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.
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