Reference no: EM133088751

RMK Financial Corporation is a California-based mortgage lenderwhich also does business under the name Majestic Home Loans. RMKmailed print advertisements to more than 100,000 consumers inseveral states, using the names and logos of the Department ofVeterans Affairs (VA) and the Federal Housing Administration (FHA)in a way that falsely implied that the advertisements were sent bythe VA or FHA, or that the company or the advertised mortgageproducts were endorsed or sponsored by the VA or FHA. RMK sent itsadvertisements to tens of thousands of U.S. military servicemembers and veterans, and other holders of VA-guaranteed mortgages.The company's typical advertisement for VA mortgages featured theDepartment of Veterans Affairs seal and logo at the top of the pageand described its loan products as part of a "distinctive programoffered by the U.S. government." The ad instructed consumers tocall the "VA Interest Rate Reduction Department" at a phone numberthat in fact belonged to RMK. Some mailers were labeled "FHABenefits" and included an image of the Statue of Liberty on theoutside, along with warnings citing the U.S. Code and threateningfines and imprisonment for tampering with the letter. RMK's adsalso contained misrepresentations about the loans' interest ratesand estimated monthly payments, including whether the interest ratewas fixed or variable. Consumers who called the company weresometimes given misleading information over the phone; in somecases, RMK employees told callers or implied that RMK was endorsedby the VA or FHA. The CFPB's investigation found that RMK'spractices violated the Truth in Lending Act, the Mort- gage Actsand Practices Advertising Rule, and other federal consumer laws.The 2011 Mortgage Acts and Practices Advertising Rule prohibitsmisleading claims in mortgage advertising, including implying agovernment affiliation. Under the terms of today's consent order,RMK will be prohibited from falsely implying a governmentaffiliation in future advertisements. It will also pay a civilpenalty of $250,000.

How and why was this situation considered a UDAAP violation?