[Federal Register Volume 74, Number 10 (Thursday, January 15, 2009)]
[Notices]
[Pages 2592-2594]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-840]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 072 3168]


American Nationwide Mortgage Company, Inc.; Analysis of Proposed 
Consent Order to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

-----------------------------------------------------------------------

SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before February 9, 2009.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``American Nationwide Mortgage, File No. 072 
3168,'' to facilitate the organization of comments. A comment filed in 
paper form should include this reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room 135-H, 600 
Pennsylvania Avenue, N.W., Washington, D.C. 20580. Comments containing 
confidential material must be filed in paper form, must be clearly 
labeled ``Confidential,'' and must comply with Commission Rule 4.9(c). 
16 CFR 4.9(c) (2005).\1\ The FTC is requesting that any comment filed 
in paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions. Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form by following the instructions on the web-based form at 
(http://secure.commentworks.com/ftc-AmericanNationwideMortgage). To 
ensure that the Commission consider an electronic comment, you must 
file it on that web-based form.
---------------------------------------------------------------------------

    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
---------------------------------------------------------------------------

    The FTC Act and other laws the Commission administers permit the 
collection of public comments to

[[Page 2593]]

consider and use in this proceeding as appropriate. All timely and 
responsive public comments, whether filed in paper or electronic form, 
will be considered by the Commission, and will be available to the 
public on the FTC website, to the extent practicable, at www.ftc.gov. 
As a matter of discretion, the FTC makes every effort to remove home 
contact information for individuals from the public comments it 
receives before placing those comments on the FTC website. More 
information, including routine uses permitted by the Privacy Act, may 
be found in the FTC's privacy policy, at (http://www.ftc.gov/ftc/
_____________________________________-
privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Carole Reynolds, Bureau of Consumer 
Protection, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 
326-3230.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for January 8, 2009), on the World Wide Web, at (http://www.ftc.gov/os/2009/01/index.htm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

    The Federal Trade Commission (``FTC'') has accepted, subject to 
final approval, an agreement containing a consent order from American 
Nationwide Mortgage Company, Inc. (``respondent'').
    The proposed consent order has been placed on the public record for 
thirty (30) days for the receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
agreement and the comments received, and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    The complaint alleges that respondent engaged in practices that 
violate Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. 
Sec.  45(a), Section 144 of the Truth in Lending Act (``TILA''), 15 
U.S.C. Sec.  1664, and Section 226.24 of Regulation Z, 12 C.F.R. Sec.  
226.24.
    Section 5(a) of the FTC Act prohibits unfair or deceptive acts or 
practices. Respondent violated Section 5(a) of the FTC Act because it 
disseminated or has caused to be disseminated home loan advertisements 
which offer a low monthly payment amount and/or low rate, but fail to 
disclose, or fail to disclose adequately, that this monthly payment 
amount and/or low rate: (1) apply only for a limited period of time, 
after which they will increase; (2) do not include the amount of 
interest that the consumer owes each month; and (3) are less than the 
monthly payment amount (including interest) and/or the interest rate 
that the consumer owes, with the difference added to the total amount 
due from the consumer or total loan balance. This information would be 
material to consumers shopping for a mortgage loan and the failure to 
disclose, or failure to disclose adequately, this information is a 
deceptive practice. Respondent also violated Section 5(a) of the FTC 
Act because it misrepresented, expressly or by implication, that its 
advertised rate was a fixed rate for the full term of the loan.
    TILA and Regulation Z require that closed-end credit advertisers 
who state a periodic payment amount must also provide additional 
information in the advertisement, including the terms of repayment; the 
annual percentage rate (``APR''); and if the APR may be increased after 
consummation, that fact. TILA and Regulation Z also require that if an 
advertisement states a rate of finance charge, it must state the rate 
as an APR. Currently, Regulation Z also requires that if the 
advertisement states a payment rate, it must include additional 
disclosures. Respondent's advertisements failed to disclose, or failed 
to disclose clearly and conspicuously, this information required by 
TILA and Regulation Z. Respondent's failure to disclose this 
information undermined consumers' ability to compare these offers to 
others in the marketplace. Through its law enforcement actions, the 
Commission intends to promote compliance with the disclosure 
requirements of TILA and Regulation Z, and to foster comparison 
shopping for mortgage loans.
    The proposed consent order contains provisions designed to prevent 
respondent from violating the FTC Act or failing to make clear and 
conspicuous disclosures required by TILA and Regulation Z, as amended, 
see 73 Fed. Reg. 44,522 (July 30, 2008), and as may be further amended 
in the future.
    Part I of the proposed order prohibits respondent, in connection 
with closed-end credit, from advertising a monthly payment amount 
unless respondent discloses, clearly and conspicuously and in close 
proximity to those representations, as applicable, that the advertised 
monthly payment amount: (1) applies only for a limited period of time, 
after which it will increase; (2) does not include the amount of 
interest that the consumer owes each month; and (3) is less than the 
monthly payment amount (including interest) that the consumer owes, 
with the difference added to the total amount due from the consumer or 
total loan balance.
    Part II of the proposed order prohibits respondent, in connection 
with closed-end credit, from advertising a rate lower than the rate at 
which interest is accruing, regardless of whether the rate is referred 
to as an ``effective rate,'' a ``payment rate,'' a ``qualifying rate,'' 
or any other term, provided that this provision does not prohibit 
advertisement of the ``annual percentage rate'' or ``APR.'' In light of 
respondent's deceptive use of payment rates in its advertisements, and 
the Federal Reserve Board's amendments to Regulation Z banning the use 
of such rates effective October 1, 2009, the proposed order prohibits 
respondent from advertising any such rate, to ensure that respondent's 
advertisements do not deceive consumers. See 73 Fed. Reg. at 44,608.
    Part III of the proposed order prohibits respondent, in connection 
with closed-end credit, from misrepresenting the nature and/or extent 
of the variability of any loan rate or payment amount, including but 
not limited to (1) an interest rate or APR; (2) whether it is fixed 
rather than adjustable or adjustable rather than fixed; and (3) for an 
interest rate or payment amount, the duration, or reasonably 
anticipated duration, of the fixed or variable interest rate or payment 
amount.
    Part IV of the proposed order prohibits respondent, in connection 
with closed-end credit, from advertising the amount of any payment, the 
number of payments or the period of repayment, or the amount of any 
finance charge,

[[Page 2594]]

without disclosing, clearly and conspicuously, all of the terms 
required by TILA and Regulation Z, including the terms of repayment; 
the APR; and if the APR may be increased after consummation, that fact.
    Part V of the proposed order prohibits respondent, in connection 
with closed-end credit, from stating a rate of finance charge without 
stating the rate as an APR, as required by TILA and Regulation Z.
    Part VI of the proposed order prohibits respondent from failing to 
comply in any respect with TILA or Regulation Z.
    Part VII of the proposed order contains a document retention 
requirement, the purpose of which is to ensure compliance with the 
proposed order. It requires that respondent maintain all records that 
will demonstrate compliance with the proposed order.
    Part VIII of the proposed order requires respondent to distribute 
copies of the order to various principals, officers, directors, and 
managers, and all current and future employees, agents and 
representatives having responsibilities with respect to the subject 
matter of the order.
    Part IX of the proposed order requires respondent to notify the 
Commission of any changes in its corporate structure that might affect 
compliance with this order.
    Part X of the proposed order requires respondent to file with the 
Commission one or more reports detailing compliance with the order.
    Part XI of the proposed order is a ``sunset'' provision, dictating 
the conditions under which the order will terminate twenty years from 
the date it is issued or twenty years after a complaint is filed in 
federal court, by either the United States or the FTC, alleging any 
violations of the order.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.
    By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. E9-840 Filed 1-14-09: 8:45 am]
BILLING CODE 6750-01-S