Settles Bait and Switch Lawsuit

Mortgage and Lending with Cambria Mortgage NMLS 274132 settles Bait-and-Switch Lawsuit.
 NovaStar, other Bankrate advertisers hit with $46 million judgment for false mortgage interest rate advertising.
 Bankrate agreed to pay $3 million in order to settle a lawsuit regarding alleged "bait-and-switch" advertisements that were appearing on the site. Former advertiser American Interbanc Mortgage accused Bankrate of removing its ads from the site after American Interbanc claimed that other advertisers were promoting loan rates that were not honored. Customers who went to those sites were quoted higher rates than appeared in the advertisements, according to the claim. While Bankrate denied the allegations, testimony was presented indicating that Bankrate received hundreds of complaints about those "bait-and-switch" advertisements.
 Flashback to pre-internet days of mortgage lead generation advertising: You opened your hometown newspaper's weekly real estate section, and found a mortgage guide where several local lenders displayed rates, in a table or display ads, showing only rate and APR. The posted rates typically showed very low rates attainable only by paying a large amount of discount points, obscured but reflected in the APR. To make things even more opaque, publishing deadlines demand ad copy, and thus rates be delivered 2-3 days prior, rendering the advertising bait, relatively meaningless.
Around 1996: Bankrate takes on this game, and puts it on steroids by making bait-n-switch rate a national game, not a local one, with a simple click.
 June 2007: Over 10 years later, successful litigation finally holds some of the these bad-players accountable. The bad lenders in this case went beyond simply practicing false advertising. They were convicted of conspiring to prevent another lender from doing business in good faith!
 Hopefully the press generated from this lawsuit will get the attention of the regulators who need to start enforcing and hopefully even giving some more punitive muscle to Regulation Z, and RESPA (the laws governing such practices). The current practice of doling out small fines and slaps on the wrists, will never change current bad lender behavior.
 Unfortunately, a quick survey of's site shows a large number of their advertising lenders are still doing what they have for years - posting rates, costs, and APR's that they will never honor, but are designed to get your attention.
 Furthermore, to make it even worse, the media (TV, newspapers, internet, etc.) constantly portray BankRate as the almighty, and quote their "average" rates everywhere. But the average is based on the phony advertising, and huge discount points most people don't pay, therefore the "average" they quote is completely worthless.
 For REAL rate averages, look at Freddie Mac's weekly rates at
 THE LAWSUIT: The successful lawsuit against Bankrate Inc. claimed that the popular website, intended to help borrowers, actually misleads them because many lenders posting rates don't really honor those rates. These are usually the lenders quoting the "lowest" rate. The lawsuit alleges that this also puts honest advertisers on the website at a competitive disadvantage.
 American Interbanc Mortgage LLC, an advertiser, sued Bankrate for $16.5 million in damages and a $33 million in punitive damages. The lawsuit began back in 2002 when American Interbanc Mortgage sued other Bankrate advertisers claiming their rates were unrealistic and put American Interbanc Mortgage at a disadvantage. Later, American Interbanc Mortgage added Bankrate to the lawsuit, after Bankrate did not renew American Interbanc Mortgage's advertising agreement.
 American Interbanc Mortgage alleged, and successfully proved that Bankrate knew what some dishonest advertisers were doing and let it happen. Court documents indicate that Bankrate has had hundreds of complaints about advertisers' posted rates. The Wall Street Journal reports that one Bankrate advertiser confided to a Bankrate employee saying the borrower would require a "direct pipeline to God" to get the rate they had posted.
 Bankrate's reach is wide. Their partnerships with Yahoo and AOL along with their newspaper presence allow their rate tables to be displayed to millions of people on a daily basis, although accuracy is a huge problem.

Comments (3)

Steve Glose
Keller Williams Legacy - Orlando, FL
TRC, CIPS, 407-616-7286, Orlando Real Estate, Orla
Ouch... Im sure this hit there reputation more than there wallet.
Dec 07, 2007 12:35 AM
Jamie Jameson
Antioch, CA

This is good stuff, Joseph! has a huge audience and lots of referrals from the financial websites. It is with great interest that I find American Interbanc has done exactly what they threaten. The details of the lawsuit must not have gotten wide attention, this is the first I have heard. Now all of us in the real estate industry has to overcome more bad press. It will be very, very interesting to hear how far the federal government will go to bring the REAL perps to justice in the bailout. How many CEO's have quit or been forced out and taken tens of millions dollars with them. The CEO's that were at the root of the subprime mess should have to repay what they stole.

Sep 21, 2008 08:06 AM
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Haven Express @ Keller Williams Arizona Realty

False Advertising of any kind is a hot topic for me right now.  It's incredible and appalling how some agents that are clueless when it comes to Short Sales boast of hundreds of transactions and high closing ratios - neither metric being supported by the MLS.

Aug 23, 2010 01:55 AM