On November 19, 2012, the Federal Trade Commission and the Consumer Financial Protection Bureau announced that they have launched a new coordinated effort to protect consumers, focusing on mortgage advertisements that they say are deceptive.
The CFPB and the FTC worked together to review roughly 800 mortgage ads. These ads were produced by entities involved in different aspects of the mortgage process, including mortgage brokers and lenders, lead generators, real estate agents, home builders, and others. The ads were featured on a wide range of media including newspaper, direct mail, email and social media.
The agencies stated that some of these ads had specifically targeted the elderly and veterans.
The letters warned the recipients that they may be in violation of the Mortgage Acts and Practices Advertising Rule (MAP Rule) that took effect in August 2011, which prohibits misleading claims concerning government affiliation, fees, costs, interest rates, payment associated with the loan, and the amount of cash or credit that is available to the consumer. The MAP Rule does not apply to traditional banks, meaning today’s actions affect only non-banks.
The FTC and the CFPB both have enforcement authority over non-bank mortgage ads under the MAP Rule. The agencies stressed that as part of the initiative they are working together to assure that consistent standards are applied across agencies. The agencies will conduct separate investigations focused on different targets to better utilize their resources and avoid double-teaming businesses.
“Working together and applying consistent standards to all types of clients in all types of ads is a very important means of making sure that mortgage advertisers are on notice that they have to comply with the law,” said Thomas Pahl, the assistant director of the FTC’s Division of Financial Practices.
The FTC and the CFPB issued more than 30 warning letters to mortgage advertisers, warning them that their advertisements may be deceptive. Both agencies stated that they have also opened formal investigations into other advertisers that may have committed more serious violations of the law. Violators of the MAP Rule can be subject to civil fines.
“Misrepresentation in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of the lives,” CFPB Director Richard Cordray stated. “Baiting consumers with false ads to buy into mortgage products would be illegal.”
The review of the advertisements revealed several different types of claims that regulators could possibly find misleading, including ads that suggested that a company was affiliated with a government agency, ads that guaranteed approval and offered low monthly payments without discussing the conditions of the offers, and ads offering a low fixed mortgage rate without discussing significant loan terms.
The announcement shows that the FTC and the CFPB are taking an aggressive and proactive look at companies that offer products in the financial services sector. Companies that offer mortgage and other consumer lending products should know that the FTC and the CFPB are paying special attention to them and that their advertisements need to comply with federal regulations.