The Consumer Financial Protection Bureau and the Federal Trade Commission have announced a joint crackdown on deceptive ads for mortgages, the first time the two agencies, which share significant overlapping jurisdiction, have officially teamed up on an enforcement effort.
Together, the two agencies reviewed 800 randomly selected advertisements for mortgages by brokers, homebuilders and other non-banks, looking for those that made misleading or deceptive claims.
On November 19, the FTC announced it has opened 13 investigations of the most egregious offenders and the CFPB has opened six. Companies with lesser violations received warning letters – 20 went out today from the FTC and 12 from the CFPB.
The agencies were looking for potential violations of the 2011 Mortgage Acts and Practices Advertising Rule. The rule bars misleading claims about government affiliation, interest rates, fees, costs, payments associated with the loan, and the amount of cash or credit available to the consumer. For example, ads might offer a very low "fixed" mortgage rate, without discussing significant loan terms, or use symbols or abbreviations like FHA suggesting that an advertiser is affiliated with a government agency.
Advertisers that are found to violate the rule can be hit with civil penalties.
"Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives," said CFPB Director Richard Cordray in a news release. "Baiting consumers with false ads to buy into mortgage products would be illegal. We will conduct a fair and rigorous investigation into these issues and will take appropriate action for any violations we find."
In a conference call with reporters, CFPB enforcement head Kent Markus and Thomas Pahl, assistant director of the FTC's division of financial practices, were full of praise for each other's agencies.
The FTC was "an invaluable partner," Markus said, calling the effort "coordinated and consistent, providing clear guidance to market participants." As for Pahl, he described it as "a great joint activity" that "avoided double-teaming businesses."
