The Federal Trade Commission (FTC) has issued a new rule banning deceptive claims about consumer mortgages, both “forward” and reverse, in advertising and other commercial communications. The rule, called the Mortgage Acts and Practices – Advertising Rule, was created in an effort to protect consumers and level the advertising playing field so legitimate, forthright businesses can compete.
The process for this new rule began in June 2009 pursuant to the Omnibus Appropriations Act, when the FTC issued an advanced notice of proposed rulemaking and sought public comment on whether certain mortgage practices were unfair or deceptive, says the FTC. Then, the proposed rule, banning deceptive advertising practices, was released in September and the FTC again sought public comment, this time about its costs and benefits.
The final rule that has just been issued is very similar to the proposed rule, says the FTC, and it applies to all entities within the FTC’s jurisdiction that advertise mortgages, including mortgage lenders, brokers, and servicers; real estate agents and brokers; and advertising agencies. Banks, credit unions, and other entities not under the FTC’s jurisdiction are not covered by the rule.
A list of 19 prohibited deceptive practices are also contained in the new rule, as well as several prohibited misrepresentations about mortgages that often occur in advertising, which include the type of mortgage offered, the amounts, terms, payments or other requirements related to taxes and insurance on forward or reverse mortgages, and the fees and costs associated with getting a mortgage.
Advertisers are prohibited from making false claims about mortgages, and the FTC will be able to take action against offending parties who fail to heed this rule. Additionally, says the FTC, the fledgling Consumer Financial Protection Bureau (CFPB) and state law enforcement authorities may also bring actions to enforce the rule.
The FTC vote to pass the rule was unanimous, and it will go into effect on August 19, 2011.
View the Mortgage Acts and Practices – Advertising Rule here.
Written by Alyssa Gerace