OCC Hits Federal Savings Bank With Consent Order for Deceptive VA Loan Ads

The OCC issued a consent order against The Federal Savings Bank of Chicago this month, alleging deceptive acts or practices in the bank’s advertising to veterans.

The $1.1 billion-asset lender told millions of consumers they had “available funds.” But the ads were solicitations for VA cash-out refinance loans, and consumers had to apply for a new loan to access anything. Some employees went further, the OCC alleged, telling customers their interest rate or monthly payment would decrease over time. The loan was a fixed-rate instrument with a fixed payment. It wouldn’t.

The OCC’s consent order (a binding supervisory agreement in which a bank accepts corrective measures without admitting fault) found that those statements induced veterans to take out VA cash-out refinance loans, paying significant origination fees and ending up with mortgages carrying significantly increased interest rates and monthly payments than before.

The bank consented but admitted nothing. It’s now required to retain a restitution consultant to identify affected customers and calculate what each is owed.

The backstory matters: The Federal Savings Bank was founded by Stephen Calk, a Trump campaign economic adviser convicted in 2021 of financial institution bribery for issuing high-risk loans to Paul Manafort in exchange for personal benefit. He was sentenced to one year and one month in federal prison. His brother John Calk has run the bank as CEO and chairman since 2019. The OCC already ordered the bank to overhaul its risk management and anti-money laundering controls in 2021.

The restitution methodology is still pending.

James Okafor