Today's Trends in Credit Regulation

The Feds Prowl for Advertising Violations
By Thomas B. Hudson

The Federal Trade Commission staff has just fired a few shots, in the form of warning letters, across the bows of 20 real estate agents, home builders, and lead generators, warning them that their ads may be deceptive. The FTC urged the companies to review their advertisements for compliance with the Mortgage Acts and Practices Advertising Rule and the FTC Act.

The FTC sent the letters in coordination with the Consumer Financial Protection Bureau, and the Bureau also issued warning letters to approximately a dozen other companies. The CFPB sent its warning letters to mortgage brokers and lenders. Both agencies have opened nonpublic law enforcement investigations of other advertisers that may have violated federal law.

The agencies reported that they had reviewed approximately 800 mortgage ads from a wide variety of media, including websites, Facebook, direct mail, and newspapers. The agencies seek to spur compliance with the Mortgage Acts and Practices Advertising Rule, known as Regulation N since rule-making authority for it transferred from the FTC to the CFPB. The rule prohibits material misrepresentations in advertising or any other commercial communication regarding consumer mortgages. The FTC and the CFPB share enforcement authority over non-bank mortgage advertisers, such as mortgage lenders, brokers, servicers, and advertising agencies. Mortgage advertisers that violate the rule may be required to pay civil penalties.

The agencies’ review revealed several types of troubling claims that could be misleading to consumers. The agencies’ review found, for example:

  • advertisements offering a very low “fixed” mortgage rate, without discussing significant loan terms;
  • advertisements containing statements, images, symbols, and abbreviations that suggest that an advertiser is affiliated with a government agency; and
  • advertisements “guaranteeing” approval and offering very low monthly payments, without discussing significant conditions on these offers.

I’ve reviewed many a direct mail piece that is dummied up to look like a piece of government correspondence, complete with the “government brown” envelope and a reference to some nondescript department that sounds vaguely like a governmental entity and festooned with enough eagles to start an aviary.

If you haven’t been diligent about having the content of your ads reviewed for legal compliance and rooting out any statements that the regulators could claim are unfair or deceptive, then you should treat these warning shots as ones aimed directly at you. If you need any encouragement in this regard, note the language above that the advertisers “may be required to pay civil penalties.”

And if you think that you don’t need to worry about enforcement actions regarding your ads because you farm your ads out to some direct mail house or other ad provider that has “never been sued,” think again. The Bureau and the FTC will hold you responsible for your ads’ content just as if you had drafted them yourself.

Thomas B. Hudson is a partner in the Hanover, Maryland office of Hudson Cook, LLP. Tom can be reached at 410-865-5411 or by email at

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