WASHINGTON (CN) – Advertisements for mortgages and mortgage rescue services will be prohibited if a reasonable interpretation of the advertisement is that it is deceptive, even if other equally reasonable non-deceptive interpretations of the ad are possible, according to new rules proposed by the Federal Trade Commission to reign in deceptive mortgage advertising.
The proposed rule includes eight specific-but not exclusive-areas where misrepresentations would be considered material and therefore actionable under the rule. The areas considered material include: Statements of the interest charged for a mortgage product; the differences between annual percentage rates, simple annual rates, and period rates; fees charged in addition to interest for the product; the additional costs for products sold with the mortgage product or which are required with the purchase of the product, such as insurance or taxes; and the cost of any prepayment penalty.
The proposed rule also would limit comparisons between short incentive interest rates or payments that do not extend to the full life of the product and the overall average interest and cost of the product.
Under new recordkeeping requirements in the proposed rule, mortgage product providers would have to maintain copies of the sales scripts, training and marketing materials, Web sites and weblogs describing the product offered, and documents describing all mortgage credit products available to consumers during the time period in which each commercial communication was disseminated, including the names and terms of the credit product and documents describing all additional products or services that are or may be offered with the mortgage credit products advertised.
In response to the common practice of speed reading or flashing disclaimers in advertisements of other regulated products such as the drugs the FTC has determined in the proposed rule that “a disclaimer or qualifying statement may correct a misleading impression only if it is sufficiently clear and prominent to convey the qualifying information effectively, i.e., it is both noticed and understood by consumers.”
If adopted, the proposed rules could be enforced by the FTC itself under the Federal Trade Commission Act, which allows the FTC to pursue injunctive relief as well as civil penalties for violations, or by state governments in federal district courts.