ClearPath Lending, an Irvine, California-based mortgage provider, has recently faced significant criticism for deceptive VA lending practices. The Consumer Financial Protection Bureau (CFPB) issued a consent decree against the corporation, requesting a civil penalty of $625,000 for misleading tactics targeting military people and veterans. This article looks into the specifics of the incident, ClearPath Lending’s history of deception, and the broader consequences of such schemes.
CFPB’s Findings and Actions on Clearpath Lending
On September 14, 2020, the CFPB issued a consent order against ClearPath Lending, citing multiple violations of federal regulations. These included violations of the Consumer Financial Protection Act (CFPA), Regulation Z, and the Mortgage Acts and Practices-Advertising Rule (MAP Rule). ClearPath was found guilty of sending deceptive and false statements about their VA-guaranteed mortgages, which were primarily aimed at military service personnel and veterans.
ClearPath’s ads misrepresented the credit terms of their mortgages, omitted required disclosures, and falsely claimed no lender costs. These dishonest methods resulted in significant financial consequences for veterans who believed the company’s misleading promotions. The CFPB’s investigation discovered that ClearPath frequently advertised variable-rate mortgages by making deceptive promises about fixed interest rates and APRs. For example, in late 2017, one advertising falsely advertised a variable-rate mortgage with a fixed interest rate of 2.25% for the first three years and an APR of 3.17%, but the actual APR was substantially higher, at 3.516%.
ClearPath not only misrepresented credit terms but also fraudulently promoted no lender costs. In July 2017, the company advertised a 3.17% APR with no lender fees but required clients to pay two discount points at closing. This clear deception was part of a larger scheme to dupe customers into believing they were getting a better price than they actually were.
Misleading affiliation and insufficient disclosures
ClearPath’s dishonest actions went beyond misrepresenting credit terms. In addition, the company’s ads included deceptive claims about its association with the Department of Veterans Affairs (VA). ClearPath mislead consumers by utilizing words such as “programs sponsored by The Department of Veterans Affairs.” This technique took advantage of the faith that military people and veterans have in government institutions, exacerbating the damage caused by ClearPath’s deception.
Furthermore, ClearPath’s advertisements regularly failed to give the necessary disclosures mandated by Regulation Z. They mentioned payment amounts, repayment intervals, and simple yearly interest rates without providing all relevant details, giving consumers an incomplete and misleading understanding of the loan terms.
A Pattern of Deception: ClearPath’s Troubled Past
ClearPath Lending’s fraudulent practices are not unique cases. The corporation has a history of unethical behavior, as proven by the legal issues of one of its senior executives, Said Djahanbin, also known as Sean Dourdian. Djahanbin was found guilty of making false representations to financial institutions as well as aiding and abetting crimes of federal law. He was compelled to pay $438,000 in reparations and was sentenced to three years of supervised release by the Bureau of Prisons.
Despite these legal difficulties, ClearPath Lending has continued to operate, attempting to cover up their scandals with bought articles, phony reviews, and savvy public relations tactics. The company’s efforts to conceal their malpractices are evidenced by their near-perfect ratings on review platforms such as ConsumerAffairs and Glassdoor, both of which provide paid memberships that allow businesses to manage their public image.
The Broader Consequences of VA Loan Scams
VA loan scams, such as those committed by ClearPath Lending, are especially heinous because they target those who have given their lives to defending their country. Military members and veterans rely on VA loans for affordable housing options, and abusing their confidence through misleading techniques is a serious breach. The CFPB’s proceedings against ClearPath Lending illustrate the necessity of remaining vigilant in safeguarding vulnerable consumers from unscrupulous lenders.
ClearPath is not alone in committing this type of wrongdoing. Other mortgage lenders, such as Accelerate Mortgage, LLC, Service 1st Mortgage, LLC, Hypotec, Inc., PHLoans.com, Inc., Go Direct Lenders, Inc., Prime Choice Funding, Inc., and Sovereign Lending Group, Inc., have been linked to similar VA loan fraud. The CFPB’s investigation of these companies demonstrates the prevalence of fraudulent behavior in the mortgage market.
ClearPath’s Attempts to Rehabilitate Their Image
ClearPath Lending has created initiatives such as the ClearPath Lending scholarship to try to restore its bad image. This fellowship, which awards $1,000 to the winner of an essay contest, is part of a larger effort to appear charitable and community-minded. However, such actions cannot undo the damage done by their years of deception and abuse.
ClearPath has also attempted to alter their internet reputation by flooding review sites with phony positive evaluations and entering into paid relationships with platforms such as ConsumerAffairs. These strategies are intended to disguise legitimate consumer concerns and create a false impression of the company’s dependability and honesty.
Consumer Vigilance and the Value of Awareness
Consumers must remain watchful and thoroughly evaluate the information they receive regarding organizations such as ClearPath Lending. Such organizations’ dishonest activities underline the importance of conducting thorough research and remaining skeptical, particularly when dealing with financial items. Consumers should seek out numerous sources of information and be skeptical of too positive evaluations, which could be faked.
It is also critical to share information about scams and fraudulent practices in order to prevent others from falling prey to similar schemes. Raising awareness of the CFPB’s actions against ClearPath Lending and other deceptive lenders will assist to avoid future abuse of service people and veterans.
Conclusion
ClearPath Lending’s VA loan scam serves as a sharp reminder of the need for regulatory monitoring and customer awareness. The company’s deceptive actions have caused enormous harm to military people and veterans, eroding their faith in the financial system. While the CFPB’s charges against ClearPath are a step in the right direction, more work is needed to safeguard vulnerable consumers from unscrupulous lenders. We can all work together to make the financial market more transparent and equitable by being informed and sharing knowledge.
