CUNA Regulatory Comment Call
October 1, 2010
FTC Proposed Rule - Mortgage Acts and Practices
- The Federal Trade Commission (FTC) has issued a proposed rule relating to unfair and deceptive acts or practices that may occur with regard to mortgage advertising. This would include prohibiting misrepresentations in commercial communications regarding any term of any mortgage credit product and would also impose corresponding recordkeeping requirements. These rules are required under the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act).
- The rules adopted by the FTC would not apply to banks, thrifts, or federal credit unions since the FTC does not have jurisdiction over these entities. However they would apply to other entities in which the FTC has jurisdiction under the FTC Act and this would include state-chartered credit unions. Any rules that would apply to state-chartered credit unions would be in addition to the current mortgage lending rules that apply to credit unions.
- The proposed rule only apply to credit for personal, family, or household purposes but would cover both closed-end and open-end credit, such as home equity lines of credit, as well as reverse mortgages. Creditors would not be able to obtain from a consumer a waiver of any of the protections provided under this rule.
- The proposal outlines a list of examples of misrepresentations that would violate this rule, which
includes misrepresentations of the following:
- The interest charged and the extent it is included in the payments.
- The disclosure of the annual percentage rate or any other rate, which includes misleading claims of any savings for consumers.
- The existence and amount of fees.
- The terms associated with additional products that may be sold with the loan.
- The taxes and insurance associated with the loan and whether this is included in the payment.
- The existence and amounts of prepayment penalties.
- The variability of interest, payments or other terms, including using the word fixed when payments may vary.
- Comparisons between rates and payments, including the savings that may result.
- The type of mortgage loan offered, including false claims that the loan is fully amortizing.
- The amount of the loan and the existence or amount of cash or credit the consumer may receive.
- The number, amount, or timing of any minimum or required payment.
- The potential for default, such as misleading the consumer with regard to defaulting on the loan for failure to pay taxes or insurance, not maintaining the property, or complying with other obligations.
- The effectiveness of the loan in helping consumers resolve problems in paying debts, such as paying debts to others.
- The association between the loan or provider of the loan and others, including an affiliation with an organizational or governmental program, benefit, or entity.
- The source of the loan and the communications surrounding it, such as a claim that the communication is being made by or on behalf of the current lender or servicer.
- The consumers right to reside in the home that is securing the loan.
- The consumers ability or likelihood to obtain a mortgage loan or any refinancing or modification of such a loan.
- The availability, nature, or substance of counseling services or other expert advice that is offered to the consumer.
- Creditors would be required to retain the following information for at least 24
months from the date of the dissemination of the applicable communication, which may
be kept in any legible form and in the same manner, format, or place as other records
that are kept in the ordinary course of business:
- Copies of all the materially different communications that are disseminated, such as sales scripts, training materials, marketing materials, websites, and blogs.
- Documents describing all mortgage loans available to consumers during the time period in which each communication was disseminated.
- Documents describing all additional products or services, such as credit insurance or credit disability insurance, that may be offered with the loan that was available to the consumer during the time period in which the communication was disseminated
- Comments in response to the proposed rule are due by November 15, 2010. Please submit your comments to CUNA by November 4, 2010. Comments directed to the FTC should refer to Mortgage Acts and Practices - Advertising Rulemaking, Rule No. R011013.
Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Deputy General Counsel Mary Dunn at firstname.lastname@example.org or to Senior Assistant General Counsel Jeff Bloch at email@example.com; or mail them to Mary or Jeff in c/o CUNAs Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, 6th Floor, Washington, DC 20004. You may also contact us if you would like a copy of the proposed rule or you may access it here.
QUESTIONS TO CONSIDER REGARDING THE FTC PROPOSED RULE
(The FTC has specifically requested comments on these issues)
- Why should state-chartered credit unions be excluded from coverage from this rule?
Should such an exclusion apply to all forms of state-chartered credit unions or only of
some to them?
- How would the proposed rule affect communications about mortgage products? What would
be the benefits and costs be for consumers and for creditors? Are consumers now likely
misled by certain types of persons or by specific types of claims?
- What changes should be made to the proposal to increase benefits and competition for consumers?
What changes should be made to decrease costs for consumers and creditors? How would the proposed
rule affect small entities, such as credit unions, with regard to costs, competitiveness, and
- The proposal outlines the prohibited misrepresentations. How widespread are these? Should
any of these be deleted? Should others be added? Should the rule prohibit providing assistance
and support to others who violate this rule?
- The FTC has noted situations in which sellers and lenders have conducted transactions in
languages other than English for non-English speakers and then provide the written disclosures
in English that makes it difficult for buyers to understand and negotiate mortgage terms. Are
more protections needed to prevent this use of multiple languages that makes it difficult for
consumers to understand mortgage terms? Should these be addressed through additional disclosures?
For example, should it be prohibited to provide some material terms in a foreign language and
other material terms only in English?
- The proposal would include a 24-month document retention period. Should this rule have
a retention requirement? If so, should the period be different than 24 months? The proposal
includes the categories of records that are to be retained. To what extent should these
categories be modified? The proposal would allow creditors to retain these records in the
same manner, format, or place as they retain records in the ordinary course of business. Is
this flexibility appropriate?
- The FTC proposes that the final version of these rules be effective 30 after publication
in the Federal Register. Is this time period appropriate?
- The proposal would not require any affirmative advertising disclosures. Should there be
required, affirmative disclosures? How should they be reconciled with the disclosures required
for mortgage advertisements under Regulation Z, the Truth in Lending Act?
- Other comments?
Eric Richard General Counsel (202) 508-6742 firstname.lastname@example.org |
Mary Mitchell Dunn SVP & Deputy General Counsel (202) 508-6736 email@example.com
Luke Martone Senior Regulatory Counsel (202) 508-6743 firstname.lastname@example.org