MAP-ping a course through marketing and advertising compliance

In 2011, the FTC worked to better protect consumers by marking clear boundaries in the area of deceitful and misleading mortgage advertisements and promotions through the Mortgages Acts and Practices-Advertising Rule (MAP), later codified in 12 C.F.R. § 1014 as Regulation N. The Rule provides directions for banks and other businesses to follow when marketing mortgage products. A recent settlement following an FTC complaint illustrates the need for banks to travel carefully in the land of mortgage advertisements. Heritage Homes Group is a Pennsylvania-based homebuilders business that published highly attractive promotional materials indicating that consumers could purchase a home and receive full financing without any down payment, pay no transfer tax or closing costs, and owe only $1,198 a month for their mortgage. The FTC complained that the advertisement deceived customers, given the hidden fees and conditions accompanying the offer. Heritage Home Group detailed the terms and restrictions of the offer at the bottom of some of the advertisements in a tiny font, when it detailed them at all. Terms and requirements included the condition that the consumer obtain financing through the USDA Rural Development Loan Program (which applied credit and income limitations), as well as a minimum $2,000 down payment that would be refunded at closing, provided USDA funding had been obtained. The FTC took issue with Heritage Homes Group's claim that consumers would owe a $0 down payment, receive 100% financing, and would not owe any closing costs. The FTC argued that this violated multiple provisions of the MAP Rule and Regulation N, including subsections (g) and (q), which provide:

It is a violation of this part for any person to make any material misrepresentation, expressly or by implication, in any commercial communication, regarding any term of any mortgage credit product, including but not limited to misrepresentations about:

(g) The variability of interest, payments, or other terms of the mortgage credit product, including but not limited to misrepresentations using the word fixed;

(q) The consumer's ability or likelihood to obtain any mortgage credit product or term, including but not limited to misrepresentations concerning whether the consumer has been preapproved or guaranteed for any such product or term;

The settlement imposed a $650,000 civil penalty among other requirements on Heritage Home Group. The Heritage Home Group case illustrates the importance of ensuring compliance with not only MAP, but also the marketing restrictions in Regulation Z. With the increasing scrutiny on unfair, deceptive, and abusive practices, banks must navigate carefully when enticing consumers with attractive mortgage promotions. Banks must orient themselves toward straightforward, honest, non-misleading advertising materials, which can be difficult given the subjective nature of UDAAP. See Fade to Grey Blog. The good news for banks is that marketing compliance is much less complex than other areas of compliance, like the CFPB's mortgage rules, for instance. The problem at many banks is that compliance is not a strength of marketers (nor should it be) and compliance staff simply does not have the time to check every marketing piece that goes out the door, particularly within the timeframe requested by the marketing staff. DMTH has launched a solution that will help banks ensure compliance marketing while saving compliance staff valuable time, which is increasingly at a premium, through a program called Compliance Counsel on Command.  

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.