The Consumer Financial Protection Bureau yesterday announced a $2.25 million civil penalty against New Day Financial for deceiving veterans and active-duty servicemembers in connection with cash-out refinance loans. This action comes after the CFPB found that the lender provided misleading cost comparisons to borrowers in North Carolina, Maine, and Minnesota, falsely making its loans appear less expensive than they were.
The details: According to the CFPB, NewDay misrepresented the costs of its cash-out refinance loans by omitting taxes and insurance from the “new loan” payment amount shown to borrowers. This deceptive practice was identified in borrower “net benefit” worksheets required in the three states mentioned. The CFPB’s findings indicate that this practice, which made the new loans appear cheaper than existing ones, affected over 3,000 borrowers.
- Background: NewDay USA has been under scrutiny for its marketing tactics that heavily target veterans and military families, often using patriotic imagery to build trust. The company previously faced action from the CFPB in 2015 for similar deceptive practices and illegal kickbacks.
- Impact on borrowers: The misleading information led many veterans to take on loans that were more expensive than their original mortgages, a significant issue given the financial vulnerability of many of these borrowers.
What’s next: In addition to the financial penalty, the CFPB has ordered NewDay to stop misrepresenting loan costs and to ensure that its future disclosures accurately reflect all components of the loan payment amounts. The CFPB will continue to monitor NewDay USA’s compliance with this order as part of its broader effort to protect consumers from predatory lending practices.
What they’re saying: “NewDay USA baited veterans and military families into cash-out refinance mortgages by hiding the true costs of these loans,” said CFPB Director Rohit Chopra. “NewDay USA’s misconduct has no place in the VA home loan program.”
