GoLoansOnline.com, Inc., a Houston, Texas-based mortgage lead generator, will pay the Federal Trade Commission $250,000 under a settlement announced earlier this month of claims it operated mortgage lending websites that deceived consumers about mortgage terms. The FTC charged that GoLoansOnline.com advertised low-interest-rate loans as fixed-rate mortgages to generate potential borrowers for third parties, but actually matched consumers with mortgage brokers, mortgage lenders, or lead brokers that did not provide mortgages with the advertised terms.
The FTC alleged that GoLoansOnline.com's advertisements represented that the company or its affiliated third-party purchasers would provide a mortgage with a low fixed interest rate or fixed monthly payment, such as a fixed rate of 2.25 percent, when the rate actually corresponded to an adjustable rate mortgage. The FTC stated that the phrase "Adjustable-Rate Mortgage," "Variable-Rate Mortgage," or "ARM" did not appear in GoLoansOnline.com's advertisements, or was not as conspicuous as the word "fixed." The FTC also claimed that GoLoansOnline.com's websites advertised a rate of finance charge without disclosing the rate as an annual percentage rate and failed to state the repayment obligations over the full term of the loan.
Based on these allegations, the complaint charged that GoLoansOnline.com disseminated deceptive commercial communications regarding mortgage credit products in violation of the FTC Act and the Mortgage Acts and Practices Advertising Rule (the MAP Rule and Regulation N). It also alleged the company failed to include the annual percentage rate and whether it would increase after the loan is made in violation of the Truth in Lending Act (TILA) and Regulation Z.
As part of the settlement, GoLoansOnline.com agreed to significant compliance reporting and recordkeeping requirements in addition to paying the $250,000 civil penalty. The settlement also prohibits GoLoansOnline.com from:
Disclosing, selling, or transferring consumer data
Misrepresenting the terms and conditions of any financial product or service, and any term or condition of a mortgage credit product
Assisting others with misrepresenting any material fact about a mortgage credit product
Violating the Federal Trade Act, the MAP Rule and Regulation N, and TILA and Regulation Z
"Buying a home is one of the most important financial decisions a consumer can make," said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, when the settlement was announced. "When companies deceive consumers about the true cost of the mortgages they offer, and consumers take on a mortgage they can’t afford, the harm can last a long time. The FTC's message is clear: Mortgage advertising must be truthful."
The recent settlement and the FTC's announcement demonstrate that the FTC intends to continue targeting companies that engage in deceptive mortgage advertising. Mortgage lenders, brokers, and lead generators should be aware of the FTC's vigorous enforcement actions and review their advertising policies and procedures to ensure continued compliance with the law.