About a dozen mortgage lenders and
brokers have been put on notice about their potentially misleading
advertisements, especially those aimed at veterans and senior citizens. The Consumer
Financial Protection Bureau (CFPB), in partnership with the Federal Trade
Commission (FTC), sent warning letters to the lenders at the same time that the
CFPB announced it has begun formal investigations of six companies that it
thinks may have committed more serious violations of the law. The letters were sent after a joint "sweep"
was conducted by the two agencies of about 800 randomly selected
mortgage-related ads from newspapers, television, and direct mail. Some of the ads were reviewed following
"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. "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."
and FTC were looking for potential violations of the 2011 Mortgage Acts and
Practices Advertising Rule which prohibits misleading advertising claims; the two
agencies share enforcement responsibility under the rule. CFPB's review generally focused on mortgage
advertisements while the FTC examined ads by home builders, realtors, and lead
generators. The FTC is issuing their own warning letters to about a dozen
additional companies and continuing with their own investigations of even more
companies based on their findings.
Among the potential misrepresentations identified in
the sweep were ads that included official-looking seals or
logos or had other characteristics that may be interpreted as indicating a
government affiliation. Some ads
promoted inaccurately low rates or may have misled consumers about the level of
pre-approval offered or the terms of the product. One example cited by CFPB were ads that offered
reverse mortgage products and claimed consumers would have no mortgage payments
even though these products commonly require monthly or other periodic tax or
insurance payments and carry a risk of default if the payments aren't made.
The warning letters will advise the
recipients that their ads may violate federal laws, and that they should review
all their advertising. CFPB said that beginning an investigation is not an
accusation of wrongdoing. Investigations are fair and reasonable inquiries into
a matter and may exonerate the subject of the investigation.