Related to:
Temporary Order to Cease and Desist

Temporary Order to Cease and Desist Direct Finance Corp

Date: 09/17/2015
Organization: Division of Banks
Docket Number: 2015-011
Location: Norwell, MA

Direct Finance Corp., Norwell, MA - Temporary Cease and Desist

COMMONWEALTH OF MASSACHUSETTS

Suffolk, SS.

COMMISSIONER OF BANKS
MORTGAGE BROKER
LICENSING
Docket No. 2015-011

TEMPORARY ORDER
TO CEASE AND DESIST
AND NOTICE OF
ADMINISTRATIVE PENALTY

In the Matter of

DIRECT FINANCE CORPORATION
Norwell, Massachusetts

Mortgage Broker License No: MB1535

The Commissioner of Banks (“Commissioner”) having determined that DIRECT FINANCE CORPORATION (“Direct Finance” or the “Corporation”) located at 40 Accord Park Drive, Suite 208, Norwell, Massachusetts has engaged in, or is engaging in, or is about to engage in, acts or practices constituting violations of Massachusetts General Laws chapter 255E, and applicable regulations found at 209 CMR 42.00 et seq., hereby issues the following TEMPORARY ORDER TO CEASE AND DESIST AND NOTICE OF ADMINISTRATIVE PENALTY (“Order”) pursuant to General Laws chapter 255E, section 7(b) and General Laws chapter 255E, section 11. 

A. FINDINGS OF FACT

  1. The Division of Banks (“Division”), through the Commissioner, has jurisdiction over the licensing and regulation of persons and entities engaged in the business of a mortgage lender and mortgage broker in Massachusetts pursuant to Massachusetts General Laws chapter 255E, section 2.
  2. Direct Finance is, and at all relevant times, has been conducting business in the Commonwealth of Massachusetts.  Direct Finance’s main office is located at 40 Accord Park Drive, Suite 208, Norwell, Massachusetts.   Direct Finance currently maintains two additional branches at 400 Trade Center, Suite 5900, Woburn, Massachusetts and 439 Columbia Rd, Hanover, Massachusetts.
  3. Direct Finance is currently licensed by the Commissioner as a mortgage broker under Massachusetts General Laws chapter 255E, section 2.  According to records maintained by the Division, the Commissioner issued a mortgage broker license, license number MB1535 to Direct Finance to engage in the business of a mortgage broker on or about December 16, 1997. 
  4. On or about August 17, 2015 the Division was forwarded a copy of a solicitation received by a Massachusetts consumer from Stephen Becker, a licensed mortgage loan originator sponsored by Direct Finance.  A copy of the Solicitation is attached as Exhibit 1 pdf format of direct-finance-stephen-becker-exhibit-1.pdf
.

    i. Misleading and Deceptive Advertising Practices

  5. Massachusetts General Laws chapter 93A, section 2(a) states:

    Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

  6. The Attorney General’s regulation 940 CMR 8.04(1) states:

    It is an unfair or deceptive act or practice for a mortgage broker or lender to make any representation or statement of fact in an advertisement if the representation or statement is false or misleading or has the tendency or capacity to be misleading, or if the mortgage broker or lender does not have sufficient information upon which a reasonable belief in the truth of the representation or statement could be based.  Such claims or representations include, but are not limited to the availability, terms, conditions, or charges, incident to the mortgage transaction and the possibility of refinancing. 

  7. The Division’s Regulation 209 CMR 42.12A(9) states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender to make false promises to influence, persuade, or induce a consumer to a sign a mortgage loan application or mortgage loan documents.

    a. The “Become a Secret Angel” Solicitation

  8. The Division’s review of the “Become a Secret Angel” solicitation (the “Solicitation) revealed that it included several statements which were misleading and deceptive.  The Solicitation was geared towards individuals who knew of a senior citizen or retired couple with financial difficulties.
  9. The body of the Solicitation offered consumers a “Lifestyle Improvement Loan” and included a statement informing the consumer that their largest asset was their home, and they should use it to their advantage.  The Solicitation also indicated that with a “Lifestyle Improvement Loan,” debt could never be negative as it is insured by the Federal Housing Administration (FHA).     It is unclear how a “Lifestyle Improvement Loan” can never be negative and is insured by FHA.  The Division believes Direct Finance is offering a Reverse Mortgage loan product, and is misleading consumers by using the term “Lifestyle Improvement Loan” without identifying the terms and conditions associated with the Reverse Mortgage product.    Furthermore, FHA insures Reverse Mortgage products, not “Lifestyle Improvement Loans.”
  10. The body of the Solicitation included six bullet points listing what a consumer could do with their money once they received a “Lifestyle Improvement Loan.”  Consumers could pay off existing credit card debt, pay off an existing mortgage, eliminate future mortgage payments as long as they occupy the home regardless of how long they live there, help children or grandchildren with college or financial obligations, make needed home repairs or improvements, and travel.   
  11. Based upon review of the Solicitation, the “Lifestyle Improvement Loan” product offered by Direct Finance is a Reverse Mortgage.   At no point in the content of the Solicitation did Direct Finance use the term “Reverse Mortgage” or discuss the terms of a Reverse Mortgage.   Direct Finance is misleading senior citizens into entering into a “Lifestyle Improvement Loan” without full knowledge of the loan product such as eligibility requirements, the availability, terms, conditions, or charges. 

    b. The Lifestyle Improvement Loan Website

  12. Included in the Solicitation was a website address, www.lifestyleimprovementloan.com (the “Website), which contained further details about the product offered by Direct Finance.
  13. Upon review of the Website, it was revealed that it contained twelve boxes that opened up additional pages with more information.  The boxes were: “Have your cake and Eat it too!; Investment, Vacation or New Home; Private Home Care; Rainy Day Fund; Seniorize Your Home; Helping Family & Gifting; Receive Additional Cash Flow; Estate & Investment Planning; Home Improvement; Remain Independent; Pay Off Credit Cards & Other Loans; and Pay off your Mortgage.”
  14. The Division’s review of the “Have your Cake and Eat it too” webpage revealed that it contains inaccurate and misleading information regarding reverse mortgage loans, including but not limited to the following statements; “The cash you receive from a Lifestyle Improvement Loan comes with no strings attached. You may use the funds however you wish.”  The Website failed to identify that the product Direct Finance was offering was a Reverse Mortgage, and the terms and conditions associated with a reverse mortgage, such as the consumer’s responsibility to pay all taxes and insurance on the consumer’s home. 
  15. Under the “Rainy Day,” tab, it states “One incredible feature of a Lifestyle Improvement Loan is a Line of Credit that gives you access to cash. Unlike a conventional home equity line of credit, a Lifestyle Improvement Loan’s unused portion will “grow”, guaranteed, for as long as you live in your home.” Direct Finance fails to mention that the product they are offering is a Reverse Mortgage and the terms and conditions needed to obtain a Line of Credit.
  16. Upon reviewing the “Home Improvement,” tab, the Website stated that “A HECM Lifestyle Improvement Loan could make your wish come true.”    The Home Equity Conversion Mortgage (HECM) program offered through FHA does not have a Lifestyle Improvement Loan product, what Direct Finance is referring to is a Reverse Mortgage.  Additionally, upon review of the Division’s records, a “HECM Lifestyle Improvement Loan” product has not been approved by the Division in accordance with General Laws 167E, section 7.
  17. Additionally, under the “Pay off your credit card and other loans,” and “Paying off your mortgage” tabs, Direct Finance uses the term Reverse Mortgage and “Lifestyle Improvement Loan” interchangeably thereby misleading consumers about which product Direct Finance is referring to. 
  18. On the left hand side of the Website, there are four links to information about Reverse Mortgages.   As the website is offering a “Lifestyle Improvement Loan,” consumers could be misled into believing the product offered was not a reverse mortgage, and therefore not review the pertinent information.   Direct Finance’s use of the term “Lifestyle Improvement Loan” instead of Reverse Mortgage misleads consumers into believing there are two loan products offered.  Additionally the terms, conditions and costs associated with obtaining a “Lifestyle Improvement Loan” are not listed which would further mislead consumers into believing a “Lifestyle Improvement Loan” and a Reverse Mortgage are different loan products.     

    ii. Failure to Disclose License Type and Number

  19. The Division’s regulation 209 CMR 42.15 states:

    A Licensee shall disclose the type and number of its license(s) to all clients and/or residential mortgage loan applicants in writing at the time a fee is paid or a mortgage loan application is accepted.  A Licensee shall also disclose the type and number of its license(s) in all advertisements.

  20. The Division’s regulation 209 CMR 42.12A(13) states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender to fail to disclose the type and number of its license in an advertisement.

  21. The Division’s regulation 209 CMR 42.12A(14) states:

    It is a prohibited act or practice for a mortgage broker or mortgage lender for an employee or a person associated with and acting under the direction of a mortgage broker or a mortgage lender to advertise residential mortgage loan services without naming the licensee and disclosing the license number of the mortgage broker or mortgage lender under whose license the individual is acting.

  22. The bottom of the Solicitation listed Stephen Becker’s Mortgage Loan Originator license number and Direct Finance’s name and address, however did not include a reference to the type and license number held by Direct Finance.  

    iii. Employee Oversight

  23. The Division’s regulation 209 CMR 42.06(2)(d) states in part:

    An Applicant shall demonstrate to the Commissioner’s satisfaction that the Applicant, and its applicable officers and employees, possess the necessary educational and business experience to engage in the business of a mortgage broker.

  24. According to the Nationwide Multi-State Licensing System, Stephen Becker has been employed by Direct Finance since January 2013. 
  25. As a licensed mortgage broker in the Commonwealth, Direct Finance has a duty to ensure that the Corporation’s employees are in compliance with state and federal laws and regulations. 
  26. Upon review of the Solicitation and website maintained by Direct Finance’s employee Stephen Becker, Direct Finance has failed to ensure that the Corporation’s employees are in compliance with state and federal laws and regulations as the Solicitation and Website are in violation of multiple state and federal laws and regulations.

    B. CONCLUSIONS OF LAW

  27. Based upon the information contained in Paragraphs 1 through 26, Direct Finance has failed to demonstrate and maintain the character, reputation, integrity, and general fitness that would warrant the belief that the mortgage broker business will be operated honestly, fairly, and soundly in the public interest in violation of Massachusetts General Laws chapter 255E, section 4 and the Division's regulations 209 CMR 42.06(2)(c).
  28. Based upon the information contained in Paragraphs 1 through 26, by distributing to Massachusetts consumers a Solicitation and maintaining a Website that contained false or misleading language or language that had the tendency to be false or misleading, including language that could lead the reader to believe they were not signing up for a reverse mortgage product, Direct Finance has violated Massachusetts General Laws chapter 93A, section 2(a), and the Office of the Attorney General's implementing regulation 940 CMR 8.04(1).
  29. Based upon the information contained in Paragraphs 1 through 26, by distributing to Massachusetts consumers a Solicitation and by maintaining a Website where the loan product information could falsely influence, persuade or induce a consumer to enter into a reverse mortgage loan application, Direct Finance has violated the Division’s Regulation 209 CMR 42.12A(9).
  30. Based upon the information contained in Paragraphs 1 through 26, by not listing Direct Finance’s mortgage broker license number on the Solicitation, Direct Finance is in violation of the Division’s regulation 209 CMR 42.15, 209 CMR 42.12A(13) and 209 CMR 42.12A(14).
  31. Based upon the information contained in Paragraphs 1 through 26, by not maintaining proper oversight over the Corporation’s Employees, Direct Finance is in violation of the Division’s regulation 209 CMR 42.06(2)(d).
  32. Based upon the information contained in Paragraphs 1 through 26,  the Commissioner has determined that:

    Direct Finance has engaged in, is engaging in, or is about to engage in, acts or practices which warrant the belief that the public interest will be irreparably harmed by delay in issuing an ORDER TO CEASE AND DESIST to Direct Finance.

    C. ORDER TO CEASE AND DESIST AND NOTICE OF ADMINISTRATIVE PENALTY

  33. After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:
  34. ORDERED that Direct Finance shall cease distributing the Solicitation identified as Exhibit 1 and any Solicitation to Massachusetts consumers that contains any representations or statements that could be considered false, misleading, or have the tendency or capacity to be misleading including but not limited to:
    1. Solicitations containing false or misleading language or language that had the tendency to be false or misleading;
    2. Solicitations that have the tendency to make false promises to influence persuade or induce a consumer to sign a mortgage loan application without knowing the type of loan product and terms and conditions associated with the loan product. 
  35. ORDERED that Direct Finance shall cease operation of www.lifestyleimprovementloan.com and any website to Massachusetts consumers that contain any representations or statements that could be considered false, misleading or have the tendency or capacity to be misleading including but not limited to:
    1. Websites containing false or misleading language or language that has the tendency to be false or misleading;
    2. Websites that have the tendency to make false promises to influence persuade or induce a consumer to sign a mortgage loan application without knowing the type of loan product and terms and conditions associated with the loan product.
  36. IT IS FURTHER ORDERED that within five (5) days of the effective date of this Order, Direct Finance shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all Massachusetts consumers to whom the Corporation distributed the Solicitation.  The records to be produced shall include the consumers' names and addresses.
  37. IT IS FURTHER ORDERED that within twenty (20) days of the effective date of this Order, Direct Finance shall submit a payment of twenty-five thousand dollars ($25,000.00), in satisfaction of an administrative penalty collected in consideration of the Corporation's engaging in deceptive and prohibited advertising.  Such administrative penalty is imposed pursuant to Massachusetts General Laws chapter 255E, section 11.  The Corporation shall remit payment pursuant to this Paragraph of the Order for the amounts due, payable to the “Commonwealth of Massachusetts Division of Banks Mortgage Loan Settlement Trust” to the Office of the Commissioner of Banks, 1000 Washington Street, 10th Floor, Boston, Massachusetts 02118-6400. 
  38. The administrative penalty imposed on Direct Finance is subject to review as provided in Massachusetts General Laws chapter 30A.  Accordingly, Direct Finance may request a hearing to contest said administrative penalty.  Such request for a hearing must be filed in writing within 20 days of Direct Finance’s receipt of this Order.  If the Corporation fails to request a hearing within the prescribed time frame pursuant to this Paragraph, the aforementioned administrative penalty shall be deemed final and binding and shall be due and owing to the Commonwealth.
  39. IT IS FURTHER ORDERED that a hearing will be scheduled on this matter to determine whether or not such Order shall become permanent and final only upon receipt of a written request for such a hearing from Direct Finance within twenty (20) days of the effective date of this Order.  If no hearing is requested within this twenty (20) day period, this Order shall become permanent and final until it is modified or vacated by the Commissioner.
  40. IT IS FURTHER ORDERED that this Order shall become effective immediately and shall remain in effect unless set aside, limited, or suspended by the Commissioner or upon court order after review under Massachusetts General Laws chapter 30A.
  41. IT IS FURTHER ORDERED that a copy of each advertisement used by Direct Finance shall be retained in the Corporation's books and records and shall be made available to the Division at its examinations/inspections of Direct Finance.

    C. GENERAL PROVISIONS

  42. Direct Finance shall revise its advertising practices and procedures to ensure that all solicitations, websites and advertising materials used by the Corporation do not contain any representations or statements that could be considered false, misleading, or have the tendency or capacity to be misleading.
  43. Direct Finance shall take all necessary steps to ensure that the Solicitation or any similar solicitation are not published or distributed to consumers in Massachusetts.
  44. Direct Finance shall take all necessary steps to ensure that the operation of the Website or any similar website has ceased. 
  45. Direct Finance shall implement, establish and maintain a system of internal controls to monitor the Corporation's compliance with the laws and regulations applicable to advertising practices including, but not limited to the Division's regulations 209 CMR 42.12A and the Office of the Attorney General's regulation 940 CMR 8.00 et seq.
  46. Direct Finance shall establish, implement and maintain policies and procedures to ensure that all advertisements are thoroughly reviewed by senior management prior to publication or distribution to consumers.  Such procedures shall include a review of the criteria utilized to generate mailing lists to ensure that targeted solicitations are appropriate for the consumers to whom such solicitations are distributed.

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 17th day of September, 2015

By: David J. Cotney
Commissioner of Banks
Commonwealth of Massachusetts

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