Tuesday, September 27, 2011
Misleading Mortgage Ads To Be A Thing of The Past
Beginning August 19, the Federal Trade Commission has applied a new rule aimed at strengthening consumer protections by placing an all-out ban on deceptive claims about consumer mortgages in ads and any other “commercial communication.”
The rule applies generically to, among others, mortgage lenders, brokers, servicers, real estate agents, ad agencies, home builders, lead generators, and rate aggregators, all of which are already under the jurisdiction of the FTC. Businesses outside of the jurisdiction of the FTC, such as banks, thrifts, and federal credit unions, will not currently be subject to these new regulations.
The FTC gives numerous examples of claims that will be prohibited under the new rule, and highlights specific areas of misrepresentation that will not be tolerated. Ads may no longer contain deceptive language regarding the existence, nature, or amount of fees or costs to the consumer associated with the mortgage, nor may they include illusory terms, amounts, payments, or other requirements relating to taxes or insurance associated with the mortgage.
The variability of interest, payments or other terms of the mortgage must be straightforward, and the type of mortgage being offered must be clear. Additionally, the producer of the advertisement or communication must be clearly indicated.
Those who violate the new rule will be exposed to civil penalties by both the individual states and the FTC. The Consumer Financial Protection Bureau will also be able to enforce the rule. Prior to institution of the rule the FTC could only bring action against deceptive mortgage advertisers to get them to stop making false claims – under the new rule, the FTC will be able to bring such an action against the deceptive advertisers and also seek civil penalties, such as fines, against them.
With this rule in place, the FTC claims that there will be a level playing field for legitimate businesses to compete in the marketplace.