NewDay Financial deceived veterans and consumers about a veterans’ organization’s endorsement of its products, and took part in a scheme that paid kickbacks for customer referrals, the Consumer Financial Protection Bureau (CFPB) said Tuesday.
NewDay, a Maryland-based nonbank mortgage lender, will pay a $2 million civil money penalty for its actions, the CFPB said.
NewDay, which is owned by Chrysalis Holdings, a private company, originates refinance mortgage loans guaranteed by the Veterans Administration (VA). These loans are available exclusively to servicemembers, veterans, and their surviving spouses.
NewDay primarily advertises its mortgage products to consumers through direct mail campaigns. Between July 2011 and July 2014, NewDay sent consumers over 50 million mortgage solicitations by postal and electronic mail.
“NewDay profited from the trust that veterans place in their veteran service organization,” said CFPB Director Richard Cordray. “Veterans, and any consumers getting a mortgage, deserve honest information about lender endorsements.”
Starting in 2010, NewDay entered into a marketing agreement with a veterans’ organization that was facilitated by a broker company.
The deal called for NewDay to pay “lead generation fees” to the veterans’ organization and the broker company, in addition to paying a $15,000 monthly licensing fee to the broker company. As part of this arrangement, NewDay was named the “exclusive lender” of the veterans’ organization.
However, NewDay never disclosde that the veterans’ organization had a financial relationship with NewDay, the CFPB alleges.
A CFPB order requires that NewDay:
End deceptive marketing: NewDay may not engage in deceptive marketing related to mortgage credit products and may not assist others in making misrepresentations.
Cease deceptive endorsement relationships: NewDay may not enter into any business relationship that would involve third-party endorsements inconsistent with the Federal Trade Commission’s (FTC) guidance on endorsements and any subsequent guidance issued by the FTC or the Bureau concerning endorsements.
End kickbacks: The consent order requires that NewDay fully comply with the law and make no payments for referrals.
Pay $2 million in civil penalties: For its conduct, NewDay will make a $2 million penalty payment to the CFPB’s Civil Penalty Fund.