FTC Issues New Rule Strengthening Consumer Protections Against Deceptive Mortgage Advertisements
On July 19, 2011, the Federal Trade Commission (“FTC”) announced a new rule aimed at enhancing consumer protections against misleading mortgage advertisements. This rule, a response to directives from Congress in the Omnibus Appropriations Act and the Credit Card Act of 2009, seeks to eliminate deceptive claims in mortgage advertising to create a fairer competitive landscape for legitimate businesses.
The rule-making process began with an advance notice in June 2009, which invited public comments on whether certain mortgage practices were unfair or deceptive. Following a proposed rule in September 2010, the FTC considered public feedback, most of which supported the initiative. The final rule closely resembles the proposed version and applies to a broad range of entities involved in mortgage advertising, including lenders, brokers, real estate agents, and advertising agencies, though it excludes banks and other institutions outside the FTC's jurisdiction.
The rule outlines 19 specific examples of prohibited deceptive claims, such as misrepresentations regarding fees, mortgage terms, interest variability, and the likelihood of refinancing. By aligning with Section 5 of the FTC Act, which forbids false or misleading advertising, the rule empowers the FTC to take action against violators, including the imposition of civil penalties. Enforcement authority will also be shared with the Consumer Financial Protection Bureau (“CFPB”) and state law enforcement agencies.
The FTC unanimously voted to issue the rule, highlighting the necessity for clear and truthful communication, especially for consumers who may not speak English as their first language. The rule was published in the Federal Register and became effective on August 19, 2011.
For more information, see here: https://www.ftc.gov/news-events/press-releases/2011/07/ftc-issues-new-rule-strengthening-consumer-protections-against
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