State Bans ‘Misleading’ Ads by First Alliance Mortgage

Continuing their pressure on First Alliance Mortgage, state regulators have banned further use of the firm’s current advertising messages, contending that they are deceptive and misleading in light of the firm’s alleged racial discrimination in lending in largely black neighborhoods.

The action was disclosed Thursday after the Orange-based home loan broker made an unsuccessful attempt to obtain a court order to prevent the state Corporations Department from enforcing its ban.

First Alliance has suspended its extensive radio advertising although it believes that it is “not legally obligated to follow the order,” said company attorney Paul J. Hall, adding that the ban is “illegal and unconstitutional.”

G. W. McDonald, assistant corporations commissioner for the state, said several parts of First Alliance’s advertising were found to be deceptive, including the following: the statement “We really make it easy to get a home equity loan;” another claim that the firm offers “competitive” interest rates, and a statement that the firm’s loan programs can be “custom-tailored” to fit individual needs “regardless of your financial situation.”

Reiterating allegations in a state lawsuit filed Aug. 10, McDonald said the advertising was misleading because First Alliance has refused to make loans in predominantly black areas and has given unfavorable loan terms to borrowers in areas where the proportion of blacks exceeds 30%.

McDonald said the department issued its order disapproving “all present and proposed advertising” by the company last Monday. That was the same day that the company succeeded in delaying for a month the state’s motions to have the Los Angeles County Superior Court appoint a receiver to take over First Alliance’s operations.

Judge Robert M. Mallano then held the motions in abeyance until he can be briefed and is able to make a ruling Sept. 16 on the question of how the Legislature intended the 1977 Holden Act to be enforced. The act bans racial discrimination in property lending by certain types of financial institutions.

Mallano said Thursday that the matter should go to an administrative hearing before the court can take it up. He scheduled further proceedings on the advertising ban for the Sept. 16 hearing.

Conceding that the advertising ban is part of a “procedural skirmish,” McDonald said later that if the department has to be “held up on procedural matters, so does the company.”