A Web site that invites consumers to compare mortgage rates offered by dozens of lenders is being sued by a former client, American Interbanc Mortgage LLC, which alleges Bankrate.com did little to prevent advertisers from engaging in bait-and-switch tactics.
The lawsuit, filed in 2002, alleges that hundreds of consumers shopping for a loan on the site complained to Bankrate.com that they weren’t able to lock in the rates advertised by lenders, who pay to have clickable links to their Web sites embedded in rate tables that are custom-generated for each visitor query.
A spokeswoman for Bankrate Inc., which owns and operates the site, said the company has been much more aggressive about quality control under CEO Tom Evans, who came on board in 2004, but is confident of winning the lawsuit if it goes to trial this fall.
“It’s an old lawsuit,” said Bankrate spokeswoman Kayleen Keneally. “If it goes to trial we’ll fight it and we think we’re going to win it. We’ve changed the QC (quality control) policy since this happened, and we are very aggressive in making sure what consumers are offered is what they are going to get.”
Unlike another big name in the online mortgage business, E-Loan, Bankrate.com does not lend money directly to consumers. Instead, it refers them to third-party lenders who advertise on the site. American Interbanc’s lawsuit claims that other lenders engaged in false advertising, luring customers with offers of low interest rates they never intended to honor.
In a motion filed last month in Superior Court in Orange County, Calif., attorneys for Bankrate argued for dismissal of the case because they say advertisers are responsible for any false claims they make on the site. American Interbanc originally sued several lenders for false advertising on Bankrate.com. After Bankrate refused to renew American Interbanc’s contract to advertise on the site, the lawsuit was expanded to include Bankrate.
“We have submitted numerous documents we believe establish that Bankrate was fully aware of the bait-and-switch advertising on their Web site … and allowed it to continue,” said Bill Claster, an attorney representing American Interbanc.
To prevent such practices, Keneally said Bankrate now employs “mystery shoppers” to verify that visitors to the site can actually obtain the loans they are promised. Violators are banned from the site for 48 hours for a first offense, two weeks for a second offense, and six months if they are caught a third time, she said.
A query of the company’s Web site Wednesday for a $500,000, 30-year fixed-rate mortgage in Oakland, Calif., produced a table of 51 results, including 46 from advertisers. The APR of the loans ranged from 6.189 percent to 7.62 percent, with fees of up to $9,450.
A disclaimer notifies users that lenders may post different rates on their own Web sites, and invites them to notify Bankrate.com of any problems.
“Many lenders have different rates on their own Web sites than those posted on Bankrate.com,” the disclaimer says. “In order to get the Bankrate.com rate, please identify yourself as a Bankrate.com customer.”
The Internet usage tracking service Alexa ranks Bankrate.com as the 1,453th most popular site on the Web, although traffic is down 23 percent over the last three months. Alexa ranks E-Loan as the 16,348th most visited Web site.
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