WASHINGTON—The Office of the Comptroller of the Currency has settled with The Federal Savings Bank of Chicago over allegations it deceptively marketed VA cash-out refinance loans, issuing a consent order that says the bank’s practices induced some borrowers to take new loans that carried significant origination fees, higher interest rates and larger monthly payments. The OCC said the action involves violations of Section 5 of the Federal Trade Commission Act.
According to the OCC’s findings, the bank sent out millions of advertisements telling consumers they had “available funds” when, in reality, they would have had to take out a new VA-backed cash-out refinance loan to access any money. The order also says certain employees implied the bank had a special relationship with the Department of Veterans Affairs and suggested borrowers’ rates or monthly payments would fall significantly within a defined period, even though the refinanced loan was a permanent fixed-rate mortgage and the bank could not guarantee any later refinancing on better terms.
The OCC said the conduct occurred from at least 2022 through 2024 and that the bank was unjustly enriched by the deceptive practices. Under the order, The Federal Savings Bank neither admitted nor denied the findings, but must stop the practices, submit quarterly progress reports, hire an independent consultant to identify eligible consumers and develop a restitution methodology, and then pay restitution subject to OCC review.
The enforcement order is also drawing scrutiny because, while it sets out a restitution framework, it does not publicly disclose how many borrowers will qualify, how much money may be repaid, or when consumers can expect checks. That lack of public redress detail was highlighted in Law360’s coverage.