The Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”) have begun an extensive joint investigation into mortgage-related advertisements to assess whether or not they are misleading. The FTC and CFPB also partnered with the Bureau of Veterans Affairs and the attorneys general of several states.
After reviewing about 800 mortgage-related advertisements, regulators investigated 19 companies and sent warning letters to an additional 32 companies. The warning letters requested that companies review their advertisements for compliance with federal law. The names of the companies that received letters or are under investigation were not disclosed.
The investigations focused on violations of the 2011 Mortgage Acts and Practices Advertising Rule (“MAPA”), which prohibits unfair or misleading advertising for mortgage credit products. The targeted companies included mortgage brokers, realtors and builders (MAPA does not apply to depository institutions). Reviewed ads included those that had been featured in newspapers, the Internet (including on Facebook), direct-mail and emails.
The warning letters outline several potentially misleading features of the ads, including implied affiliations with, or approval by, government agencies such as the Department of Housing and Urban Development and suggestions that rates were part of an “economic stimulus plan” that was set to expire soon. Some of the ads directed at service members and veterans contained logos that were very similar to the logo of the Veteran Affairs Department and prominent displays of the acronym “VA” (which may be taken to refer to the Veterans Administration). In addition, some of the advertisements contained disclaimers that were in tiny print or not otherwise conspicuous enough.
Though the sweep was jointly conducted by the FTC and CFTB and they will be sharing information with each other, both agencies stressed that they are conducting their own investigations and will not “double team” businesses.
Thomas Pahl, an assistant director in the FTC’s division of financial practices, revealed that the driving force behind the investigation was consumer complaints received by the FTC, and stated that “[m]ortgage advertisers are on notice that they have to comply with the law.” Kent Markus, the CFPB’s assistant director of enforcement, stated that “[m]isrepresentations in advertising for mortgage products pose a significant risk of harm to consumers because they can confuse and mislead consumers when they are making one of the biggest financial transactions of their lives,” and this risk is “particularly significant for veterans and older Americans.” Markus also indicated that the main reason for the investigations was to spur compliance with the law.
The CFPB’s blog entry from November 19 directed consumers to “be on the lookout” for claims that sound “too good to be true” when they get mortgage advertisements, and encouraged consumers to be vigilant for:
- Official-looking seals or logos that imply some kind of government status;
- Promises of amazingly low rates which may turn out to only be in effect for a short period before readjustment to a higher amount;
- Promises that a reverse mortgage will allow borrowers to stay in their home payment-free; and
- Announcements of “pre-approval” and large amounts of cash or credit available to borrowers.
The FTC created mock ads meant to demonstrate what kinds of mortgage-related claims could be potentially misleading, including one that stated “We can get you into a home like this with a low monthly payment. Guaranteed approval for these great deals!”
The CFPB blog entry is available here: http://www.consumerfinance.gov/blog/buyer-beware-potentially-deceptive-mortgage-ads-are-targeting-veterans-and-older-americans/.
The FTC’s mock ads are available here: http://www.ftc.gov/os/2012/11/121119mortgagead_mockads.pdf.
A consumer alert regarding deceptive mortgage ads is available here: http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt023.shtm.