Excerpt from our One Page Annotated Wall Street Journal Summary (get it e-mailed to you every morning by signing up here):
Popular Mortgage Web Site Under Scrutiny
Summary: A former advertiser is suing Bankrate.com for carrying misleading "bait and switch" ads from competitors. The suit, against the advertisers themselves and Bankrate.com as well, seeks $16.5 million in damages and a minimum of $33 million in punitive damages. Bankrate is accused of knowingly carrying ads from mortgage lenders that offered unrealistically low rates that were never in practice given to borrowers in an attempt to lure them into more expensive deals. The plaintiff, the founder of mortgage lender American Interbanc, alleges that Bankrate received 529 complaints from users about the ads, mostly before Bankrate CEO Thomas Evans took office, but some after he did so. The president of another mortgage lender is quoted in the article saying he stopped using Bankrate because it is "not a level playing field". In contrast, competing sites E-LOAN and Lending Tree have received relatively few complaints.
Comment on related stocks/ETFs: Other than the financial impact of the lawsuit, this article is a major blow to Bankrate's (NYSE:RATE) credibility. Incrementally positive for competitors IAC/Interactive (IACI) which owns Lending Tree and Popular Inc. (NASDAQ:BPOP) which owns E-LOAN.