The Federal Trade Commission (FTC) recently announced a settlement of a lead generation enforcement action. The settlement reflects that the FTC remains focused on lead generation and, more specifically, mortgage advertising, even though it shares enforcement authority for nonbank mortgage advertising with the Consumer Financial Protection Bureau (CFPB). In addition, the settlement is an important reminder that lead generators and buyers need to review advertising and marketing for compliance with applicable laws and regulations.
The FTC's complaint alleged that the online lead generator operated websites that advertised low interest-rate loans as fixed-rate mortgages, when, in fact, they were adjustable-rate mortgages that could become more expensive for borrowers over time. The advertising also allegedly failed to include required disclosures, such as the annual percentage rate, amount of down payment, and repayment terms that figure into the advertised payment amounts and interest rate.
The complaint charged the lead generator with allegedly violating the FTC Act, the Mortgage Acts and Practices Advertising (MAP) Rule (also known as Regulation N), and the Truth in Lending Act and Regulation. The settlement imposes a $225,000 civil penalty and forbids the lead generator from a) violating the law; b) misrepresenting the terms and conditions of any financial product or service, and term or condition of a mortgage credit product; and c) assisting others to misrepresent any material fact about a mortgage credit product. In addition, the settlement prohibits the disclosing, selling, or transferring of consumer data. The lead generator did not admit or deny any wrongdoing under the terms of the settlement.
In November 2012, the CFPB and FTC jointly announced they began formal investigations of six companies that may have violated federal law. At the time the CFPB said, "the actions stem from a joint 'sweep' – a review conducted by the CFPB and the FTC of about 800 randomly selected mortgage-related ads across the country – including ads for mortgage loans, refinancing, and reverse mortgages." The CFPB and FTC also issued warning letters to mortgage lenders and mortgage brokers advising them to "clean up potentially misleading advertisements, particularly those targeted toward veterans and older Americans."
Third-party marketers, including online lead generators, and mortgage lenders and brokers need to be prepared to respond to increased scrutiny.