Here’s a first for you: The FTC has released a series of ads created by its own staff and boy, are they bad. No, we’re not channeling our inner Sterling Cooper Mad Men. The goal is to help companies comply with their legal obligations by showing some of the questionable mortgage-related claims likely to cause law enforcement — and consumer — heartburn.
FTC staff and their counterparts at the Consumer Financial Protection Bureau (CFPB) have been looking at a lot of mortgage ads lately, including ones running on websites, on Facebook, in direct mail, and in newspapers. The FTC has sent warning letters to 20 companies — real estate agents, home builders, and lead generators — raising concerns about possible deception under the Mortgage Acts and Practices Advertising (MAP) Rule and the FTC Act. The CFPB sent letters to another dozen mortgage brokers and lenders, posing similar questions about the companies’ ad claims. Both agencies also have nonpublic law enforcement investigations underway into other advertisers’ practices.
What’s behind the wave of warning letters? The FTC and CFPB want to spur compliance with the MAP Rule, which bans material misrepresentations in advertising or any other commercial communications about consumer mortgages. Under the Rule (now known as Regulation N since rulemaking authority for it transferred from the FTC to the CFPB), the two agencies share enforcement authority over non-bank mortgage advertisers like mortgage lenders, brokers, servicers, and ad agencies. Non-compliance can be costly since rule violations kick in hefty civil penalties.
Why the mock ads? They’re tools to help keep your clients’ promotions in line with the law. They illustrate examples of claims companies want to avoid, including:
- Ads offering very low “fixed” mortgage rates without discussing important loan terms;
- Ads using visuals or copy that suggest a government affiliation; and
- Ads “guaranteeing” approval and offering very low monthly payments, without talking about significant strings.
The Business Center's Real Estate and Mortgages page offers resources for companies within the FTC's jurisdiction. Looking for a mortgage yourself? Don't make a move without reading Deceptive Mortgage Ads: What They Say; What They Leave Out.