WA State DFI Slaps “Cash Call” for Multiple Consumer Protection Violations

In 2011 I posted this article about the deceptive advertising practices of Cash Call.  Washington State DFI went after Cash Call for their deceptive and abusive acts and practices towards WA State Consumers and here is the result:

$14875 Investigation fee to be paid to WA DFI

$244,100 Fine

$6,131,694. RESTITUTION ordered to be paid back to consumers

Cash Call tried to defend itself in an interesting way, but that failed.  Please warn consumers about this company’s history of blatant violation of state and federal law.

 

Are the Cash Call radio ads advertising a “no fee” loan deceptive?

I listen to 97.3FM and am a longtime listener of Dave, Luke, Dori (accidentally listening since 1995), Ron, Don, John, @thenewschick and @joshkerns38. I am so sick and tired of hearing the Cash Call radio ads that everytime one of the ads run, I feel the need to switch the dial over to satellite radio and I’ve been meaning to write this blog post for many months so here it goes. 

Radio listeners: There’s nothing inherently wrong with mortgage companies that advertise on the radio. This is one business model of many but realize that radio ads are not inexepensive and there are a few ways that a mortgage company can pay for their advertising. One way is to charge you higher interest rates.  But wait, how could they do that when they’re advertising low, low mortgage rates? 

The answer is one you will not want to hear but I’m going to tell you anways:  The rates advertised are likely NOT the rate that you will get.  The rate advertised is for a loan program that only a very small percentage of people will qualify for.  People with credit scores above 740. People with lots of equity in their homes, people who want a 10 year mortgage, or in the case of Cash Call, people who ONLY live in the state of California.  That’s right, the radio ad that’s running in Seattle comes with one caveat: It’s only avail for California borrowers.

To their defense, the Cash Call radio ad airing on 97.3FM does state that the rate and APR advertised are for a 10 year mortgage but realize that only a very small percentage of people calling that firm will end up with a 10 year mortgage.  This might come very, very close to a classic bait-and-switch scheme without crossing over the line but we don’t have enough facts to make that determination.  Instead the reason for their radio ad is to motivate radio listeners to pick up the phone and call. 

So, who’s on the other end of the phone?  The answer shows us another way companies that advertise on the radio make money. 

Any consumer who is curious about the licensing status of their loan originator can use the Nationwide Mortgage Licensing System’s Consumer Access website to check on the status of a mortgage company or individual loan originator.  When searching for the company name CashCall you’ll see many, many licensed LOs, okay that’s good. But dig a little deeper and you’ll notice that each person’s employment history contains many months of unemployment right around the subprime meltdown and lots of jobs held at subprime shops or other companies that only do radio or TV ads…Ditech, Amerisave, Countrywide, and other low wage side jobs outside of the mortgage industry.  That leads to the second part of how these companies make money advertising on the radio.

If they can’t offer you the lowest rates they’re advertising, then another way to make money is for the radio-advertising mortgage company to pay their loan originators a really low fee.  This is justified by the firm because…the company is making the phone ring! All the LO has to do is sit there, answer the phone and close the customer.  This is loan origination at its worst and if you don’t believe me just simply google:  Cash Call Complaints or Quicken Loans Complaints and see how many dis-satisfied customers they’ve left in their wake.

Homebuyers and refinancing homeowners should be wary of ANY mortgage lender that operates out of state and has no physical prescence in your state and if they did have an office here, why aren’t you working with a local person? 

Homebuyers and refinancing homeowners should always check the licensing status of their loan originator here and if their LO is not in the NMLS system ask WHY and ask to speak with their manager. Mortgage brokers and non-depository mortgage lenders must license their LOs. Depository bank LOs begin registering their LOs within the NMLS system this year. Maybe the person on the phone calls himself/herself an intake specialist or a loan something or other. Ask to speak with a licensed LO. If there are no licensed LOs then you’re probably dealing with a lead generation company and I’ll do a serious smackdown on lead gen firms in another blog post.

Companies like Cash Call and Quicken hire the loan originators who have no client base, don’t want to work hard enough to earn repeat business, only work part time, will work for a low wage, and/or are paid to close deals and not serve the best interests of their clients.  Do you want low rates? Go ahead and use one of these companies but you should have extremely low expectations of your rate being as verbally promised or the transaction closing at all. Expect pain and suffering. Some people pay extra for that, but now we’re getting off track.

Do you want your transaction to close? Select a loan originator based on his or her experience and knowledge. Choose a local company with a loan originator located right in your city so you can go into the office and meet with him or her face to face at application.  Yes, this will take time. Do you want your transaction to close and also get a fair interest rate? Then that means you will have to invest some time into understanding your options and understanding the documents you’re signing and that means human interaction whether that’s email, text or facebook messages.  You will need someone to respond to your questions who knows what they’re doing.  It is impossible to be a part time loan originator and serve your clients efficiently because there are far too many changes taking place on a daily basis.  A part time salesperson’s time and energy are split between many competing interests and self interest will typically win out every time. 

Kiel Mortgage radio ads are great. The radio ads from TILA Mortgage have improved over the years.  Best Mortgage’s ads are fine.  These are all LOCAL Seattle area companies with local loan originators and company owners who have been serving homebuyers and homeowners for decades.

I notice that on the Cash Call website, and on KIRO 97.3 FM, they’re advertising a “no cost” mortgage loan.  Folks, there is no such thing as a zero cost loan.  It doesn’t exist unless you’re doing a straight interest rate reduction refinance with your same lender, going through that lender’s loan servicing department and I think it’s even rare that that would happen nowadays with so many banks and lenders immediately selling everything to Fannie Mae or Freddie Mac.  Mortgage loans will always have fees and costs involved.  Some of those fees will be to the bank funding the loan, other fees will benefit the loan originator helping you, and still more fees will go to third parties.  Any company that tries to sell you a “no fee” mortgage loan is lying to you. The fees ARE being charged….they’re just being covered by a higher rate or they’re not telling you about the other third party fees that you’ll pay at closing unless you decide to read the fine print. 

So the opening call-to-action phrase on the Cash Call home page is a lie, the radio ads are deceptive and their loan originators are sub-par. I’m sure they’ll make several million dollars this year, pay a very small percentage of their profits in fines, and keep on using the radio to find more rate shoppers.  It’s a business model that works. Expect more copycats.

Mortgage Lead Generation Firms Continue to Violate Federal and State Laws

So here we go again.  Now that mortgage rates are headed up, the deceptive lead generation ads are crawling back onto the web.  Here’s a great example from a Google ad:

FHA Refinance 4.0% Fixed
$160,000 FHA mortgage for $633/mo. No SSN req. Calculate payments now!
MortgageRefinance.LendGo.com

When clicking through, the lendgo.com lead generation site asks some simple questions like the value of my home, zip code, whether or not I’ve ever filed bankruptcy, etc.  Then I’m asked to provide personal information and assured that I’m dealing with a secure website.  Name address, phone number, etc.  After I click “submit,” I’m told that I will be given four quotes. I clicked ‘submit’ after offering them the following:
First Name: Your Ad
Last Name: Violates TILA
But I don’t get a quote. Instead I’m asked even more questions before being told that four lenders will contact me within 24 hours:  Quicken Loans, Onyx Mortgage, Americash Mortgage Bankers (I’m thinking it was a seven beer night when someone decided on that name), and….I’m totally surprised here:  Paramount Equity Mortgage.

So, Quicken, Onyx, Americash, and PEM, Are you aware that the lead generation company you’re using is violating the Truth in Lending Act and probably a handful of state laws by advertising a note rate without conspicuously including APR in that ad? 

I bet someone at these mortgage companies assumed that no one would be able to trace the deceptive ad back to them.  Nah, their chief compliance officer couldn’t be that stupid. Oh wait, maybe they don’t have a chief compliance officer. Or perhaps these big mortgage companies are just making a strategic business decision: Violate TILA and some state laws and if we get caught, we’ll just pay the fine and move on because we’ll be able to earn six times the amount of the fine anyways. 

Regulators:  You’re being tossed under the bus in Washington D.C. this week as banker after banker stands before various congressional committees telling the world that the bank regulators were asleep at the wheel. I’m not going to throw you under the bus. Why? Because there never will be enough money to regulate every single mortgage lending transaction across your area of authority.  You’ve got limited resources and regulators are always trying to balance everyone’s needs and are constantly being pulled in 10 different directions at once. 

So I’d like to give the regulators a helping hand.

If mortgage companies are buying leads from a firm that’s using deceptive advertising, you can write out 5 consent orders and be very efficient with your time.  Just start clicking on all the banner ads!  It will be easy and mildly entertaining for your staff! At the same time, you’ll help consumers avoid getting sucked into doing business with a company that has chosen a business model of attracting consumers who are an easy mark. 

They fell for the click through ad. They believed there was a 30 year fixed rate mortgage available under 4 percent!  If they were stupid enough to fall for this, then that means perhaps the mortgage company can also win all kinds of other shell games with these folks, who probably believe there’s a diet pill that will help them lose those last 10 pounds and that the secret to prosperity and abundance is to think thoughtful thoughts.  Maybe that’s the secret to the housing market recovery: We can just “think” away all those short sale, REOs, and re-defaulting loan mods!

Here’s another one:
3.44% APR – Refinance Now
$200,000 Mortgage for $898/Month! As Featured on CNNMoney & Forbes.
DeltaPrimeRefinance.com

Oh my goodness! This lead generation firm actually quoted APR! Which would be a cause for celebration, until you click through and see that they’re quoting a 5/1 ARM loan, and then they also inform us that this might be a 15 year amortization.  Of course the APR looks awesome. Regulators, it would be interesting to find out exactly how many people, after filling out the online lead generation form, decided to select a traditional 30 year fixed rate loan instead of an ARM loan or a 15 year amortization.  Classic bait and switch.  Like shooting fish in a barrel.

These lead generation companies appear to hold a mortgage broker or lender licenses in various states, yet the consumer information is sold to other licensed brokers or lenders.

Question: Are mortgage brokers, lenders and banks responsible for making sure the leads they purchased are generated by advertisements that do not violate state and federal law?  If the answer is no, then deceptive mortgage lending advertising will continue to grow as long as brokers, lenders and banks are able to skirt law by purchasing these leads.

To the loan originators who regularily purchase these leads: we need to send you to Tiger’s rehab center and wean you off the crack.  Deceptive ads are poison to the system and they make it harder for you to procure clients using advertising methods that are transparent, ethical, and legal.

Maybe the broker/lender/banker willl say “We sign a contract and it’s the lead gen company’s responsibility to make sure the leads are generated according to state and federal law.”  If I was a regulator (and sometimes I like to put on a dark blue suit and high heels and pretend I’m a regulator in the privacy of my own home) I might say, in response, “So what method do you use to be certain that the lead gen companies you deal with are advertising according to state and federal law?” 

Quicken Loans, Onyx Mortgage, Americash Mortgage Bankers and Paramount Equity Mortgage, all a rational, thinking consumer has to do is google or bing your company name with the word “complaints” in the search box like I just did and they’d have all the info they need.  But the rational, thinking consumer is not your target market.