Privacy & Information Security Law Blog

In a joint-agency media conference and press release with the Federal Trade Commission today, the Consumer Financial Protection Bureau (“CFPB”) used the “rulemaking-through-enforcement” method of regulation to create several de-facto guidelines for what is “unfair, deceptive, or abusive” in mortgage advertising. Bypassing the more arduous rulemaking process, the CFPB published “sample warning letters” that effectively made the following advertising practices illegal:

1. Falsely suggesting – through the incorporation of “Government Loan Department” in a company’s return address at the top of an advertisement, the use of a logo very similar to that of the United States Department of Housing and Urban Development, and the prominent display of a website address that includes the initials of the Federal Housing Administration – that a company is affiliated with a government agency or government-sponsored program (i.e., ads with misrepresentations about government affiliation);
2. Suggesting that consumers who enter into a reverse mortgage will have “no payments,” notwithstanding that such consumers may continue to be responsible for tax and insurance payments (i.e., ads with misleading statements about the costs of reverse mortgages);
3. Falsely indicating that a consumer is pre-approved for, or guaranteed, specific loan rates or terms (i.e., ads with misrepresentations about the amount of cash or credit available to a consumer);
4. Falsely indicating that a consumer entering into a reverse mortgage will have the opportunity to receive a discount on existing credit card debt in connection with the loan (i.e., ads with misleading statements about the benefits of reverse mortgages);
5. Falsely suggesting — through the use of a logo very similar to that of the United States Department of Veterans Affairs, the prominent display of a website address that includes the acronym “VA” and the use of language stating “the VA is offering you” the advertised product — that a company is affiliated with a government agency or government-sponsored program (i.e., ads with misrepresentations about government affiliation);
6. Indicating that a specific “fixed” rate is available for a “30-year” loan when, in fact, the stated rate is for an adjustable rate loan (i.e., ads with inaccurate information about interest rates); and
7. Suggesting that the rate being offered is part of an “economic stimulus plan” that will expire shortly, notwithstanding that the Department of Veterans Affairs’ loan guarantee programs do not have an expiration date (i.e., ads with misrepresentations about government programs).