On Thursday, June 27, 2013, the Federal Trade Commission ("FTC") announced that Mortgage Investors Corporation of Ohio, Inc. ("Mortgage Investors") will pay a $7.5 million civil penalty for alleged violations of the Telemarketing Sales Rule ("TSR"). This settlement marks the largest fine that the FTC has ever collected for TSR violations and cleverly coincides with the 10th Anniversary of the National Do Not Call Registry.
Mortgage Investors is one of the largest refinancers of veterans' home loans and provides home loan refinancing services in 42 states. To promote these services, Mortgage Investors employs hundreds of telemarketers to cold-call consumers, encouraging them to schedule in-home sales appointments with company affiliated licensed loan officers. This tactic in and of itself is not problematic. However, according to the FTC's Complaint, Mortgage Investors has continually thwarted multiple provisions of the TSR.
The original TSR was adopted by the FTC in 1995, in response to Congress' directive to prescribe rules prohibiting abusive and deceptive telemarketing acts or practices. In 2003, the TSR was extensively amended, resulting in, among other things, the establishment of the National Do Not Call Registry, a list that consumers can join to opt-out of receiving telemarketing calls. The TSR, as amended, prohibits sellers and telemarketers from initiating outbound telephone calls to numbers on the National Do Not Call Registry. 16 C.F.R. § 310.4(b)(1)(iii)(B). In addition, it prohibits sellers and telemarketers from initiating outbound telephone calls to any consumer who has previously stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the seller whose goods or services are being offered. 16 C.F.R. § 310.4(b)(1)(ii)(A). Lastly, the TSR prohibits sellers and telemarketers from engaging in conduct that denies or interferes with a person's right to be placed on a list of persons who made do-not-call-requests. 16 C.F.R. § 310.4(b)(1)(ii).
In its Complaint, the FTC alleges that in promoting its home loan refinancing services, Mortgage Investors placed more than 5.4 million calls to telephone numbers listed on the National Do Not Call Registry between February 2, 2009 and July 30, 2012 and failed to remove consumers from its internal call lists when they so requested, continuing to target such consumers through cold calling. This action is also the first brought by the FTC to enforce the Mortgage Acts and Practices – Advertising Rule (the "MAP Rule"), which allows the FTC to collect civil penalties for deceptive mortgage advertising. According to the Complaint, Mortgage Investor telemarketers led consumers to believe that low interest, fixed rate mortgages were available at no cost when in reality Mortgage Investors offered only adjustable rate mortgages in which consumers' payments would increase with rising interest rates and would require consumers to pay closing costs. Telemarketers for Mortgage Investors also allegedly misled consumers about their affiliation with the Department of Veterans Affairs.
In addition to the $7.5 million fine, Mortgage Investors is barred from denying future requests by consumers to be placed on internal do-not-call lists, calling consumers on the Do Not Call Registry, and from misrepresenting any terms related to mortgage credit products or affiliation with any government entity. Businesses employing telemarketing strategies should heed this settlement, which makes clear that enforcement of the TSR and like regulations remains a top priority for the FTC.
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