Just on the heels of announcing settlements of enforcement actions against several credit card companies, the Consumer Financial Protection Bureau (the "Bureau") seems to have set its sights on the target of its next round of enforcement actions – lenders who are allegedly violating the Mortgage Acts and Practices – Advertising Rule ("MAP Rule"). The Bureau has launched formal investigations of six companies who it believes have violated the MAP Rule, a rule that addresses claims and statements in mortgage advertising that may be misleading to consumers. The Bureau is particularly focused on advertisements and claims aimed at the elderly and veterans.
In a blog on its Web site, the Bureau has specifically warned against these types of advertisements, which the Bureau says come from complaints it has received from consumers:
- Advertisements including "[o]fficial-looking seals or logos that imply some kind of government status," misleading the consumer into believing they come from the VA or HUD;
- Promises of "amazingly low rates," which, in reality, are only in effect for a short period and are readjusted under the terms of the loan to a much higher rate;
- Promises that reverse mortgages will allow a consumer to stay in their home payment-free, with no mention of the need to keep up with tax and insurance payments;
- Announcements of "pre-approval" and the availability of "large amounts of cash or credit," without reference to the need to go through a standard qualification process.
These types of misleading advertisements not only implicate the MAP Rule, but such practices, if true, also could also violate Dodd-Frank Act's prohibition against the "unfair, deceptive, or abusive acts or practices" ("UDAAP").
Mortgage lenders can learn from the Bureau's recent enforcement actions involving UDAAP. In the ensuing settlements with a number of credit card companies, the Bureau provided some limited guidance on what it considers to be deceptive acts and practices under Dodd-Frank through those enforcement actions. The Bureau has indicated, for instance, that it "will take all necessary steps to ensure that consumers are protected from deceptive sales and marketing practices, including those resulting from failures to adequately disclose important product terms and conditions, or other violations of Federal consumer financial law." The Bureau specifically warned that marketing materials have to "reflect the actual terms and conditions of the product and are not deceptive or misleading to consumers."
The Bureau has yet to offer guidance on what it considers unfair acts or practices or what the "abusive" standard means, however. Abusive is a new concept in the financial services industry – and the Bureau has done nothing to define the term, leaving financial institutions in the dark as to how they can avoid abusive acts and practices.
Likely, the financial services industry will have to wait for further enforcement actions to glean any meaning out of these other terms – and the mortgage industry may be the means by which the Bureau provides such guidance.
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