The feds warned the mortgage industry on Monday that potentially false or misleading advertisements will not be tolerated. The Consumer Financial Protection Bureau and the Federal Trade Commission announced that they have issued a total of 32 warning letters to mortgage lenders and mortgage brokers to clean up their ads. They have also opened 19 formal investigations into companies that may have committed more serious violations of law.
"Misrepresentations in advertising for mortgage products pose a significant risk of harm to consumers because they can confuse and mislead consumers when they are making one of the biggest transactions of their lives,” said Kent Marcus, assistant director for enforcement at the CFPB.
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These enforcement actions result from an industry-wide advertising “sweep” conducted by both agencies which now enforce the Mortgage Acts and Practices Advertising Rule which took effect in August or 2011.
For this review about 800 mortgage-related ads for loans, refinancing and reverse mortgages were randomly chosen and examined. These ads were on the Internet, in newspapers and in mail solicitations.
The agencies report finding four major problems:
- Potential misrepresentations about government affiliation: For example, some of the ads for mortgage products contained official-looking seals or logos, or have other characteristics that may be interpreted by consumers as indicating a government affiliation.
- Potentially inaccurate information about interest rates: For example, some ads promoted low rates that may have misled consumers about the terms of the product actually offered.
- Potentially misleading statements concerning the costs of reverse mortgages: For example, some ads for reverse mortgage products claimed that a consumer will have no payments in connection with the product, even though consumers with a reverse mortgage are commonly required to continue to make monthly or other periodic tax or insurance payments, and may risk default if the payments aren’t made.
- Potential misrepresentations about the amount of cash or credit available to a consumer: For example, some ads contained a mock check and/or suggested that a consumer has been pre-approved to receive a certain amount of money in connection with refinancing their mortgage or taking out a reverse mortgage, when a number of additional steps would customarily need to be completed before the consumer would qualify for the loan.
“Our hope is through this joint effort that we will make the point that mortgage advertisers need to be very careful about the claims that they're making in their ads,” said Thomas Pahl, assistant director of the FTC’s Division of Financial Practices. “Both the FTC and the CFPB will be making sure claims are not being made that are deceptive which would cause harm to consumers,”