United States: FTC Continues Enforcement Push On Mortgage Lead Generation

Last Updated: September 23 2014
Article by Jonathan L. Pompan and Alexandra Megaris

A mortgage lead generator has settled charges that it engaged in deceptive advertising with ads that falsely claimed they could refinance their mortgages for free, according to recently filed court documents by the Federal Trade Commission (FTC). "Lead generators need to understand that federal laws governing truth in advertising apply to them as well as everybody else," according to Jessica Rich, Director of the FTC's Bureau of Consumer Protection.

The FTC in a complaint filed on September 12, 2014 alleges the lead generator designed and distributed deceptive refinancing ads as part of its service. According to the complaint, the company ran these ads on well-known third-party Internet websites and ad networks, as well as on its own websites. The ads took consumers to a landing page where they provided contact information, which was passed on to providers of mortgage refinancing.

According to the FTC's complaint, the lead generation company allegedly made deceptive and unsupported claims in its advertisements that overstated how much consumers could reduce their payments if they refinanced their mortgages, how low their annual percentage rate would be, and how easy it would be for them to qualify for refinancing. The complaint also says that some ads falsely claimed there were no hidden fees, and that the mortgage refinancing was "free," and that other ads claimed that fixed interest rates were available, when in fact the rates and the amount consumers spent on interest were variable.

The complaint charges the lead generator with violating the Federal Trade Commission Act; the Mortgage Acts and Practices Advertising Rule, or "MAP" Rule, and Regulation N; and the Truth in Lending Act and Regulation Z.

The terms of the settlement include a $500,000 civil penalty and prohibition on:

  • misrepresenting the terms and conditions of any financial product or service, and any term or condition of a mortgage credit product;
  • disclosing, selling, or transferring the consumer data obtained through the Delta Prime Refinance lead generation service; and
  • violating the FTC Act; the MAP Rule and Regulation N; and the Truth in Lending Act and Regulation Z.

The lead generator did not admit or deny any wrongdoing under the terms of the settlement.

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, and bedrock advertising requirements.

A copy of the FTC's press release, complaint, and settlement with the lead generator, Intermundo Media, LLC d/b/a Delta Prime Refinance, Delta Prime Mortgage, and American Dream Quotes, is available here.

We recently discussed heightened government scrutiny of online lead generation advertising in greater detail during our panel session, Staying Current with Consumer Protection: Practical Lessons from Recent Enforcement Actions (presentation slides available), at LeadsCon NY 2014. The panel included commentary from Roberto Anguizola, Assistant Director of the FTC Division of Marketing Practices; Natalie Williams, Assistant Litigation Deputy of the CFPB Office of Enforcement; and David Morgan of PerformLine. For a write-up on the session, see What lead gen firms need to know about consumer protection laws (third party link).

Since November 2012, the CFPB and FTC have jointly been investigating mortgage advertising, including lead generators, and since then have brought several public enforcement actions. 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."

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Below is a list of several relevant articles and presentations from our attorneys, which may be of assistance to your organization in this environment of enhanced scrutiny.

To view any of these articles, alerts, or presentations, please click on the title.

Navigating CFPB, FTC, and State Attorneys General Consumer Protection Investigations (Presentation)

Mortgage Lending: Important Lessons about Advertising, Affiliates, and Authorizations (Article)

Advertising and Marketing Law Fundamentals for Consumer Financial Products and Services (Presentation)

The FTC's Revised .com Disclosures Guide: What Third Party Advertisers and Lead Generators Need to Know (Presentation)

CFPB and FTC Target Mortgage Advertising (Article)

New FTC Mortgage Assistance Rule Targets Lead Generators and Affiliate Marketers (Article)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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