This story can be adequately summed up with the internet meme: 'facepalm.'  Yet another ethically challenged lender is going to pay for implying a government agency sponsors or endorses its products.  If there's a gray area here, it's hard to see what it would be.

This time it is RMK Financial Corporation, a California-based mortgage lender which decided it was a good idea to market its products to tens of thousands of military personnel and veterans using Department of Veterans Affairs and FHA logos. Not surprisingly, they were caught.

The Consumer Financial Protection Bureau (CFPB) announced on Thursday it had taken action against the company, which also does business as Majestic Home Loans, for deceptive mortgage advertising including using ads that led consumers to believe it was affiliated with the U.S. government.  Under a consent order with the Bureau RMK will end its illegal practices and pay a civil penalty of $250,000.

CFPB claims that RMK mailed misleading print advertisements to more than 100,000 consumers in several states.  The ads falsely implied that that they were sent by VA or FHA or that the agencies endorsed or sponsored the loans.

A typical company ad for VA mortgages featured the VA logo and described RMK's loan products as part of a "distinctive program offered by the U.S. government."  Recipients were instructed to call the "VA Interest Rate Reduction Department" at an RMK owed phone number. Those who called were sometimes given misleading information over the phone or were told by employees that RMK was endorsed by the VA or FHA. While there could--at one time--have been an argument that a lenders' underwriters were 'endorsed' due to the 'direct endorsement' (DE) designation, HUD no longer conducts DE certification directly.

Other mailers were labeled "FHA Benefits" and included an image of the Statue of Liberty on the outside, along with warnings citing the U.S. Code and threatening fines and imprisonment for tampering with the letter. CFPB said both FHA and VA ads also contained misrepresentations about interest rates, estimated monthly payments, and whether rates were variable or fixed. 

"Deceptive advertising has no place in the mortgage marketplace, and the Consumer Bureau will continue to take action against companies that mislead consumers with false claims of government affiliation," said CFPB Director Richard Cordray. "Today's action sends a clear message that misleading consumers is illegal, unacceptable, and will not be tolerated."  

The CFPB's investigation found that RMK's practices violated the Truth in Lending Act, the Mortgage Acts and Practices Advertising Rule, and other federal consumer laws.  The 2011 Mortgage Acts and Practices Advertising Rule prohibits misleading claims in mortgage advertising, including implying a government affiliation.