WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has taken decisive action against NewDay Financial, LLC, known as NewDay USA, for deceptive practices targeting active-duty servicemembers and veterans. The CFPB discovered that NewDay USA misled borrowers in North Carolina, Maine, and Minnesota by presenting skewed cost comparisons in their cash-out refinance loans.
NewDay USA, a direct mortgage lender based in West Palm Beach, Florida, specializes in loans backed by the U.S. Department of Veterans Affairs (VA). The company has been found guilty of providing borrowers with incomplete and misleading cost comparisons, making their loans appear cheaper than existing mortgages. This tactic primarily involved displaying only the principal and interest payments for new loans while juxtaposing them against the full payment amounts, including taxes and insurance, of previous loans. As a result, many veterans were misled into believing the refinanced loans were more affordable, when in fact, they often carried higher costs.
CFPB Director Rohit Chopra expressed firm disapproval, stating, “NewDay USA baited veterans and military families into cash-out refinance mortgages by hiding the true costs of these loans. NewDay USA’s misconduct has no place in the VA home loan program.”
The issue of loan “churning” — where lenders aggressively push veterans to repeatedly refinance their VA home loans unnecessarily — has been a point of concern for the CFPB, VA, and Ginnie Mae. This practice often results in veterans facing higher overall costs while lenders profit from refinancing fees and the sale of loans on secondary markets. Ginnie Mae has previously acted against NewDay USA and other lenders by limiting their capacity to sell these loans to investors. Both Ginnie Mae and the VA have implemented measures to curb such activities.
In 2015, the CFPB had previously penalized NewDay Financial for paying illegal kickbacks and misleading borrowers about endorsements from veterans’ organizations. Now, under the Consumer Financial Protection Act, the CFPB has mandated NewDay USA to pay a $2.25 million civil penalty to the agency’s victims relief fund. Additionally, the company is prohibited from misrepresenting loan costs and must cease using misleading comparison worksheets.
This enforcement aims to safeguard consumer rights and ensure transparency in financial dealings, particularly for vulnerable groups like servicemembers and veterans. As the CFPB continues its oversight, this case serves as a critical reminder of the importance of honest communication in financial services.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and MSN.