Either way, whether through restitution or disgorgement, the Bureau should not allow companies to retain the profits derived through marketing practices that target our veterans.

As servicemembers, veterans, and their families make sacrifices for our country, they expose themselves to a number of financial risks and challenges; the Bureau must be clear that it is looking out for them in return. We are concerned that there has been no effort to ensure that thousands of servicemembers and veterans are made whole or at least compensated for damages caused by unscrupulous lenders seeking to profit by misleading homeowners.

Given our concerns, we request a response to the following questions:

1.Please elaborate on the Bureau's decision not to require restitution or redress for consumers.
2.What is the standard that the Bureau applied in the above cases to determine whether to provide restitution?

3. Is the standard for restitution that the Bureau applied in the above cases different than the standard applied by courts and in prior Bureau settlements? If so, what is the case law or legal support for the Bureau's new restitution standard?

4. For each of the eight cases:

a. Did the Bureau seek out evidence about individuals who were harmed by these deceptive practices? If not, why?

b. What did Bureau career staff in Enforcement recommend for damages, restitution, disgorgement, other remedies, or civil penalties?

c. Did political appointees overrule career staff's recommendations for action, including penalties, damages, restitution, disgorgement, other remedies, or civil penalties?

I look forward to hearing back from you regarding this matter within 30 days of receipt of this letter.

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