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FTC PROPOSES UNFAIR OR DECEPTIVE MORTGAGE ADVERTISING RULE

The Federal Trade Commission (FTC) has issued a Notice of Proposed Rulemaking (NPRM) relating to unfair or deceptive acts and practices that may occur with regard to mortgage advertising, which it is calling the Mortgage Acts and Practices (MAP) Advertising Rule. See 75 Fed. Reg. 60352 (Sept. 30, 2010).

Congress directed the FTC to issue mortgage rules that "relate to" unfairness or deception in the 2009 Omnibus Appropriations Act. Congress then clarified the scope of this rulemaking authority in the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). See Alerts dated April 9 and May 20, 2009.

The CARD Act specified that the rulemaking should (i) relate to unfair or deceptive acts or practices regarding mortgage loans, which may include unfair or deceptive acts or practices involving loan modification and foreclosure rescue services, and (ii) apply only to entities over which the FTC has jurisdiction under the FTC Act (which does not include, e.g., national banks or banks insured by the Federal Deposit Insurance Corporation).

The Dodd-Frank Act transferred rulemaking authority from the FTC to the new Bureau of Consumer Protection (Bureau) and deleted the limitation on rulemaking authority in item (ii). Thus, the Bureau will take over rulemaking at some point and expand the scope of the Rule to include all entities over which the Bureau has jurisdiction.<

The FTC began mortgage rulemaking proceedings last year. See 74 Fed. Reg. 26118 (June 1, 2009) (Advance Notice of Proposed Rulemaking (ANPR) on Mortgage Acts and Practices); 74 Fed. Reg. 26130 (June 1, 2009) (ANPR on Mortgage Assistance Relief Services (MARS)); 75 Fed. Reg. 10707 (March 9, 2010) (NPRM on the MARS Rule). Additional rules may be proposed in the future.

The proposed MAP Advertising Rule does not require affirmative advertising disclosures, but generally would:

  • Prohibit any misrepresentation in any commercial communication regarding any term of any mortgage credit product;
  • Impose recordkeeping requirements; and
  • Permit actions by state attorneys general to enforce the Rule.

Although the rulemaking may be intended to address mortgage advertising, the Supplementary Information (or "preamble") published with the rule may be of interest to lenders advertising other forms of credit. The preamble includes an overview of the FTC's policies on deception and describes a number of FTC enforcement actions, thus illustrating some general advertising principles with details of alleged advertising violations. The footnotes in the preamble are unusually long and detailed.

For those interested in mortgage advertising, the FTC seeks comment on the proposed rule in general and some specific questions, such as:

  • What types of mortgage credit products currently are being offered to consumers or may be offered in the future? In what ways do the fees, costs, obligations, characteristics of, conditions on or availability associated with these products vary?
  • What would be the effects of the proposed rule (including any benefits and costs) on consumers and covered persons? What changes, if any, should be made to the proposed rule to decrease costs to industry or consumers?
  • Should subsidiaries or affiliates of banks and thrifts be excluded from coverage?
  • Is an effective date of 30 days following publication of the final rule in the Federal Register appropriate?
  • Are affirmative advertising disclosures needed to prevent deception?
  • Is a mortgage advertiser's failure to comply with any of Regulation Z's requirements an unfair or deceptive act or practice under the FTC Act? Would requiring mortgage advertisers to comply with any of Regulation Z's requirements be reasonably related to the prevention of unfair or deceptive acts or practices?
    Comments must be received by November 15, 2010.

Judy Scheiderer