Licensed mortgage companies must add which of the following to advertisements?

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After reviewing hundreds of mortgage advertisements, the Federal Trade Commission staff has sent letters to 20 companies, warning them that their ads may be deceptive.

The FTC sent its warning letters to real estate agents, home builders, and lead generators, urging them 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 (CFPB), which 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 reviewed approximately 800 mortgage ads from a wide variety of media that included web sites, 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.  Examples are illustrated in these “mock ads".  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 suggesting that an advertiser is affiliated with a government agency.
• Advertisements “guaranteeing” approval and offering very low monthly payments, without discussing significant conditions on these offers.  

The FTC has advice for consumers about mortgage advertising.  For more information see the website Your Home and the publication Deceptive Mortgage Ads: What They Say; What They Leave Out. 

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and for the latest FTC news and resources.

If an advertisement promoting closed-end credit for real estate contains any of the following trigger terms, the three specific disclosures listed at the bottom of this page must also be included in the advertisement. The triggering terms are:

1. The amount of the down payment, expressed either as a percentage or as a dollar amount.

EXAMPLES: "10% down"

           "25% down"

            "90% financing"

2. The amount of any payment expressed either as a percentage or as a dollar amount.

EXAMPLES: "Monthly payments less than $67"

           "Pay 5% each month"

            "$9 per month"

3. The number of payments.

EXAMPLES: "36 small payments are all you make"

            "48 monthly payments and you're paid up"

4. The period of repayment (the total time required to repay).

EXAMPLES: "Five years to pay"

            "36 months to pay"

           "4 year loans available"

5. The amount of any finance charge.

EXAMPLES: "Financing costs less than $100"

           "Less than $100 interest"

           "$100 financing"

The following are examples which do not trigger the required disclosures:

"No down payment"

"18% Annual Percentage Rate"

"Rate loans available here"

"Easy monthly payments"

"Loans available at 5% below our standard annual percentage rate"

"Low down payment accepted"

"Pay weekly"

"Terms to fit your budget"

"Financing available"

Required Disclosures

If any triggering term is used in a closed-end credit advertisement, then the following three disclosures must also be included in that advertisement:

1. The amount or percentage of the down payment;

2. The terms of repayment; and

3. The "annual percentage rate,"using that term spelled out in full. If the annual percentage rate may be increased after consummation of credit transaction, that fact must be disclosed.

Which item is a trigger term for advertisements promoting closed end credit products?

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