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 adopted by the Federal Trade Commission.
The new rules, meant to reign in deceptive mortgage advertising, include eight specific-but not exclusive-areas in which 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.
Comparisons between “teaser” 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 – often used to confuse the actual monthly cost of the mortgage – are limited under the new rule.
Under new recordkeeping requirements mortgage product providers would 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.
The records must include 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.
Under the new rules the use of speed reading disclaimers or flashing them in advertisements -a common practice in advertising for other regulated products like prescription drugs – will not be considered sufficient to warn consumers unless they are “clear and prominent to convey the qualifying information effectively, i.e., it is both noticed and understood by consumers.”
The FTC will enforce the new rules under the Federal Trade Commission Act, which allows the agency to pursue injunctive relief as well as civil penalties for violations. State governments can also file complaints in federal district courts if they think the new rules are being violated by mortgage marketers.