The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) announced today that they have sent warning letters to more than 30 companies, including lenders, mortgage brokers, real estate agents, home builders and lead generators, notifying them that their advertisements may have violated the Mortgage Acts and Practices Rules (“MAP Rule”). The MAP Rule prohibits material misrepresentations in any commercial communication (including advertising) regarding any mortgage credit product, and contains record-keeping requirements for persons subject to the rule. Mortgage advertisers that violate the MAP Rule could be subject to civil penalties. The FTC and CFPB reviewed more than 800 mortgage ads across a variety of media and found numerous types of potentially false or misleading claims, including:

  • Promises of low rates without discussing loan terms
  • Advertisements containing official-looking seals, statements, images or logos suggesting that the advertiser is affiliated with a governmental agency
  • Promises of “pre-approval” without discussing significant conditions on the offer
  • Promises that a reverse mortgage will let consumers stay in their home for free

Mock advertisements with misleading claims can be found here. The CFPB noted that many of the potentially misleading advertisements seemed to be directed at service members/veterans or older Americans. The text of the MAP Rule can be found here.

In a separate press conference, the two agencies announced that they had sent out a total of 33 warning letters; 20 from the FTC and 13 from the CFPB. They also announced that in addition to the companies that received the warning letters, 19 other companies are under active investigation for violations of the MAP Rule and possible deceptive marketing practices. The FTC is conducting 13 of those investigation while the CFPB is conducting the remaining six. At this time, it remains unclear how the two agencies split the targets of either the letters or the investigations. According to the spokespersons for the two agencies at the press conference, those companies that received the warning letters are believed to be companies that should be doing a better job, while those that are under investigation may be guilty of far more serious violations. Concerns were also expressed about ads that targeted veterans and offered reverse mortgages.

Why this matters: This is the first joint FTC/CFPB effort and an important reminder to entities and persons that market and advertise mortgage products that there are two federal agencies on the prowl to find violations and to ensure that mortgage product communications (including traditional advertisements, websites, direct marketing, and social media pages) are in compliance with the MAP Rule, and FTC and CFPB rules and regulations. It is also important to remember that states, in addition to the FTC and CFPB, can enforce the MAP Rule, so it’s not just the FTC and CFPB that are watching! This is clearly the first shot across the bow of the financial services industry by two very powerful federal regulators and is something that must be watched very closely. In addition to specific ads being targets, of equal importance is understanding how the two agencies split the responsibilities. Without a clear understanding of how that came about, the financial industry will be answering to two masters that may well have inconsistent perspectives.