In July, the Federal Trade Commission (FTC) issued a final rule relating to unfair or deceptive acts and practices in mortgage loan advertisements.
The rule, which became effective August 19, 2011, applies to state-chartered credit unions (but not to federal credit unions).
While the rule doesn’t specifically mention credit union service
organizations (CUSOs), CUNA believes FTC’s jurisdiction and the final rule would also apply to these organizations.
The FTC will be allowed to enforce the rule and seek civil penalties against violators. The Consumer Financial Protection Bureau and state law enforcement authorities may also bring actions to enforce the rule.
FTC’s rule prohibits any misrepresentation in any advertisement or commercial communication regarding the terms or conditions of any mortgage product (for personal, family, or household purposes) regardless of whether the loan is open- or closed-end.
The agency defines “commercial communication” as any written or oral statement designed to make a sale or create interest in purchasing goods or services regardless of the medium.
Among other things, lenders can’t make misrepresentations about:
These examples of mortgage advertisements likely would be deceptive and misleading:
In short, mortgage advertisements must tell the truth and not mislead consumers. An advertisement may be misleading if it omits relevant information or if the ad implies something that isn’t true.
The rule requires creditors to keep, for a period of 24 months from the last date of any mortgage advertisement, the following items:
These records may be kept in any legible form, including electronic or hard copy formats. Failure to keep the required records is a violation of the rule.
State-chartered credit unions and CUSOs should become thoroughly familiar with this final rule and establish appropriate policies and procedures to ensure they’re in compliance.
MICHAEL McLAIN is CUNA’s assistant general counsel and senior compliance counsel. Contact him at 608-231-4185.