[Federal Register Volume 76, Number 141 (Friday, July 22, 2011)]
[Rules and Regulations]
[Pages 43826-43847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-18605]


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FEDERAL TRADE COMMISSION

16 CFR Part 321


Mortgage Acts and Practices--Advertising

AGENCY: Federal Trade Commission (FTC or Commission).

ACTION: Final rule.

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SUMMARY: Pursuant to the 2009 Omnibus Appropriations Act (Omnibus 
Appropriations Act), as clarified by the Credit Card Accountability, 
Responsibility and Disclosure Act of 2009 (Credit CARD Act), the 
Commission issues this Final Rule and Statement of Basis and Purpose 
(SBP) relating to unfair or deceptive acts and practices that may occur 
with regard to mortgage advertising. This Final Rule, among other 
things: Prohibits any misrepresentation in any commercial communication 
regarding any term of any mortgage credit product; and imposes certain 
recordkeeping requirements.

DATES: This final rule is effective August 19, 2011.

ADDRESSES: Requests for copies of this Rule and this SBP should be sent 
to: Public Reference Branch, Federal Trade Commission, 600 Pennsylvania 
Avenue, NW., Room 130, Washington, DC 20580. The complete record of 
this proceeding is also available at that address. Relevant portions of 
the proceeding, including the Final Rule and SBP, are available at 
http://www.ftc.gov. On July 21, 2011, the Commission's rulemaking 
authority under the Omnibus Appropriations Act transfers to the 
Consumer Financial Protection Bureau (contact information available at 
http://www.consumerfinance.gov).

FOR FURTHER INFORMATION CONTACT: Laura Johnson or Carole Reynolds, 
Attorneys, Division of Financial Practices, Federal Trade Commission, 
600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-3224.

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Authority

    On March 11, 2009, President Obama signed the Omnibus 
Appropriations Act.\1\ Section 626 of that Act directed the Commission 
to commence, within 90 days of enactment, a rulemaking proceeding with 
respect to mortgage loans.\2\ Section 626 also directed the FTC to use 
notice and comment procedures under Section 553 of the Administrative 
Procedure Act \3\ to promulgate these rules.\4\
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    \1\ Omnibus Appropriations Act, 2009, Public Law 111-8, 123 
Stat. 524 (Omnibus Appropriations Act).
    \2\  Id. Sec.  626(a), 123 Stat. at 678.
    \3\ 5 U.S.C. 553.
    \4\ Omnibus Appropriations Act Sec.  626(a). Because Congress 
directed the Commission to use APA rulemaking procedures, the FTC 
did not use the procedures set forth in Section 18 of the Federal 
Trade Commission Act (FTC Act), 15 U.S.C. 57a.
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    On May 22, 2009, President Obama signed the Credit CARD Act.\5\ 
Section 511 of this statute clarified the Commission's rulemaking 
authority under the Omnibus Appropriations Act.\6\
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    \5\ Credit Card Accountability Responsibility and Disclosure Act 
of 2009, Public Law 111-24, 123 Stat. 1734 (Credit CARD Act).
    \6\ Id. Sec.  511.
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1. Covered Acts and Practices
    Section 511 of the Credit CARD Act specified that the FTC 
rulemaking ``shall relate to unfair or deceptive acts or practices 
regarding mortgage loans, which may include unfair or deceptive acts or 
practices involving loan modification and foreclosure rescue 
services.'' \7\ The Omnibus Appropriations Act, as clarified by the 
Credit CARD Act, does not otherwise specify what the Commission should 
include in, or exclude from, a rule, but rather directs the FTC to 
issue mortgage rules that ``relate to'' unfairness or deception.\8\
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    \7\ Id. Sec.  511(a)(1)(B). In a separate rulemaking, the 
Commission issued a final rule with respect to mortgage assistance 
relief services. See Mortgage Assistance Relief Services (MARS), 
Final Rule, 75 FR 75092 (Dec. 1, 2010), available at http://www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf.
    \8\ Credit CARD Act Sec.  511(a)(1)(B).
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    Section 5 of the FTC Act broadly proscribes unfair or deceptive 
acts or practices in or affecting commerce. An act or practice is 
deceptive if there is a representation, omission of information, or 
practice that is likely to mislead consumers who are acting reasonably 
under the circumstances, and the representation, omission, or practice 
is one that is material, i.e., likely to affect consumers' decisions to 
purchase or use the product or service at issue.\9\ Section 5(n) of the 
FTC Act sets forth a three-part test to determine whether an act or 
practice is unfair. First, the practice must be one that causes or is 
likely to cause substantial injury to consumers. Second, the injury 
must not be outweighed by countervailing benefits to consumers or to 
competition. Third, the injury must be one that consumers could not 
reasonably have avoided.\10\
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    \9\ Federal Trade Commission Policy Statement on Deception, 
appended to In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 174-84 
(1984) (Deception Policy Statement).
    \10\ 15 U.S.C. 45(n). Additionally, Section 5(n) of the FTC Act 
provides that ``[i]n determining whether an act or practice is 
unfair, the Commission may consider established public policies as 
evidence to be considered with all other evidence. Such public 
policy considerations may not serve as a primary basis for such 
determination.''
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    Accordingly, the Commission interprets the Omnibus Appropriations 
Act, as clarified by the Credit CARD Act, to allow it to issue rules 
that prohibit or restrict unfair or deceptive conduct or that are 
reasonably related to the goal of preventing unfair or deceptive 
practices. The FTC notes, however, that all of the conduct prohibited 
by the Final Rule is itself deceptive.
2. Covered Entities
    Section 511 of the Credit CARD Act also clarified that the 
Commission's rulemaking authority is limited to entities over which the 
FTC has jurisdiction under the FTC Act.\11\ Under the FTC Act, the 
Commission has jurisdiction over any person, partnership, or 
corporation that engages in unfair or deceptive acts or practices in or 
affecting commerce, except, among others: \12\ banks,\13\ savings and 
loan

[[Page 43827]]

institutions, Federal credit unions,\14\ non-profits,\15\ and common 
carriers. The Final Rule does not cover the practices of entities that 
are excluded from the FTC's jurisdiction.
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    \11\ Credit CARD Act Sec.  511(a)(1)(C).
    \12\ See 15 U.S.C. 44, 45(a)(2).
    \13\ The FTC Act defines ``banks'' by reference to a listing of 
certain distinct types of depository institutions. See 15 U.S.C. 44, 
57a(f)(2). That list includes: National banks, Federal branches of 
foreign banks, member banks of the Federal Reserve System, branches 
and agencies of foreign banks, commercial lending companies owned or 
controlled by foreign banks, banks insured by the Federal Deposit 
Insurance Corporation (FDIC), and insured state branches of foreign 
banks. The Commission has jurisdiction over entities that are 
affiliated with banks, such as parent or subsidiary companies, that 
are not themselves banks. This jurisdiction is held concurrently 
with the Federal bank regulatory agencies (the Board of Governors of 
the Federal Reserve System (Federal Reserve Board or Board), the 
Office of the Comptroller of the Currency (OCC), the FDIC, and the 
Office of Thrift Supervision (OTS)) and the National Credit Union 
Administration (NCUA) as to their respective institutions. See 
Gramm-Leach-Bliley Act, Public Law 106-102, Sec.  133(a), 113 Stat. 
1338, 1383 (1999) (codified at 15 U.S.C. 41 note (a)); Minnesota v. 
Fleet Mortg. Corp., 181 F. Supp. 2d 995 (D. Minn. 2001). The FTC 
also has jurisdiction over non-bank entities that provide services 
to or on behalf of a bank, such as credit card marketing. See, e.g., 
FTC v. CompuCredit Corp., No. 08-1976, at 6-15 (N.D. Ga. Oct. 8, 
2008) (magistrate judge's non-final report and recommendation) 
(finding that the FTC has jurisdiction under FTC Act against entity 
that contracted to provide services to a bank); FTC v. Am. Std. 
Credit Sys., 874 F. Supp. 1080, 1086 (C.D. Cal. 1994) (dismissing 
argument that entity that contracted to perform credit card 
marketing and other services for a bank is not subject to FTC Act). 
Effective July 21, 2011, the FTC and the Bureau of Consumer 
Financial Protection (CFPB) will share concurrent enforcement 
authority over specific categories of ``nondepository covered 
persons.'' See infra Part I.A.4.
    \14\ The exclusion is limited to Federal credit unions; thus, 
the FTC has jurisdiction over state-chartered credit unions (whether 
or not they have Federal insurance), among others. See infra note 
127 and accompanying text.
    \15\ Section 4 of the FTC Act, 15 U.S.C. 44, specifies that the 
Commission's jurisdiction over ``corporations'' is limited to 
entities that are organized to carry on business for their own 
profit or that of their members. Thus, the non-profit exemption does 
not apply to ostensible non-profits that operate for the profit of 
their members. See, e.g., Am. Med. Ass'n v. FTC, 638 F.2d 443 (2d 
Cir. 1980), aff'd by an equally divided court, 445 U.S. 676 (1982); 
FTC v. AmeriDebt, Inc., 343 F. Supp. 2d 451 (D. Md. 2004).
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3. Enforcement
    The Omnibus Appropriations Act, as clarified by the Credit CARD 
Act, also permits both the Commission and the states to enforce the 
rules the FTC issues.\16\ The Commission can use its powers under the 
FTC Act to investigate and enforce such rules, and the FTC can seek 
civil penalties under the FTC Act against those who violate them. In 
addition, states can enforce the rules by bringing civil actions in 
Federal district court or another court of competent jurisdiction to 
obtain civil penalties and other relief. Before bringing such an 
action, however, states must give 60 days advance notice to the 
Commission or other ``primary federal regulator'' of the proposed 
defendant,\17\ and the regulator has the right to intervene in the 
action.
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    \16\ Omnibus Appropriations Act Sec.  626(b); Credit CARD Act 
Sec.  511(a)(1)(B).
    \17\ Effective July 21, 2011, states must provide the advance 
notice to the CFPB or Commission, as appropriate. See infra Part. 
I.A.4.
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4. The Dodd-Frank Act
    On July 21, 2010, President Obama signed the Dodd-Frank Wall Street 
Reform and Consumer Protection Act.\18\ The Dodd-Frank Act made 
substantial changes in the Federal regulatory framework for providers 
of financial services. Among the changes, the Dodd-Frank Act will 
transfer the Commission's rulemaking authority under the Omnibus 
Appropriations Act to a new Bureau of Consumer Financial Protection 
(CFPB) \19\ on July 21, 2011, the ``designated transfer date'' set by 
the Treasury Department.\20\ In addition, on the designated transfer 
date, the FTC's authority to ``issue guidelines'' under the Omnibus 
Appropriations Act will transfer to the CFPB.\21\ Both the Commission 
and the CFPB, however, will have authority to bring law enforcement 
actions and seek civil penalties against specific categories of 
``nondepository covered persons'' to enforce the rules promulgated 
under the Omnibus Appropriations Act, including this Final Rule.\22\
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    \18\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376 (2010) (Dodd-Frank Act).
    \19\  Id. Sec.  1061.
    \20\ See CFPB, Designated Transfer Date, 75 FR 57252, 57253 
(Sept. 20, 2010); see also Dodd-Frank Act Sec.  1062.
    \21\ Dodd-Frank Act Sec.  1061.
    \22\  See Dodd-Frank Act Sec. Sec.  1024, 1061, 1097.
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B. The Rulemaking and Public Comments Received

    On June 1, 2009, the Commission published in the Federal Register 
an Advance Notice of Proposed Rulemaking (ANPR) soliciting comments on 
the contours of a possible rule that would prohibit or restrict unfair 
and deceptive acts and practices that may occur throughout the life-
cycle of a mortgage loan,\23\ i.e., in the advertising and marketing of 
the loan, at the time of loan origination, in the home appraisal 
process, and during the servicing of the loan. The ANPR described these 
services generically as ``Mortgage Acts and Practices,'' and the 
rulemaking proceeding was entitled the Mortgages Acts and Practices 
(MAP) Rulemaking.\24\
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    \23\ The Omnibus Appropriations Act and the Credit CARD Act use 
the term ``loan'' in referring to mortgage credit generally and do 
not limit that term in any way. Accordingly, this SBP and Final Rule 
use the term ``loan'' to refer to any form of mortgage credit.
    \24\  Mortgage Acts and Practices (MAP), ANPR, 74 FR 26118 (June 
1, 2009).
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    On September 30, 2010, the Commission published in the Federal 
Register a Notice of Proposed Rulemaking (NPRM) relating to unfair or 
deceptive acts and practices that may occur with regard to mortgage 
advertising, the MAP B Advertising Rule (proposed rule).\25\ Among 
other things, the proposed rule prohibited any misrepresentation in any 
commercial communication regarding any term of any mortgage credit 
product, and it imposed certain recordkeeping requirements.
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    \25\ See MAP B Advertising, NPRM, 75 FR 60352 (Sept. 30, 2010).
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    In response to the NPRM, the Commission received a total of 22 
comments.\26\ Commenters included industry trade associations or 
groups, credit unions, state credit union regulators, a not-for-profit 
law firm, a real estate settlement services firm, and a group of state 
banking and consumer credit regulators. The Commission also received 
five comments from individuals. Most of the comments expressed support 
for FTC regulatory action or particular aspects of the proposed rule. 
These comments are discussed below.\27\
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    \26\ The comments submitted in response to the NPRM are 
available at http://www.ftc.gov/os/comments/mapadrule/index.shtm. A 
list of those who submitted comments appears following Part V of 
this SBP.
    \27\  See infra Part III.
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II. Mortgage Advertising Practices

A. Overview

    As discussed in the ANPR and NPRM, the mortgage life-cycle begins 
when a consumer initially shops for a mortgage, whether to purchase a 
home or real property,\28\ refinance an existing mortgage, or obtain a 
home equity loan or line of credit (known as a HELOC) based on the 
consumer's equity in the home.\29\ Consumers may consider obtaining 
diverse types of mortgage products. The loan may be a forward mortgage, 
the most prevalent type of loan, in which the homeowner borrows funds 
and remits payments for principal, interest, and, in some cases, other 
charges. Alternatively, the loan may be a reverse mortgage, in which 
senior citizens borrow funds secured by their homes. With a reverse 
mortgage, the borrower is not required to repay the debt as long as he 
or she remains in the home; and the loan is not due until the homeowner 
moves out of or sells the home, dies, or fails to satisfy certain loan 
conditions.\30\ Forward mortgages may be traditional, such as fully 
amortizing 30-year fixed-rate or

[[Page 43828]]

adjustable rate mortgages (ARMs),\31\ or nontraditional.\32\
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    \28\ Traditional mortgages are considered ``closed-end credit,'' 
generally consisting of installment financing where the amount 
borrowed and repayment schedule are set at the transaction's outset. 
The Truth in Lending Act (TILA), 15 U.S.C. 1601-1666j, and its 
implementing Regulation Z, 12 CFR part 226, set various advertising 
and other requirements for closed-end credit. See, e.g., 12 CFR 
226.17-.24.
    \29\ HELOCs typically are ``open-end credit,'' which TILA 
defines as credit extended to a consumer under a plan in which: (1) 
The consumer reasonably contemplates repeated transactions; (2) the 
creditor may impose a finance charge from time to time on the 
outstanding unpaid balance; and (3) the amount of credit that may be 
extended to the consumer during the plan's term is generally made 
available to the extent that any unpaid balance is repaid. See 15 
U.S.C. 1602(i); 12 CFR 226.2(a)(10) and (20).
    \30\ See generally 12 CFR 226.33 (reverse mortgages under 
Regulation Z) and U.S. Department of Housing and Urban Development 
(HUD), Glossary, definition of ``reverse mortgage,'' available at 
http://www.hud.gov/offices/hsg/sfh/buying/glossary.cfm.
    \31\ In a fully amortizing loan, the borrower pays principal and 
the full amount of interest that is due each month throughout the 
life of the loan.
    \32\ Nontraditional mortgages have included, for example, 
interest-only (I/O) loans and payment option ARMs (option ARMs). I/O 
loans involve an initial loan period in which the borrower pays only 
the interest accruing on the loan balance; after the initial period, 
the borrower either makes increased payments of principal and 
interest or remits a large payment, sometimes referred to as a 
``balloon payment.'' Option ARMs offer borrowers several choices 
each month during the loan's introductory period, including a 
minimum payment that is smaller than the interest accruing on the 
principal. After the introductory period, the loan is recast, and 
the borrower's payments increase to amortize and repay principal and 
the adjustable interest rate over the remaining loan term. See 
generally FTC, Comment to Jennifer L. Johnson, Secretary, Board of 
Governors of the Federal Reserve System (Sept. 14, 2006), at 5-13 
(providing comments on the home equity lending market and 
summarizing the Commission's May 2006 alternative mortgage workshop, 
Protecting Consumers in the New Mortgage Marketplace), available at 
http://www.ftc.gov/opa/2006/09/fyi0661.shtm (FTC Comment on Home 
Equity Lending and Alternative Mortgage Workshop).
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    Consumers receive information about mortgages through many 
different channels of communication. Some consumers seek out mortgage 
information on their own, for example, on the Internet or by contacting 
a real estate broker, mortgage lender, mortgage broker, or others. 
Marketers and advertisers widely disseminate mortgage advertisements to 
consumers through print media (such as newspapers and magazines), 
television, radio, the Internet, billboards, and other methods. 
Marketers and advertisers also send targeted information to particular 
consumers through direct mail or electronic communications such as e-
mail or text messages.
    Many types of entities market and advertise mortgage products. 
Mortgage lenders, mortgage brokers, mortgage servicers, and real estate 
brokers advertise and market mortgage products. In addition, 
advertising agencies, home builders, lead generators,\33\ rate 
aggregators,\34\ and others also may market and advertise mortgage 
products to consumers. Mortgage lenders and servicers are particularly 
likely to market products to their current customers, in addition to 
prospective customers.
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    \33\ Lead generators are business entities that provide, in 
exchange for consideration, consumer information to a seller or 
telemarketer for use in the marketing of goods or services. See, 
e.g., Quik Payday, Inc. v. Stork, 549 F.3d 1302, 1304 (10th Cir. 
2008); FTC v. Connelly, No. SA CV 06-701 DOC (RNBx), 2006 U.S. Dist. 
LEXIS 98263, at *11 (C.D. Cal. Dec. 20, 2006); United States v. 
Ameriquest Mortg. Co., No. 8:07-cv-01304 CJC-MLG (C.D. Cal. 2007) 
(stipulated judgment and order).
    \34\ Rate aggregators regularly collect and publish rates and 
other information from numerous mortgage lenders, mortgage brokers, 
or other sources. Consumers typically can compare mortgage credit 
product terms for free by searching or viewing this information 
sorted by rate, loan amount, mortgage credit product, or other 
criteria. Rate aggregators may supply the lenders' or brokers' 
contact information, so the consumer can reach lenders or brokers 
directly, or they may act as lead generators and provide the 
consumer's information to lenders or brokers.
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B. Deception in Mortgage Advertising

    Advertising and marketing can provide consumers with valuable 
information about mortgage options, costs, and features. This 
information is critical to the decisions consumers make throughout the 
mortgage origination process, especially because mortgage products are 
typically complex.\35\ Information is useful for decision making, 
however, only if it is truthful and non-misleading.\36\ Preventing and 
deterring deception in advertisements for mortgages, therefore, is a 
primary objective of FTC law enforcement and of the Final Rule.
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    \35\ This is particularly true for nontraditional mortgages, the 
terms of which are often unfamiliar to consumers. See generally FTC 
Comment on Home Equity Lending and Alternative Mortgage Workshop, 
supra note 32.
    \36\ See Deception Policy Statement, supra note 9, at 176-77.
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    The elements of deception are set forth in the FTC's Deception 
Policy Statement of 1984. An act or practice is deceptive if: (1) There 
is a representation, omission of information, or practice that is 
likely to mislead consumers acting reasonably under the circumstances; 
and (2) that representation, omission, or practice is material to 
consumers.\37\
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    \37\ See id. at 175-183; see also FTC v. Tashman, 318 F.3d 1273, 
1277 (11th Cir. 2003); FTC v. Gill, 265 F.3d 944, 950 (9th Cir. 
2001); FTC v. QT, Inc., 448 F. Supp. 2d 908, 957 (N.D. Ill. 2006), 
aff'd, 512 F.3d 858 (7th Cir. 2008); FTC v. Think Achievement Corp., 
144 F. Supp. 2d 993, 1009 (N.D. Ind. 2000); FTC v. Minuteman Press, 
53 F. Supp. 2d 248, 258 (E.D.N.Y. 1998).
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    A representation may be express or implied. ``Express claims 
directly represent the fact at issue, while implied claims do so in an 
oblique or indirect way.'' \38\ Whether an implied claim is made 
depends on the overall net impression that consumers take away from an 
advertisement, based on all of its elements (language, pictures, 
graphics, etc.).\39\ The FTC evaluates whether consumers' impressions 
or interpretations of a representation or omission are reasonable. 
Reasonableness is evaluated based on the sophistication and 
understanding of consumers in the group to which the representation is 
targeted, which may be a general audience or a specific group, such as 
children or the elderly.\40\ A claim may be susceptible to more than 
one reasonable interpretation, and if one such interpretation is 
misleading, then the advertisement is deceptive, even if other, non-
deceptive interpretations are possible.\41\
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    \38\ FTC v. QT, Inc., 448 F. Supp. 2d at 957.
    \39\ See FTC v. Cyberspace.com, LLC, 453 F.3d 1196, 1200 (9th 
Cir. 2006) (``A solicitation may be likely to mislead by virtue of 
the net impression it creates even though the solicitation also 
contains truthful disclosures.''); FTC v. Gill, 265 F.3d at 956 
(affirming deception finding based on ``overall `net impression' '' 
of statements); Removatron Int'l Corp. v. FTC, 884 F.2d 1489, 1497 
(1st Cir. 1989) (advertisement was deceptive despite written 
qualification); Thompson Med. Co. v. FTC, 791 F.2d 189, 197 (DC Cir. 
1986) (literally true statements may nonetheless be deceptive); FTC 
v. QT, Inc., 448 F. Supp. 2d at 958.
    \40\ See Deception Policy Statement, supra note 9, at 177-79.
    \41\ See id. at 178.
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    A disclaimer or qualifying statement may correct a misleading 
impression, but only if it is sufficiently clear and prominent to 
convey the qualifying information effectively, i.e., it is both noticed 
and understood by consumers. ``[I]n many circumstances, reasonable 
consumers do not read the entirety of an ad or are directed away from 
the importance of the qualifying phrase by the acts or statements of 
the seller;'' \42\ thus, a fine print disclosure at the bottom of a 
print advertisement or a brief video superscript in a television 
advertisement is unlikely to qualify a claim effectively.\43\ 
Similarly, because consumers ``may glance only at the headline'' of an 
advertisement, ``accurate information in the text may not remedy a 
false headline.'' \44\
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    \42\ Id. at 181.
    \43\ See, e.g., id. at 180; see also In re Stouffer Food Corp., 
118 F.T.C. 746 (1994); In re Kraft, Inc., 114 F.T.C. 40, 124 (1991), 
aff'd, 970 F.2d 311 (7th Cir. 1992).
    \44\ Deception Policy Statement, supra note 9, at 180.
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    A representation, omission, or practice is material if it is likely 
to affect a consumer's choice of or conduct regarding a product.\45\ If 
consumers are likely to have chosen differently but for the claim, the 
claim is likely to have caused consumer injury.\46\ Express claims are 
presumed material.\47\ Similarly, information regarding the cost of a 
product or service is presumed material.\48\ Intentional implied 
claims,\49\ and claims about the purpose and

[[Page 43829]]

efficacy of a product or service,\50\ are also presumed to be material.
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    \45\ See Kraft, Inc. v. FTC, 970 F.2d 311, 322 (7th Cir. 1992); 
In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 165 (1984); see also 
FTC v. SlimAmerica, Inc., 77 F. Supp. 2d 1263, 1272 (S.D. Fla. 
1999).
    \46\ See Deception Policy Statement, supra note 9, at 183.
    \47\  See FTC v. Pantron I Corp., 33 F.3d 1088, 1095-96 (9th 
Cir. 1994).
    \48\ See In re Peacock Buick, 86 F.T.C. 1532, 1562 (1975), 
aff'd, 553 F.2d 97 (4th Cir. 1977); Deception Policy Statement, 
supra note 9, at 182-83.
    \49\  See In re Thompson Med. Co., Inc., 104 F.T.C. 648, 816 
(1984), aff'd, 791 F.2d 189 (DC Cir. 1986).
    \50\  Novartis Corp. v. FTC, 223 F.3d 783, 786-87 (DC Cir. 
2000).
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C. Other Mortgage Advertising Requirements \51\
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    \51\ This discussion is not intended as a comprehensive list of 
all potentially applicable mortgage advertising and marketing laws.
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    In addition to the FTC Act, mortgage advertisers and marketers are 
subject to TILA (including the Home Ownership and Equity Protection Act 
(HOEPA) \52\) and Regulation Z, among other legal requirements.\53\ In 
July 2008, the Federal Reserve Board issued many new mortgage 
advertising rules under Regulation Z; these rules took effect on 
October 1, 2009.\54\
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    \52\ 15 U.S.C. 1639.
    \53\ For a brief summary of the advertising requirements under 
TILA and Regulation Z, see MAP--Advertising, NPRM, 75 FR 60352, 
60356-57 (Sept. 30, 2010). Other requirements include mortgage 
advertising mandates under the Helping Families Save Their Homes Act 
of 2009, Public Law 111-22, Sec.  203, 123 Stat. 1632, 1643 
(codified at 12 U.S.C. 5201 note), which HUD enforces, and 
advertising regulations and guidance for Federal Housing 
Administration (FHA) programs, which HUD has issued. For example, 
FHA-approved lenders or mortgagees must use their HUD-registered 
business names in advertisements and promotional materials for FHA 
programs and maintain copies of their materials for two years. See 
75 FR 20718 (Apr. 20, 2010) (codified at 24 CFR 202). Lenders and 
others are permitted to distribute the FHA and fair housing logos in 
marketing materials to prospective FHA borrowers. HUD-approved 
mortgagees are required to establish procedures for compliance with 
FHA program requirements, including to avoid engaging in false or 
misrepresentative advertising. See HUD Mortgagee Letters 2009-02 and 
2009-12, available at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/2009ml.cfm; see also infra note 124 (discussing 
NCUA advertising regulations).
    \54\ See 73 FR 44522, 44599-602 (July 30, 2008) (codified 
generally at 12 CFR 226.16, 226.24). The Board promulgated some of 
these rules under Section 129(l)(2) of TILA, 15 U.S.C. 1639(l)(2), 
and others under Section 105 of TILA, 15 U.S.C. 1604. The Commission 
has authority to obtain civil penalties for violations of rules that 
the Board promulgates under Section 129(l)(2), but does not have 
specific authority to obtain civil penalties for violations of rules 
that the Board promulgates under Section 105.
    On August 16, 2010, the Board proposed additional protections 
and disclosure requirements for mortgage advertisements. See Press 
Release, Board, Federal Reserve Board Proposes Enhanced Consumer 
Protections and Disclosures for Home Mortgage Transactions, 
available at http://www.federalreserve.gov/newsevents/press/bcreg/20100816e.htm (Aug. 16, 2010). The Board subsequently announced that 
it does not expect to finalize this proposal prior to the July 2011 
date for transfer of rulemaking authority to the CFPB. See Press 
Release, Board, available at http://www.federalreserve.gov/newsevents/press/bcreg/20110201a.htm (Feb. 1, 2010).
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    The states also have enacted various laws or regulations that 
address aspects of deceptive mortgage advertising practices,\55\ 
including laws implementing the Federal Secure and Fair Enforcement for 
Mortgage Licensing Act of 2008 (SAFE Act), which requires a nationwide 
licensing and/or registration system for mortgage loan originators.\56\
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    \55\ State advertising requirements differ from one another in 
the practices, types of credit, and entities covered. See, e.g., Me. 
Rev. Stat. Ann. tit. 9-A, 9-301 (2010); Md. Code Regs. 09.03.06.05 
(2010); Nev. Rev. Stat. Ann. 645B.196 (2010); N.Y. Bank. Law 595-a 
(Consol. 2010).
    \56\ Title V of the Housing and Economic Recovery Act of 2008, 
Public Law 110-289 (2008) (codified at 12 U.S.C. 5101). After the 
SAFE Act's enactment on July 30, 2008, the states moved to enact or 
amend laws to license mortgage loan originators. See generally 
http://www.csbs.org; see also HUD SAFE Mortgage Licensing Act, 
available at http://hud.gov/offices/hsg/rmra/safe/sfea.cfm. State 
SAFE laws address advertising in different ways. See, e.g., S.B. 
948, 2009 Gen. Assem., Reg. Sess. (Conn. 2009); S.B. 1218, 25th 
Leg., 1st Spec. Sess. (Haw. 2009); H.B. 4011, 96th Gen. Assem., Reg. 
Sess. (Ill. 2009); A.B. 3816, 213th Leg., 2nd Ann. Sess. (N.J. 
2009). The Federal banking agencies and Farm Credit Administration 
have also implemented a registration system and other requirements 
for mortgage loan originators, in connection with the SAFE Act. See 
75 FR 51623 (Aug. 23, 2010); see also 76 FR 6185 (Feb. 3, 2011).
---------------------------------------------------------------------------

    None of these Federal or state statutes or regulations duplicates 
the specificity and breadth of practices, and diversity of 
entities,\57\ covered in the Final Rule.
---------------------------------------------------------------------------

    \57\ See infra Part III.B.4.
---------------------------------------------------------------------------

D. Consumer Protection Problems in Mortgage Advertising

    The FTC has substantial law enforcement experience with mortgage 
advertising practices. Since 1995, the Commission has brought 18 law 
enforcement actions against individuals or companies that allegedly 
engaged in unfair or deceptive practices or violations of TILA in 
mortgage advertising.\58\ These actions have targeted large and small 
mortgage lenders, mortgage brokers, and others throughout the 
country.\59\ The cases have involved advertisements and marketing 
materials in various media, including print advertisements,\60\ 
unsolicited e-mails,\61\ direct mail marketing,\62\ Internet 
advertisements and Web sites,\63\ telemarketing,\64\ and in-person 
sales presentations.\65\ The alleged violations have included deceptive 
claims--often made to subprime borrowers--about key terms and other 
aspects of the loans, such as:
---------------------------------------------------------------------------

    \58\ See Table B--List of FTC Mortgage Advertising Enforcement 
Actions, infra.
    \59\ See, e.g., FTC v. Mortgages Para Hispanos.com Corp., No. 
4:06-cv-19 (E.D. Tex. 2006); FTC v. Ranney, No. 04-F-1065 (MJW) (D. 
Colo. 2004); FTC v. Chase Fin. Funding, Inc., No. SACV04-549 GLT 
(ANx) (C.D. Cal. 2004); FTC v. OSI Fin. Servs., Inc., No. 02-C-5078 
(N.D. Ill. 2002); United States v. Mercantile Mortg. Co., No. 02-C-
5079 (N.D. Ill. 2002); FTC v. Assocs. First Capital Corp., No. 1:01-
00606 JTC (N.D. Ga. 2001); FTC v. First Alliance Mortg. Co., No. 
SACV 00-964 DOC (EEx) (C.D. Cal. 2000).
    \60\ See, e.g., FTC v. Safe Harbour Found. of Fla., Inc., No. 
08-C-1185 (N.D. Ill. 2008); FTC v. Ranney, No. 04-F-1065 (MJW) (D. 
Colo. 2004).
    \61\ See, e.g., FTC v. 30 Minute Mortg., Inc., No. 03-60021 
(S.D. Fla. 2003); FTC v. Chase Fin. Funding, Inc., No. SACV04-549 
GLT (ANx) (C.D. Cal. 2004).
    \62\ See, e.g., In re Am. Nationwide Mortg. Co., F.T.C. Dkt. No. 
C-4249 (2009); In re Michael Gendrolis, F.T.C. Dkt. No. C-4248 
(2009); FTC v. Chase Fin. Funding, Inc., No. SACV04-549 GLT (ANx) 
(C.D. Cal. 2004); FTC v. First Alliance Mortg. Co., No. SACV 00-964 
DOC (EEx) (C.D. Cal. 2000); United States v. Unicor Funding, Inc., 
No. SACV99-1228 (C.D. Cal. 1999); FTC v. Assocs. First Capital 
Corp., No. 1:01-00606 JTC (N.D. Ga. 2001); FTC v. Safe Harbour 
Found. of Fla., Inc., No. 08-C-1185 (N.D. Ill. 2008); In re 
FirstPlus Fin. Group, Inc., F.T.C. Dkt. No. C-3984 (2000).
    \63\ See, e.g., In re Shiva Venture Group, Inc., F.T.C. Dkt. No. 
C-4250 (2009); FTC v. Ranney, No. 04-F-1065 (MJW) (D. Colo. 2004).
    \64\ See, e.g., FTC v. First Alliance Mortg. Co., No. SACV 00-
964 DOC (EEx) (C.D. Cal. 2000).
    \65\ See, e.g., id.; FTC v. Assocs. First Capital Corp., No. 
1:01-00606 JTC (N.D. Ga. 2001).
---------------------------------------------------------------------------

     Misrepresentations of the loan amount or the amount of 
cash disbursed; \66\
---------------------------------------------------------------------------

    \66\ See, e.g., id.; FTC v. OSI Fin. Servs., Inc., No. 02-C-5078 
(N.D. Ill. 2002); United States v. Mercantile Mortg. Co., No. 02-C-
5079 (N.D. Ill. 2002); In re FirstPlus Fin. Group, Inc., F.T.C. Dkt. 
No. C-3984 (2000).
---------------------------------------------------------------------------

     Claims for loans with specified terms, when no loans with 
those terms were available from the advertiser; \67\
---------------------------------------------------------------------------

    \67\ See, e.g., FTC v. 30 Minute Mortg., Inc., No. 03-60021 
(S.D. Fla. 2003).
---------------------------------------------------------------------------

     Claims of low ``teaser'' rates and payment amounts, 
without disclosing that the rates and payments would increase 
substantially after a limited period of time; \68\
---------------------------------------------------------------------------

    \68\ See, e.g., In re Am. Nationwide Mortg. Co., F.T.C. Dkt. No. 
C-4249 (2009); In re Shiva Venture Group, Inc., F.T.C. Dkt. No. C-
4250 (2009); In re Michael Gendrolis, F.T.C. Dkt. No. C-4248 (2009). 
The FTC also sent over 200 warning letters in 2007 to mortgage 
lenders, mortgage brokers, and media outlets regarding mortgage 
advertising claims, including teaser rates, that could be deceptive 
or violate TILA. See Press Release, FTC, FTC Warns Mortgage 
Advertisers and Media That Ads May Be Deceptive (Sept. 11, 2007), 
available at http://www.ftc.gov/opa/2007/09/mortsurf.shtm.
---------------------------------------------------------------------------

     Misrepresentations that rates were fixed for the full term 
of the loan; \69\
---------------------------------------------------------------------------

    \69\ See, e.g., In re Am. Nationwide Mortg. Co., F.T.C. Dkt. No. 
C-4249 (2009).
---------------------------------------------------------------------------

     Misrepresentations about, or failure to adequately 
disclose, the existence of a prepayment penalty \70\ or large balloon 
payment due at the end of the loan; \71\
---------------------------------------------------------------------------

    \70\ See, e.g., FTC v. Chase Fin. Funding, Inc., No. SACV04-549 
(GLT (ANx) C.D. Cal. 2004); FTC v. OSI Fin. Servs., Inc., No. 02-C-
5078 (N.D. Ill. 2002).
    \71\ See, e.g., FTC v. OSI Fin. Servs., Inc., No. 02-C-5078 
(N.D. Ill. 2002).
---------------------------------------------------------------------------

     Claims about the monthly payment amounts that the borrower 
would owe, without disclosing the existence, cost, and terms of credit 
insurance products ``packed'' into the loan; \72\
---------------------------------------------------------------------------

    \72\ See, e.g., FTC v. Assocs. First Capital Corp., No. 1:01-
00606 JTC (N.D. Ga. 2001). The complaint in that case alleged, among 
other things, that the defendants included credit insurance products 
in the loan package without the borrower's knowledge.

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[[Page 43830]]

     Claims that the loans were amortizing, when, in fact, they 
involved interest-only transactions; \73\
---------------------------------------------------------------------------

    \73\ See, e.g., FTC v. Capital City Mortg. Corp., No. 1:98CV237 
(D.D.C. 1998).
---------------------------------------------------------------------------

     Claims of mortgage payment amounts that failed to include 
loan fees and closing costs of the kind typically included in loan 
amounts; \74\
---------------------------------------------------------------------------

    \74\ See, e.g., FTC v. Assocs. First Capital Corp., No. 1:01-
00606 JTC (N.D. Ga. 2001). In addition, in making these statements, 
the lender allegedly did not reveal that the loans were interest-
only and that borrowers would owe the entire principal amount in a 
large balloon payment at the end of the loan term.
---------------------------------------------------------------------------

     False or misleading savings claims in high loan-to-value 
loans; \75\
---------------------------------------------------------------------------

    \75\ See, e.g., In re FirstPlus Fin. Group, Inc., F.T.C. Dkt. 
No. C-3984 (2000).
---------------------------------------------------------------------------

     False or misleading claims regarding the terms or nature 
of interest rate lock-ins; \76\
---------------------------------------------------------------------------

    \76\ See, e.g., In re Lomas Mortg. U.S.A., Inc., 116 F.T.C. 1062 
(1993).
---------------------------------------------------------------------------

     False claims that an entity was a national mortgage 
lender; \77\
---------------------------------------------------------------------------

    \77\ See, e.g., FTC v. 30 Minute Mortg. Inc., No. 03-60021 (S.D. 
Fla. 2003).
---------------------------------------------------------------------------

     Failure to disclose adequately that the advertiser, not 
the consumer's current lender, was offering the mortgage; \78\ and
---------------------------------------------------------------------------

    \78\ See, e.g., In re Michael Gendrolis, F.T.C. Dkt. No. C-4248 
(2009).
---------------------------------------------------------------------------

     False or misleading claims that consumers were ``pre-
approved'' for mortgage loans.\79\
---------------------------------------------------------------------------

    \79\ See, e.g., United States v. Unicor Funding, Inc., No. 
SACV99-1228 (C.D. Cal. 1999).
---------------------------------------------------------------------------

    Numerous states also have brought enforcement actions under state 
laws alleging deceptive mortgage advertising and marketing, challenging 
misrepresentations about: (1) The lack of closing costs; \80\ (2) low 
fixed or teaser rates or payments; \81\ (3) the advertiser's 
affiliation with the consumer's current lender; \82\ (4) the 
availability of government grants for home repairs; \83\ (5) the 
savings available by refinancing; \84\ (6) reverse mortgage terms and 
government affiliation; \85\ (7) the availability of rates compared to 
competitors; \86\ and (8) the advertiser's self-description as a 
``bank.'' \87\
---------------------------------------------------------------------------

    \80\ See, e.g., In re Lenox Fin. Mortg., LLC, No. 2007-017383 
(Ariz. Sup. Ct. 2007) (assurance of discontinuance), available at 
http://www.azag.gov/press_releases/sept/2007/LenoxFinancialAssurance&Approval.pdf.
    \81\ See, e.g., State v. Lifetime Fin., Inc., No. LC080829 (Cal. 
Super. Ct. 2008), available at http://www.ag.ca.gov/cms_attachments/press/pdfs/n1533_complaint_for_civil_penalties.pdf; 
State v. Green River Mortg., No. 2009CV89 (Colo. Dist. Ct. 2009), 
press release available at http://www.coloradoattorneygeneral.gov/press/news/2009/05/12/attorney_general_announces_settlement_barring_mortgage_broker_operating_inside; State v. One Source 
Mortg., Inc., No. 07CH34450 (Ill. Cir. Ct. 2007), press release 
available at http://www.ag.state.il.us/pressroom/2007_11/20071126.html; In re Paramount Equity Mortg., Inc., No. C-07-405-08-
SC01 (Wash. Dept of Fin. Inst. 2008), available at http://www.dfi.wa.gov/CS%20Orders/C-07-405-08-SC01.pdf.
    \82\ See, e.g., State v. Sroka, No. 2007-16-61 (Idaho Dept of 
Fin. 2007), available at http://finance.idaho.gov/ConsumerFinance//Actions/Administrative/2007-16-61_Sroka_Terrazas_Order_Cease_and_/Desist.pdf; State v. Sage, No. 2007-8-45 (Idaho Dept of Fin. 
2007), press release available at http://finance.idaho.gov/PR/2007/PressRel_Sage_CDOrder.pdf; State v. Goldstar Home Mortg., No. 
09AB-CV02310 (Mo. Cir. Ct. 2009) press release available at http://ago.mo.gov/newsreleases/2009/AG_Koster_files_lawsuits_after_mortgage_fraud/.
    \83\ See, e.g., State v. Ellis, No. 07CH34451 (Ill. Cir. Ct. 
2007), press release available at http://www.ag.state.il.us/pressroom/2007_11/20071126.html.
    \84\ See, e.g., State v. Advantage Mortg. Serv., Inc., No. C107 
(Neb. Dist. Ct. 2007), available at http://www.ndbf.ne.gov/forms//Advantage_Mortgage_/Complaint.pdf.
    \85\ See, e.g., State v. Upstate Capital, Inc., No. 08-036 (N.Y. 
Office of Att'y Gen. 2008), press release available at http://www.ag.ny.gov/media_center/2008/apr/apr24a_08.html. Other cases 
have charged other entities with deceptive advertising, including 
using the words ``United States of America'' or an image of the 
Statute of Liberty, when the advertiser had no affiliation with the 
government (see State v. Island Equity Mortg., Inc., (N.Y. Banking 
Dept 2007), available at http://www.banking./state.ny.us//ea070412.htm), and falsely representing that the advertisers were 
affiliated with a government program (see In re Assurity Fin. 
Servs., LLC, No. C-07-320-08-SC01 (Wash. Dept of Fin. Inst. 2008), 
available at http://www.dfi.wa.gov/CS%20Orders/C-07-fxsp0;320-08-
SC01.pdf); see also State v. Am. Advisors Group, Inc., No. 
2010CH00158 (Ill. Cir. Ct. filed Feb. 8, 2010), available at http://www.scribd.com/doc/33748621/People-Illinois-v-American-Advisors-Group-Complaint; State v. Hartland Mortg. Ctrs., Inc., No. 10CH05339 
(Ill. Cir. Ct. filed Feb. 8, 2010), press release available at 
http://www.ag.state.il.us/pressroom/2010_02/20100208.html). HUD 
also has taken action against two lenders for deceptive advertising 
of HUD-insured reverse mortgages. See Press Release, HUD, FHA 
Withdraws Three Lenders, Suspends a Fourth (Feb. 25, 2010), 
available at http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-019.
    \86\ See, e.g., In re Paramount Equity Mortg., Inc., No. C-07-
405-08-SC01 (Wash. Dept of Fin. Inst. 2008), available at http://www.dfi.wa.gov/CS%20Orders/C-07-405-08-SC01.pdf.
    \87\ See, e.g., id.
---------------------------------------------------------------------------

III. Discussion of the Rule

    The Commission's law enforcement experience, state law enforcement 
activities, and the comments received in response to the ANPR and NPRM 
demonstrate that deceptive claims in mortgage advertising and marketing 
pose a risk of significant harm to consumers. The FTC believes that 
this Final Rule prohibiting misrepresentations in mortgage advertising 
will enable the agency to protect prospective borrowers by establishing 
clearer standards, increasing the efficiency of law enforcement, and 
deterring unlawful behavior. In particular, as noted above, the 
Commission and CFPB will be able to seek civil penalties for violations 
of the Final Rule, thereby enhancing the deterrent effect of law 
enforcement actions.\88\ Civil penalties may be an especially useful 
deterrent in cases in which consumer redress or disgorgement is not 
available or not feasible. States also will be able to enforce the Rule 
and seek civil penalties, which will further help deter deception in 
mortgage advertising and marketing.
---------------------------------------------------------------------------

    \88\  See supra Part I.A.4.
---------------------------------------------------------------------------

A. Section 321.1: Scope

    Section 321.1 states that the Final Rule implements the mandate of 
the Omnibus Appropriations Act, as clarified by the Credit CARD 
Act.\89\ These statutes direct the Commission to commence a rulemaking 
proceeding to issue rules that ``relate to unfair or deceptive acts or 
practices regarding mortgage loans''.\90\ The Credit CARD Act limits 
the Commission's rulemaking authority to persons over whom the FTC has 
jurisdiction under the FTC Act, as discussed above.
---------------------------------------------------------------------------

    \89\ Section 321.1 of the Final Rule merely simplifies the 
language that was used in this section of the proposed rule.
    \90\  See Omnibus Appropriations Act Sec.  626(a); Credit CARD 
Act Sec.  511(a)(1)(B).
---------------------------------------------------------------------------

B. Section 321.2: Definitions

1. Sections 321.2(e): ``Mortgage Credit Product;'' 321.2(c): 
``Credit;'' 321.2(d): ``Dwelling;'' and 321.2(b): ``Consumer''
    The Final Rule, like the proposed rule, prohibits any person from 
``making any material misrepresentation * * * in any commercial 
communication, regarding any term of any mortgage credit product'' 
Section 321.2(e) of the Rule adopts the proposed rule's definition of 
``mortgage credit product.'' To fall within that definition, the 
product must meet three criteria. First, it must be a form of 
``credit.'' The term ``credit'' is defined in Sec.  321.2(c) as ``the 
right to defer payment of debt or to incur debt and defer its 
payment.'' \91\ Second, the credit must be secured by either real 
property or a dwelling.\92\ The proposed rule defined ``dwellin'' as 
``a

[[Page 43831]]

residential structure that contains one to four units, whether or not 
that structure is attached to real property'' and includes ``an 
individual condominium unit, cooperative unit, mobile home, and 
trailer, if it is used as a residence''.\93\ The Final Rule adds the 
term ``manufactured home'' to the definition to ensure that the Rule's 
protections extend to consumers whose homes are constructed at a site 
(e.g., factory floor) other than the final location of the 
structure.\94\ Third, the credit must be ``offered or extended to a 
consumer primarily for personal, family, or household purposes.'' 
``Consumer'' is defined in Sec.  321.2(b) as a ``natural person to whom 
a mortgage credit product is offered or extended''.\95\ ``Personal, 
family, or household purposes'' includes, for example, home purchase or 
improvement loans, debt consolidation or home equity transactions, 
credit for medical or dental expenses, and educational loans. Credit 
offered or extended primarily for a business purpose would not be 
covered, even if a lien on a dwelling secures the loan. The 
determination of whether the credit is ``primarily'' for personal, 
family, or household use rather than ``primarily'' for business use 
requires an assessment of all of the facts of a particular transaction.
---------------------------------------------------------------------------

    \91\ Final Rule Sec.  321.2(c). This definition is largely based 
on that in Regulation Z. See 12 CFR 226.2(a)(14). One difference, 
however, is that the Final Rule covers all shared equity and shared 
appreciation mortgages offered to consumers, whereas certain types 
of such mortgages may not be considered ``credit'' under Regulation 
Z. See Regulation Z Commentary, 12 CFR 226.2(a)(14)-1 and 
226.17(c)(1)-11, Supp. I. In shared equity and shared appreciation 
mortgages, the consumer receives cash, a lower interest rate, or 
other favorable terms in exchange for agreeing to share with the 
lender or other company all or part of the consumer's total equity 
or the appreciation in the consumer's equity when the loan comes 
due, or at some other point during the loan.
    \92\ Note that some aspects of the Regulation Z advertising 
rules apply to credit secured by a dwelling but not credit secured 
by real property. See 12 CFR 226.16(d); 12 CFR 226.24(f) and (i).
    \93\ Final Rule Sec.  321.2(d). Both primary and secondary (or 
vacation) homes are covered if they are used as collateral for the 
loan. The term ``dwelling'' is based on that used in TILA and 
Regulation Z. See 15 U.S.C. 1602(v) and 12 CFR 226.2(a)(19).
    \94\ The Final Rule also includes a non-substantive revision to 
the last sentence of the proposed definition. These changes conform 
the Rule's definition of ``dwelling'' more closely with the 
definition of the same term used in the Commission's MARS Rule. See 
12 CFR 322.2(e).
    \95\ Final Rule Sec.  321.2(b). Thus, credit offered or extended 
to an organization or governmental entity is not covered.
---------------------------------------------------------------------------

    ``Mortgage credit product'' is defined to include ``credit'' that 
is either closed-end (e.g., installment financing) \96\ or open-end 
(e.g., HELOCs).\97\ The term includes traditional, fully amortizing 
loans and nontraditional or alternative financing.\98\ ``Mortgage 
credit product'' further includes both forward and reverse 
mortgages.\99\ The Commission did not receive any comments on the 
above-defined terms or concepts.
---------------------------------------------------------------------------

    \96\ Construction financing and other forms of credit in which 
multiple advances may be common are also covered. In these 
transactions, some or all of the advances may be estimates (as to 
their dollar amount or the date on which they will occur)
    \97\ The Rule applies the same standards to closed-end and open-
end credit. In contrast, the Regulation Z advertising provisions 
(including restrictions on deceptive claims) are different for 
closed-end and open-end credit. See, e.g., 12 CFR 226.24(i) and 12 
CFR 226.16(d)(5) and (f).
    \98\ Covered alternative loans include, for example, hybrid 
ARMs, teaser rate or teaser payment loans with low rates or payments 
that expire after a short period, interest-only and balloon 
mortgages, negative amortization mortgages, shared equity and shared 
appreciation mortgages, buydowns, and payment option ARMs.
    \99\ See supra note 30 and accompanying text.
---------------------------------------------------------------------------

2. Section 321.2(g): ``Term''
    The Final Rule applies to commercial communications regarding any 
``term'' of any mortgage credit product. It adopts, without change, the 
proposed rule's broad definition of ``term,'' which means ``any of the 
fees, costs, obligations, or characteristics of, or associated with, 
the product.'' The definition also ``includes any of the conditions on 
or related to the availability of the product.'' ``Term'' is intended 
to cover all aspects of a mortgage credit product without exception. 
The Commission did not receive any comments on this definition.
3. Section 321.2(a): ``Commercial Communication''
    As discussed above, the Rule applies to claims made in any 
``commercial communication.'' The definition of that term in the Final 
Rule, which includes only non-substantive modifications to the proposed 
rule's definition, provides that a ``commercial communication'' is:

any written or oral statement, illustration, or depiction, whether 
in English or any other language, that is designed to effect or 
create interest in purchasing goods or services, whether it appears 
on or in a label, package, package insert, radio, television, cable 
television, brochure, newspaper, magazine, pamphlet, leaflet, 
circular, mailer, book insert, free standing insert, letter, 
catalogue, poster, chart, billboard, public transit card, point of 
purchase display, film, slide, audio program transmitted over a 
telephone system, telemarketing script, onhold script, upsell 
script, training materials provided to telemarketing firms, program-
length commercial (``infomercial''), the Internet, cellular network, 
or any other medium. Promotional materials and items and Web pages 
are included in the term ``commercial communication''.\100\
---------------------------------------------------------------------------

    \100\ Proposed Sec.  321.2(a) used the term ``verbal'' where the 
Final Rule uses the term ``oral.'' The Final Rule also includes non-
substantive revisions to the last sentence of the proposed 
definition. These changes conform the Rule's definition of 
``commercial communication'' more closely with the definition of the 
same term used in the Commission's MARS Rule. See 16 CFR 322.2(c).

This definition encompasses commercial communications \101\ in any 
medium and in any language.\102\
---------------------------------------------------------------------------

    \101\ Based on this definition, the Rule has broader 
applicability than the Board's advertising rules in Regulation Z, 
which specifically exempt personal contacts, communications about 
existing accounts, and certain educational materials. See Regulation 
Z Commentary, 12 CFR 226.2(a)(2), Supp. I.
    \102\ See also infra Part III.C.5.
---------------------------------------------------------------------------

    The Commission received a few comments relating to the proposed 
definition of ``commercial communication.'' \103\ One commenter 
suggested that the Rule provide a safe harbor or alternative disclosure 
mechanism for commercial communications delivered by radio.\104\ The 
commenter expressed concern that any disclosures that may be required 
to comply with the Rule would require airtime in addition to that used 
for the advertisement itself.\105\ The Commission declines to make this 
change because the Final Rule does not impose any affirmative 
disclosure requirements but rather prohibits misrepresentations.
---------------------------------------------------------------------------

    \103\ CMC/MBA at 5-6; HSA at 2-6; NRMLA at 4. The Commission 
notes that one commenter suggested a ``Good Housekeeping Seal of 
Approval'' concept for online mortgage calculators, generally 
commenting that the Federal Government should make certain HUD-
certified mortgage evaluation technology widely available to 
consumers on Federal agency Web sites. CMC/MBA at 5-6. This 
commenter also requested that the Commission postpone this 
rulemaking and, instead, engage in a coordinated rulemaking with the 
CFPB. Id. at 1.
    \104\ NRMLA at 4.
    \105\ Id.
---------------------------------------------------------------------------

    Another commenter stated that the combination of the risk of 
liability and the recordkeeping requirements under the proposed rule 
would discourage real estate agents and brokers from providing general 
mortgage-related information to clients or prospective clients.\106\ 
This commenter suggested revising the definition of ``commercial 
communication'' to address this issue, or in the alternative, narrowing 
the recordkeeping requirements and adding a ``good-faith 
exception''.\107\ Specifically, the commenter stated that the 
definition of ``commercial communication'' is overbroad because it goes 
beyond mortgage advertising to encompass communications about any goods 
or services.\108\ Thus, according to the commenter, the Commission 
should narrow the definition by replacing the phrase ``purchasing goods 
or services'' with ``obtaining a particular mortgage credit 
product''.\109\ The Commission declines to revise the definition as 
suggested. The definition is not overbroad when viewed in the context 
of the Final Rule. The prohibition against misrepresentations in Sec.  
321.3 does not apply to all commercial communications; rather, it 
applies to any commercial communication ``regarding any term of any 
mortgage

[[Page 43832]]

credit product.'' \110\ Thus, the Rule is appropriately limited to 
mortgage-related communications.
---------------------------------------------------------------------------

    \106\ HSA at 2-6.
    \107\ See infra Part III.E.2.
    \108\ HSA at 3.
    \109\ Id. at 5
    \110\ To provide clarity and guidance, Sec. Sec.  321.3(a)-(s) 
of the Final Rule set forth a non-exclusive list of such 
misrepresentations.
---------------------------------------------------------------------------

    The commenter also suggested adding an exception at the end of the 
definition for certain informational or educational statements that 
real estate brokers and agents may make.\111\ With respect to this 
suggestion, the Commission notes that a communication is not 
``commercial'' unless it ``is designed to effect or create interest in 
purchasing goods or services.'' Thus, a statement that is purely 
informational and is not designed to effect or create interest in 
purchasing goods or services would not be covered by the Rule.\112\ The 
Commission believes that the language in the definition of ``commercial 
communication,'' which also appears in the Commission's MARS Rule \113\ 
and several advertising-related orders,\114\ provides an appropriate 
dividing line between commercial and noncommercial communications.
---------------------------------------------------------------------------

    \111\ HSA at 5. Specifically, the commenter suggested adding the 
following language: ``Informational or educational statements made 
by real estate brokers and agents in an effort to explain or 
illustrate concepts relating to mortgage credit products generally, 
and not designed to advertise a particular mortgage credit product, 
are not included in the phrase `commercial communication.' '' Id.
    \112\ Note that commercial communications include promotional 
materials even if they are portrayed as educational in nature. For 
example, the term encompasses program-length commercials 
(``infomercials'') and other promotional items. See Final Rule Sec.  
321.2(a); see also supra note 101.
    \113\ See 12 CFR 322.2(c).
    \114\ See, e.g., FTC v. Xacta 3000, Inc., No. 09-CV-0399 (D. 
N.J. 2010); In re Novartis Corp., F.T.C. Dkt No. 9279 (1999).
---------------------------------------------------------------------------

4. Section 321.2(f): ``Person''
    The Final Rule adopts the proposed rule's definition of ``person,'' 
which means ``any individual, group, unincorporated association, 
limited or general partnership, corporation, or other business 
entity''.\115\ Thus, any individual or entity that makes 
representations in a commercial communication about a mortgage credit 
product is a ``person'' for purposes of the Rule. The types of entities 
the Rule covers generally include mortgage lenders, mortgage brokers, 
mortgage servicers, real estate agents and brokers, advertising 
agencies, home builders, lead generators, rate aggregators, and others 
within the Commission's jurisdiction who engage in commercial 
communications concerning mortgage credit products.\116\ As mandated by 
the Omnibus Appropriations Act, the Rule does not cover individuals and 
entities that are excluded from the FTC's jurisdiction.
---------------------------------------------------------------------------

    \115\ Final Rule Sec.  321.2(f). This definition is based on 
that used in Regulation Z. See 12 CFR 226.2(a)(22).
    \116\ See supra notes 33-34 and accompanying text.
---------------------------------------------------------------------------

    The Commission received numerous comments regarding whom the Final 
Rule should cover. One commenter representing several groups of state 
financial institution regulators supported broad coverage without 
exemptions for any non-depository institutions beyond those that are 
exempt under the FTC Act. In particular, this commenter advocated for 
coverage of subsidiaries or affiliates of banks and thrifts.\117\ 
Another commenter requested an exemption for advertising agencies, 
stating that the responsibility for compliance with the Rule should 
fall on the lenders, brokers, or agents promoting the products.\118\ 
Another commenter similarly requested an exemption from the Rule for 
real estate agents and brokers, stating that they provide incidental or 
de minimis advice about mortgage lending simply to inform consumers of 
their options and not to market any particular mortgage credit 
product.\119\ The commenter stated, however, that the Rule should apply 
to a real estate professional that is compensated as a loan originator 
or by a loan originator for this service.\120\ Another commenter, 
raising concerns about the Rule's impact on real estate agents and 
brokers, requested other specific amendments to the Rule that would 
effectively exempt such persons from the Rule.\121\
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    \117\ CSBS/ACSSS/NACCA at 1.
    \118\ Gorbey at 1.
    \119\ NAR at 1-2.
    \120\ Id. at 2.
    \121\ See generally HSA; see also supra Part III.B.3 and infra 
Part III.E.2.
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    The Commission declines to exempt advertising agencies or real 
estate professionals from the Final Rule. These types of individuals 
and entities, as well as others, can make direct or indirect 
misrepresentations to consumers about mortgage credit products, causing 
consumers harm.\122\ Accordingly, the Final Rule must cover 
misrepresentations by each of these categories of persons to protect 
consumers from deception. In addition, the Commission notes that the 
Rule covers any person, including an advertising agency \123\ or real 
estate professional, who makes representations to consumers about a 
mortgage credit product only to the same extent that the person would 
be covered and subject to liability under Section 5 of the FTC Act.
---------------------------------------------------------------------------

    \122\ For example, a company may make a representation 
indirectly to consumers by providing another with materials 
containing deceptive claims that the recipient, in turn, provides to 
consumers. The Commission has held companies that provide others 
with such deceptive ``means and instrumentalities'' liable under 
Section 5 of the FTC Act. See, e.g., In re Castrol N. Am., Inc., 128 
F.T.C. 689 (1999); In re Shell Chem. Co., 128 F.T.C. 749 (1999); 
Waltham Watch Co. v. FTC, 318 F.2d 28, 32 (7th Cir. 1963) (``Those 
who put into the hands of others the means by which they may mislead 
the public, are themselves guilty of a violation of Section 5.* * 
*'').
    \123\ Under the FTC Act, an advertising agency is liable for the 
claims it made to consumers if it was ``an active participant in 
preparing the violative advertisements'' and ``must have known or 
had reason to know'' the advertisements were deceptive. See, e.g., 
In re Bristol-Myers Co., 102 F.T.C. 21, 364 (1983). The Commission, 
for example, has brought cases alleging that advertising agencies 
violated Section 5 of the FTC Act by making deceptive 
representations of automobile lease or credit terms in 
advertisements. See In re Bozell Worldwide, Inc., 127 F.T.C. 1 
(1999); In re Martin Adver., Inc., 127 F.T.C. 10 (1999); In re 
Foote, Cone & Belding Adver., Inc., 125 F.T.C. 528 (1998); In re 
Grey Adver., Inc., 125 F.T.C. 548 (1998); In re Rubin Postaer and 
Assocs., Inc., 125 F.T.C. 572 (1998).
---------------------------------------------------------------------------

    Most of the submitted comments advocating particular exemptions 
from the Rule were from or on behalf of state-chartered credit unions. 
Some of these commenters urged the Commission to exclude state-
chartered credit unions because existing regulations already cover them 
\124\ or because Federally-chartered credit unions would not be covered 
by the Rule.\125\ Some commenters suggested, in the alternative, that 
the Commission include state-chartered credit unions under the Rule but 
``deem'' them in compliance if, for example, they comply with other 
current and future mortgage regulations.\126\
---------------------------------------------------------------------------

    \124\ See CUAO at 1; PCUA at 1; WCUL at 1; see also NASCUS at 1; 
CUNA at 1; OMNI at 1. Federally-insured credit unions are prohibited 
generally by NCUA's regulations from using advertising or 
promotional material that contains inaccurate, misleading, or 
deceptive claims concerning their products, services, or financial 
condition. See 12 CFR 740.2. Some commenters noted that the 
advertising practices of state-chartered credit unions that are 
Federally insured are subject to existing NCUA advertising 
regulations. See NASCUS at 2; CUNA at 2; see generally BECU.
    \125\ See BECU at 3; PCUA at 2.
    \126\ See, e.g., CUAO at 1; WCUL at 1; CUNA at 1.
---------------------------------------------------------------------------

    Because of the importance of protecting consumers from deceptive 
mortgage advertising, regardless of the type of entity engaged in the 
deception, the Final Rule does not grant any exemptions for 
institutions within the FTC's jurisdiction under the FTC Act. 
Consistent with the FTC's jurisdiction, the Final Rule covers all 
credit unions except Federally-chartered credit unions.\127\ The Rule 
simply prohibits

[[Page 43833]]

material misrepresentations and does not conflict with the regulations 
of other Federal agencies.\128\ Nor does the Commission believe that 
prohibiting any person, including nonfederally-chartered credit unions, 
real estate professionals, advertising agencies, and others, from 
making deceptive claims would put them at a competitive disadvantage. 
Many entities not covered by the Final Rule are subject to general 
Federal and state truth-in-advertising laws, including state ``little 
FTC Acts'' that reflect the prohibition against unfair or deceptive 
acts or practices found in Section 5 of the FTC Act. Moreover, 
compliance with the Final Rule's recordkeeping obligations should not 
be overly burdensome, because it requires the retention of documents 
that many covered persons already retain in the ordinary course of 
business.\129\
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    \127\ The Commission's jurisdiction excludes Federally-chartered 
credit unions but includes all state-chartered credit unions and 
nonfederally-chartered credit unions in Puerto Rico and other U.S. 
territories (whether or not they have Federal insurance). See 15 
U.S.C. 45(a)(2), 57a(f)(4); 12 U.S.C. 1766, 1786; see also FTC, 
Disclosures for Non-Federally Insured Depository Institutions Under 
the Federal Deposit Insurance Corporation Improvement Act (FDICIA), 
Final Rule, 75 FR 31682, 31683 (June 4, 2010); NCUA, Frequently 
Asked Questions, http://www.ncua.gov/About/FAQ.aspx (last visited 
Apr. 4, 2011); NASCUS, State Credit Union Facts & Figures, http://www.nascus.org/facts-figures/index.php (last visited Apr. 4, 2011).
    \128\ In other words, nothing in the other agencies' regulations 
would require entities to make deceptive claims that the Final Rule 
prohibits.
    \129\ See infra Part III.E.
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C. Section 321.3: Prohibited Representations

1. Final Rule
    The Final Rule adopts, without change, proposed Sec.  321.3, which 
prohibits any material misrepresentation, whether made expressly or by 
implication, in any commercial communication, regarding any term of any 
mortgage credit product.\130\ The Commission concludes that this 
provision is necessary and appropriate to protect consumers from 
deceptive practices.
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    \130\ As noted above, a claim is deceptive under Section 5 of 
the FTC Act if there is a ``representation, omission, or practice 
that * * * is likely to mislead consumers acting reasonably under 
the circumstances, and * * * the representation, omission, or 
practice is material.'' Cliffdale, 103 F.T.C. at 165. Information is 
``material'' if it is ``likely to affect [a consumer's] choice of, 
or conduct regarding, a product.'' Id.; see also Novartis, 223 F.3d. 
at 786; supra notes 45-50 and accompanying text. The types of 
information in the representations specified in Sec.  321.3 of the 
Rule involve matters central to consumers' decisions about mortgage 
credit products. Thus, the types of misrepresentations the Rule 
prohibits are ``material.''
---------------------------------------------------------------------------

    To provide clarity and guidance, Sec. Sec.  321.3(a)-(s) also set 
forth a non-exclusive list of misrepresentations that would violate the 
Final Rule.\131\ The list includes the most common misrepresentations 
that have been challenged in Federal and state enforcement actions over 
the past several years. The list is intended to provide illustrative 
guidance about the kinds of claims that are prohibited, thereby 
promoting compliance.
---------------------------------------------------------------------------

    \131\ In the NPRM, the Commission informally grouped the list of 
misrepresentations into three broad categories to facilitate 
discussion. Neither the SBP nor the Final Rule uses the three 
categories.
---------------------------------------------------------------------------

    Section 321.3(a) covers misrepresentations about interest charged 
for the product, including, but not limited to, misrepresentations 
about (1) the amount of interest owed each month that is included in 
the consumer's payments, loan amount, or total amount due; or (2) the 
interest owed each month that is not included in the payments but is 
instead added to the total amount due.\132\
---------------------------------------------------------------------------

    \132\ In the NPRM, the Commission also addressed negative 
amortization products in connection with Sec.  321.3(a). After 
further reflection, the Commission believes it is more appropriate 
to address this topic in connection with Sec.  321.3(i). See infra 
note 144 and accompanying text.
---------------------------------------------------------------------------

    Section 321.3(b) bars misrepresentations about the APR, simple 
annual rate, periodic rate, or any other rate, including, but not 
limited to, a payment rate.\133\ The Commission has challenged 
deceptive rate claims in many cases, some of which included allegations 
that originators understated the true rate by more than 100 
percent.\134\
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    \133\ A payment rate is the rate used to calculate the 
consumer's monthly payment amount and is not necessarily the same as 
the interest rate. If the payment rate is less than the interest 
rate, the consumer's monthly payment amount does not include the 
full interest owed each month; the difference between the amount the 
consumer pays and the amount the consumer owes is added to the total 
amount due from the consumer.
    The Rule prohibits misrepresentations about payment rates and 
any other rate, for both closed-end and open-end credit. In 
comparison, Regulation Z bans advertising of payment rates, 
effective rates, and qualifying rates for closed-end credit, see 
Regulation Z Commentary, 12 CFR 226.24(c)-2, Supp. I, but does not 
ban advertising of such rates for open-end credit.
    \134\ See FTC v. Safe Harbour Found. of Fla., Inc., No. 08-C-
1185 (N.D. Ill. 2008) (severely understated APR); see also In re Am. 
Nationwide Mortg. Co., F.T.C. Dkt. No. C-4249 (2009); In re Shiva 
Venture Group, Inc., F.T.C. Dkt. No. C-4250 (2009); In re Michael 
Gendrolis, F.T.C. Dkt. No. C-4248 (2009).
    In the NPRM, the Commission addressed savings rates in 
connection with Sec.  321.3(b). After further reflection, the 
Commission believes it is more appropriate address this topic in 
connection with Sec.  321.3(h). See infra notes 141-43 and 
accompanying text.
---------------------------------------------------------------------------

    Section 321.3(c) bars misrepresentations about the existence, 
nature, or amount of fees or costs associated with any mortgage credit 
product. It also prohibits false or misleading claims that no fees are 
charged, for example, if the fees and costs in fact are incorporated in 
the loan amount or total amount due from the consumer.\135\ This 
provision covers fees and costs imposed at any point during the life of 
the loan.
---------------------------------------------------------------------------

    \135\  See, e.g., FTC v. Ranney, No. 04-F-1065 (MJW) (D. Colo. 
2004); FTC v. Chase Fin. Funding, Inc., No. SACV04-549 GLT (ANx) 
(C.D. Cal. 2004) (allegedly promoting ``NO COSTS * * * NO KIDDING'' 
and ``no-fee'' loans, when in fact, the loans included such 
charges); see also FTC v. Assocs. First Capital Corp., No. 1:01-
00606 JTC (N.D. Ga. 2001); FTC v. First Alliance Mortg. Co., No. 
SACV 00-964 DOC (EEx) (C.D. Cal. 2000).
---------------------------------------------------------------------------

    Section 321.3(d) covers misrepresentations about terms associated 
with additional products or features that may be sold in conjunction 
with a mortgage credit product.\136\ Thus, this provision covers claims 
made in cross-selling other products or features in mortgage credit 
product offers, including, but not limited to, credit insurance, credit 
disability insurance, car clubs, or other ``add-ons'' to the loan.\137\
---------------------------------------------------------------------------

    \136\ The Commission has challenged such misrepresentations in 
its law enforcement actions. See, e.g., FTC v. Assocs. First Capital 
Corp., No. 1:01-00606 JTC (N.D. Ga. 2001).
    \137\ The Commission has alleged deceptive practices involving 
add-ons to non-mortgage personal loans as well. See FTC v. Stewart 
Fin. Co. Holdings, Civ. No. 1:03-CV-2648-JTC (N.D. Ga. 2003).
---------------------------------------------------------------------------

    Section 321.3(e) covers misrepresentations relating to the taxes or 
insurance associated with a mortgage credit product, for example, 
claims about whether tax or insurance charges are included in the 
overall monthly payment or must be paid separately.\138\
---------------------------------------------------------------------------

    \138\ Commission enforcement actions have challenged deceptive 
claims that the advertised monthly payment included tax and 
insurance charges, when in fact it did not. See, e.g., United States 
v. Mercantile Mortg. Co., No. 02-C-5079 (N.D. Ill. 2002); FTC v. OSI 
Fin. Servs., Inc., No. 02-C-5078 (N.D. Ill. 2002); FTC v. Assocs. 
First Capital Corp., No. 1:01-00606 JTC (N.D. Ga. 2001).
---------------------------------------------------------------------------

    Section 321.3(f) bars misrepresentations about the existence or 
amount of any penalty for making prepayments on the mortgage.\139\
---------------------------------------------------------------------------

    \139\ The Commission has brought several cases against entities 
that allegedly deceived consumers about prepayment penalties. See, 
e.g., United States v. Mercantile Mortg. Co., No. 02-C-5079 (N.D. 
Ill. 2002); FTC v. OSI Fin. Servs., Inc., No. 02-C-5078 (N.D. Ill. 
2002); FTC v. Chase Fin. Funding Inc., No. SACV 04-549 GLT (ANx) 
(C.D. Cal. 2004); see also FTC Bureau of Consumer Protection, Bureau 
of Economics, and Office of Policy Planning, Comments before Board 
of Governors of Federal Reserve System on Truth in Lending 4 n.11 
(Apr. 8, 2008), available at http://www.ftc.gov/os/2008/04/V080008frb.pdf.
---------------------------------------------------------------------------

    Section 321.3(g) prohibits misrepresentations pertaining to the 
variability of interest, payments, or other terms of mortgage credit 
products, including, but not limited to, misrepresentations using the 
word ``fixed'' when terms are, in fact, variable or limited in 
duration.\140\
---------------------------------------------------------------------------

    \140\ The Commission has charged mortgage brokers and other 
entities with falsely promising consumers low fixed payments and 
rates on their mortgage loans, including promising ``30 year fixed. 
1.95%,'' ``3.5% fixed payment loan,''; and other rates that were 
not, in fact, fixed. See, e.g., In re Am. Nationwide Mortg. Co., 
F.T.C. Dkt. No. C-4249 (2009); FTC v. Chase Fin. Funding, Inc., No. 
SACV 04-549 GLT (ANx) (C.D. Cal. 2004); see also FTC v. 30 Minute 
Mortg., Inc., No. 03-60021 (S.D. Fla. 2003); Andrews v. Chevy Chase 
Bank, 240 F.R.D. 612 (E.D. Wis. 2007) (describing payment option ARM 
sold as ``fixed rate'' when interest was only fixed for one month, 
although payments were fixed for a year).
    Section 321.3(g) of the Final Rule is broader than a similar 
provision in Regulation Z that applies only to closed-end dwelling-
secured credit and requires specific advertising disclosures. See 12 
CFR 226.24(i)(1).

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[[Page 43834]]

    Section 321.3(h) bars false or misleading comparisons between rates 
or payments,\141\ including, but not limited to, comparisons involving 
savings. It also is intended to cover false or misleading savings rate 
claims in financing promotions. The Commission has challenged, for 
example, deceptive claims that consumers will save money (such as at a 
particular rate of savings) by accepting a credit offer.\142\ This 
provision also bars false or misleading comparisons between rates or 
payments available for different parts of the loan term.\143\
---------------------------------------------------------------------------

    \141\ Section 321.3(h) of the Final Rule is broader than a 
similar provision in Regulation Z that applies only to closed-end 
dwelling-secured credit and requires specific advertising 
disclosures. See 12 CFR 226.24(i)(2).
    \142\ The Commission has challenged deceptive savings rate 
claims in non-mortgage contexts. See In re Automatic Data 
Processing, Inc., 115 F.T.C. 841 (1992) (alleged deceptive 
comparisons in automobile financing). Section 321.3(h) of the Final 
Rule would prohibit these types of promotions when used in the 
mortgage context. In the NPRM, the Commission addressed savings 
rates in connection with Sec.  321.3(b).
    \143\ See, e.g., In re FirstPlus Fin. Group, Inc., F.T.C. Dkt. 
No. C-3984 (2000).
---------------------------------------------------------------------------

    Section 321.3(i) prohibits misrepresentations about the type of 
mortgage credit product being offered, e.g., false claims that a 
mortgage is fully amortizing.\144\
---------------------------------------------------------------------------

    \144\ The Commission has challenged such misrepresentations in 
its law enforcement actions. See, e.g., In re Shiva Venture Group, 
Inc., F.T.C. Dkt. No. C-4250 (2009); In re Michael Gendrolis, F.T.C. 
Dkt. No. C-4248 (2009); In re Am. Nationwide Mortg. Co., F.T.C. Dkt. 
No. C-4249 (2009); FTC v. OSI Fin. Servs., Inc., No. 02-C-5078 (N.D. 
Ill. 2002); United States v. Mercantile Mortg. Co., No. 02-C-5029 
(N.D. Ill. 2002); FTC v. Capital City Mortg. Corp., No. 1:98CV237 
(D.D.C. 1998).
---------------------------------------------------------------------------

    Section 321.3(j) bars misrepresentations about the amount of the 
obligation or the existence, nature, or amount of cash or credit the 
consumer could receive from the loan.\145\ This would include, for 
example, false claims that the consumer will receive a certain amount 
of cash by obtaining a home equity loan, or will receive a certain 
amount of credit through a purchase money loan.
---------------------------------------------------------------------------

    \145\ See FTC v. Assocs. First Capital Corp., No. 1:01-00606 JTC 
(N.D. Ga. 2001) (alleging deceptive representations about loan 
amounts in home equity mortgages); FTC v. First Alliance Mortg. Co., 
No. SACV 00-964 DOC (EEx) (C.D. Cal. 2000) (same); see also United 
States v. Mercantile Mortg. Co., No. 02-C-5079 (N.D. Ill. 2002) 
(alleging deceptive representations about cash dispersal amounts in 
home equity loans or refinances); FTC v. OSI Fin. Servs., Inc., No. 
02-C-5078 (N.D. Ill. 2002) (same).
---------------------------------------------------------------------------

    Section 321.3(k) prohibits misrepresentations about the existence, 
number, amount, or timing of any minimum or required payments.\146\ One 
commenter, focusing on reverse mortgages, suggested revising the Rule 
to clarify that it is not a violation of Sec.  321.3(k) if the 
advertisement makes clear that the borrower has no regular monthly 
repayment installment obligations under the loan but must pay the real 
estate taxes and hazard insurance.\147\ Although no revision of the 
Rule text is necessary on this point, the Commission emphasizes that 
the Final Rule does not prohibit a person from including in an 
advertisement truthful, non-misleading information about the borrower's 
responsibility to pay real estate taxes and hazard insurance. The 
Commission notes, however, that the determination of whether an 
advertisement is deceptive is based on the net impression of the 
advertisement as a whole. Thus, a fine print disclosure about the 
borrower's need to pay taxes and insurance often would not be 
sufficient to qualify a more prominent claim that the borrower need not 
make monthly payments.\148\
---------------------------------------------------------------------------

    \146\ This provision covers, for example: (1) Misrepresentations 
about whether certain payments are part of the loan, see, e.g., FTC 
v. OSI Fin. Servs., Inc., No. 02-C-5078 (N.D. Ill. 2002); United 
States v. Mercantile Mortg. Co., No. 02-C-5079 (N.D. Ill. 2002); (2) 
false claims that an aspect of the loan would cover the payments 
due, see FTC v. Ranney, No. 04-F-1065 (MJW) (D. Colo. 2004); and (3) 
false or misleading claims as to the obligation to repay, or make 
other payments associated with, a reverse mortgage, see Federal 
Financial Institutions Examination Council (FFIEC), Reverse Mortgage 
Products: Guidance for Managing Compliance and Reputation Risks 
(FFIEC Reverse Mortgage Guidance), 75 FR 50801, 50809 (Aug. 17, 
2010) (guidance issued by Federal and state bank regulatory agencies 
on need for adequate information and other consumer protections 
regarding reverse mortgage products). The Commission notes that 
reverse mortgages are also subject to other Federal requirements. 
See, e.g., 24 CFR 206 (HUD regulations on HECMs). See generally 12 
CFR 226 (Regulation Z).
    \147\ See NRMLA at 4.
    \148\ ``Fine print disclosures generally may not cure a 
misimpression created by the text of an advertisement.'' In re 
Stouffer Foods Corp., 118 F.T.C. 746, 786 (citation omitted); see 
also In re Am. Nationwide Mortg. Co., F.T.C. Docket No. C-4249 
(2009); In re Michael Gendrolis, F.T.C. Dkt. No. C-4248 (2009).
---------------------------------------------------------------------------

    Section 321.3(l) prohibits misrepresentations about the potential 
for default on the mortgage credit product, including, but not limited 
to, misrepresentations about the circumstances under which the consumer 
could default for nonpayment of taxes or insurance, failure to maintain 
the property, or non-compliance with other obligations.\149\
---------------------------------------------------------------------------

    \149\ For example, it would violate this section for a reverse 
mortgage lender to make the false or misleading claim that ``no 
matter what, you can stay in your home for life,'' when the lender 
can force the sale of the property if the consumer does not 
adequately maintain the property.
---------------------------------------------------------------------------

    Section 321.3(m) bars misrepresentations about the effectiveness of 
the mortgage credit product in helping consumers resolve problems in 
paying debts.\150\ This section covers false or misleading claims that 
the lender's or servicer's product (through a waiver, forgiveness, or 
otherwise) can reduce, eliminate, or restructure a debt or any other 
obligation of any person.\151\
---------------------------------------------------------------------------

    \150\ The Commission notes that the MARS Rule prohibits mortgage 
assistance relief service providers from: (1) Misrepresenting the 
amount of money or percentage of the debt amount that a consumer may 
save by using the mortgage assistance relief service; and (2) making 
a representation about the efficacy of any such service unless the 
provider can substantiate the representation. See 16 CFR 
322.3(b)(10), (c). In contrast, the MAP--Advertising Final Rule 
prohibits any person from misrepresenting the effectiveness of the 
mortgage credit product in helping the consumer resolve problems 
paying debts. While the Final Rule is intended to address 
communications from lenders, servicers, and other advertisers 
primarily, it also is worded broadly enough to cover 
misrepresentations about mortgage credit products that may not be 
covered by the MARS Rule.
    Section 321.3(m) of the Final Rule is broader than a similar 
provision in Regulation Z that applies only to closed-end dwelling-
secured credit. See 12 CFR 226.24(i)(5).
    \151\ Thus, this provision covers false or misleading claims of 
debt elimination, debt forgiveness, or savings associated with 
mortgage credit products. See, e.g., In re FirstPlus Fin. Group, 
Inc., F.T.C. Dkt. No. C-3984 (2000); FTC v. Safe Harbour Found. of 
Fla., Inc., No. 08-C-1185 (DC Ill. 2008).
---------------------------------------------------------------------------

    Section 321.3(n) prohibits misrepresentations about the association 
between a mortgage credit product or a provider of such product and any 
other person or program, including, but not limited to, any affiliation 
with an organizational or governmental program, benefit, or 
entity.\152\
---------------------------------------------------------------------------

    \152\ The FTC has challenged many of these types of claims in 
its loan modification cases, including where the defendants 
allegedly claimed, in part through the use of names, seals, or 
symbols, that the mortgage credit product was a government benefit 
or that the lender was affiliated with the government. See, e.g., 
FTC v. Ryan, No. 1:09-cv-00535-HHK (D.D.C. 2009). In some contexts, 
such misrepresentations may also violate the MARS Rule. See 16 CFR 
322.3(b)(3). The MAP--Advertising Final Rule is worded broadly 
enough to cover misrepresentations about mortgage credit products 
that may not be covered by the MARS Rule.
    Section 321.3(n) of the Final Rule is broader than a similar 
provision in Regulation Z that applies only to closed-end dwelling-
secured credit and is limited to claims about the loan program 
advertised. See 12 CFR 226.24(i)(3). In comparison, the Commission's 
Rule applies to both closed-end and open-end credit secured either 
by real property or a dwelling, covers claims about the loan program 
as well as the provider of the advertisement, and expressly 
references use of symbolic representations.

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[[Page 43835]]

    One commenter suggested revising the Rule to clarify that Sec.  
321.3(n)(2) does not prohibit a person from advertising that it offers 
FHA-insured home equity conversion mortgages (HECM loans) if the 
person, in fact, does so.\153\ While no revision of the Rule text is 
warranted on this point, the Commission notes that the Final Rule does 
not prohibit advertisers from making truthful, non-misleading claims as 
to the products they offer, including HECMs.
---------------------------------------------------------------------------

    \153\ See NRMLA at 4.
---------------------------------------------------------------------------

    The same commenter also suggested making clear that the Rule 
permits advertisers to use symbols or logos that resemble those of a 
government entity, organization, or program, when their use is required 
or allowed, such as the Equal Housing lender logo.\154\ The Final Rule 
generally permits the use of symbols and logos when required or allowed 
by the government.\155\ Nevertheless, an advertisement including such a 
symbol or logo may be misleading, depending on the circumstances. For 
example, if an Internet advertisement, which is accessible by consumers 
located in any state, included such logos, but the advertiser had 
recently lost certain of its state licenses or certifications to offer 
mortgages in those jurisdictions, the advertisement could be deceptive 
and violate the Rule. Thus, the Commission agrees that the Rule permits 
the use of such symbols or logos in a truthful, non-misleading manner, 
but it does not believe that it is necessary to revise the language of 
the Rule to address the commenter's concern.
---------------------------------------------------------------------------

    \154\ See id. For example, HUD regulations implementing the Fair 
Housing Act, 42 U.S.C. 3601-3631, generally require the Equal 
Housing Opportunity logo on fair housing posters. See 24 CFR 110.
    \155\ See, e.g., 42 U.S.C. 3605; 24 CFR 110.
---------------------------------------------------------------------------

    Section 321.3(o) covers misrepresentations about the source of the 
mortgage credit product and the commercial communications for it, 
including, but not limited to, claims that the communication is made by 
or on behalf of the consumer's current mortgage lender or 
servicer.\156\
---------------------------------------------------------------------------

    \156\ See, e.g., In re Michael Gendrolis, F.T.C. Dkt. No. C-4248 
(2009) (alleging the failure to disclosure adequately that the 
advertiser, not the consumer's current lender, was offering the 
mortgage). This section also covers false or misleading ``trigger 
lead'' solicitations, in which entities: (1) Obtain information 
about the consumer from sources such as prescreened lists sold by 
consumer reporting agencies; (2) based on that information, contact 
the consumer to promote a mortgage credit product or term; and (3) 
misrepresent their identity as the consumer's current lender or 
servicer.
    Section 321.3(o) of the Final Rule is broader than a similar 
provision in Regulation Z that applies only to closed-end dwelling-
secured credit and is limited to representations about lenders. See 
12 CFR 226.24(i)(4). In comparison, the Commission's Rule applies to 
both closed-end and open-end credit secured either by real property 
or a dwelling and bars misrepresentations about both servicers and 
lenders.
---------------------------------------------------------------------------

    Section 321.3(p) prohibits misrepresentations about the consumer's 
right to reside in the dwelling that is the subject of the mortgage 
credit product, including, but not limited to, false or misleading 
claims about how long or under what conditions a consumer can stay in 
the dwelling.\157\ One commenter, focusing on reverse mortgages, 
suggested revising the Rule to clarify that it is not a violation of 
Sec.  321.3(p) if the advertisement makes clear that the borrower must 
maintain the collateral property, satisfy any occupancy requirements, 
and timely pay the real estate taxes and hazard insurance, if such are 
required and applicable under the loan agreement.\158\ While no 
revision of the Rule text is necessary on this point, the Commission 
emphasizes that the Final Rule does not prohibit a person from 
including in an advertisement truthful, non-misleading information 
about the obligations the borrower must meet to stay in the dwelling.
---------------------------------------------------------------------------

    \157\ Issues concerning the consumer's right to reside in the 
dwelling have frequently arisen in the sale of reverse mortgages. 
See generally U.S. Gov't Accountability Office (GAO), GAO-09-606, 
Reverse Mortgages: Product Complexity and Consumer Protection Issues 
Underscore Need for Improved Controls over Counseling for Borrowers 
(2009) (GAO Reverse Mortgage Report).
    \158\ NRMLA at 4.
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    Sections 321.3(q) and 321.3(r) bar misrepresentations about the 
consumer's ability or likelihood to obtain any mortgage credit product 
or term, or a refinancing or modification of any mortgage credit 
product or term. This includes false or misleading claims about whether 
the consumer has been preapproved or guaranteed for any such product or 
term.\159\
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    \159\ The Commission has challenged similar claims in prior law 
enforcement actions. See, e.g., United States v. Unicor Funding, 
Inc., No. 99-1228 (C.D. Cal. 1999); In re Lomas Mortg. U.S.A., Inc., 
116 F.T.C. 1062 (1993); FTC v. Safe Harbour Found. of Fla., Inc., 
No. 08-C-1185 (DC Ill. 2008); FTC v. Assocs. First Capital Corp., 
No. 1:01-00606 JTC (N.D. Ga. 2001).
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    Section 321.3(s) bars misrepresentations about the availability, 
nature, or substance of counseling services or any other expert advice 
offered to the consumer regarding any mortgage credit product or term, 
including, but not limited to, the qualifications of those offering the 
services or advice.\160\ One commenter suggested clarifying whether, 
with respect to reverse mortgages, Sec.  321.3(s) applies primarily to 
counselors and counseling agencies, or also applies to lenders and loan 
originators.\161\ Because Sec.  321.3(s) in the Final Rule applies to 
any ``person,'' as defined in Sec.  321.2(f), it applies to all of 
these types of individuals or entities. The same commenter also 
suggested clarifying that advertisements may include valid professional 
designations, such as a Better Business Bureau indication or reference 
to status as a Certified Reverse Mortgage Professional for a loan 
originator.\162\ The Final Rule does not prohibit truthful, non-
deceptive references to valid professional designations.\163\
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    \160\ Such misrepresentations have been identified as 
problematic in the offering of reverse mortgages, see, e.g., FFIEC 
Reverse Mortgage Guidance, supra note 146, and GAO Reverse Mortgage 
Report, supra note 157, and of loan modifications, see generally 
MARS, Final Rule, 75 FR 75092. In some contexts, such 
misrepresentations may also violate the MARS Rule. See 16 CFR 
322.3(b)(1). The MAP--Advertising Final Rule is worded broadly 
enough to cover misrepresentations about mortgage credit products 
that may not be covered by the MARS Rule.
    Section 321.3(s) of the Final Rule is broader than a similar 
provision in Regulation Z that applies only to closed-end dwelling-
secured credit and addresses advertisements that use the term 
``counselor'' to refer to a for-profit mortgage broker or creditor, 
its employees, or others working for the broker or creditor in 
offering, originating, or selling mortgages. See 12 CFR 
226.24(i)(6). In comparison, the Commission's Rule applies to both 
closed-end and open-end credit secured either by real property or a 
dwelling and bans misrepresentations regardless of the type of for-
profit entity involved.
    \161\ NRMLA at 4.
    \162\ Id.
    \163\ A literally true claim about a professional designation 
could nonetheless be misleading. For example, if an advertisement 
included a reference to ``Better Business Bureau approval,'' when 
certain Better Business Bureau offices approved the lender but 
others had issued a cautionary rating, this advertisement could be 
deceptive and violate the Rule.
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2. Advertising Disclosures
    The proposed rule did not include any affirmative advertising 
disclosure requirements, and the Final Rule does not adopt any such 
requirements for the reasons discussed further below. In the NPRM, the 
Commission tentatively concluded that it was unnecessary to mandate 
advertising disclosures. The Commission also tentatively concluded that 
not doing so would avoid possible inconsistencies with other Federally- 
or state-mandated disclosure requirements for mortgage advertising, 
thereby lowering the likelihood of consumer confusion while making 
compliance easier. Nevertheless, the NPRM specifically requested 
comment on whether there are any disclosure

[[Page 43836]]

requirements that the Commission should include in the Final Rule. The 
Commission received several comments addressing this issue--some 
discussing disclosures generally and others recommending specific 
disclosure requirements.
a. Comments Discussing Disclosures Generally
    A comment from a group of state banking and consumer credit 
regulators generally recommended against requiring disclosures because 
other Federal rules require specific advertising disclosures and 
imposing additional requirements could create inconsistencies and 
confusion.\164\ This commenter suggested, however, that the Rule should 
prohibit advertising that obscures significant risks to the consumer. 
The commenter stated that advertisements promoting a particular 
mortgage product or feature should give clear and prominent information 
alerting consumers to any potentially negative aspects of the loan, 
such as negative amortization.\165\ To achieve this result, the 
commenter suggested that the Rule require mortgage advertisements to 
disclose any qualifying information, the omission of which would likely 
mislead reasonable consumers in a material way.\166\ The Commission 
declines to adopt any affirmative disclosure requirements in the Final 
Rule but notes that Sec.  321.3 broadly prohibits misrepresentations 
about any term of any mortgage credit product and that the omission of 
qualifying information may cause a representation to be misleading in 
violation of Sec.  321.3.\167\
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    \164\ See CSBS/ACSS/NACCA at 1.
    \165\ See id.
    \166\ See id.
    \167\ Under Section 5 of the FTC Act, it is a deceptive practice 
to omit qualifying information when making a literally truthful 
claim if the omission of that information is likely to mislead 
reasonable consumers in a material way. See Deception Policy 
Statement, supra note 9, at 176-77. For example, a closed-end 
mortgage advertisement likely would be deceptive if it represented 
that a loan has a very low interest rate, but failed to disclose 
that the rate would substantially increase after a few months. Such 
claims often are referred to as ``half truths.'' Mortgage 
advertisements that include half truths in most cases also would be 
considered to have made implied misrepresentations that would fit 
into the specific categories of misrepresentations in the Rule. 
Continuing with the above example, a claim that a loan has a very 
low interest rate, in the absence of any qualifying information, is 
likely to imply to reasonable consumers that the rate lasts at least 
for longer than a few months. Thus, the Final Rule's prohibition on 
misrepresentations likely will cover the sorts of half truths that 
can arise when mortgage advertisers fail to make material 
disclosures.
---------------------------------------------------------------------------

    In addition, as noted in the NPRM and in several comments the 
Commission received, there are already substantial Federal and state 
regulations applicable to mortgage advertisements, including those that 
mandate disclosures. Mandating advertising disclosures in this Rule 
would create potential conflicts and inconsistencies with the 
disclosure provisions of the other requirements to which covered 
entities are also subject, particularly TILA and Regulation Z. For 
example, under TILA and Regulation Z, the APR must be calculated 
following certain methods, and it must be disclosed in mortgage 
advertisements in some circumstances.\168\ If the Commission were to 
require a disclosure of the APR, it would either duplicate the TILA 
requirements or, if the APR was calculated using different costs and 
procedures than those established by TILA and Regulation Z, would 
result in inconsistent Federal requirements and inconsistent 
disclosures, leading to potential consumer confusion and increased 
burden on business. Similarly, if the Commission were to require a 
specific disclosure in all mortgage advertisements that state a monthly 
payment amount, this disclosure would either duplicate or potentially 
conflict with numerous other requirements under Regulation Z.\169\
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    \168\ See, e.g.,12 CFR 226.4; 226.14; 226.16(b) and (d)(1), (2) 
and (6); 226.22; and 226.24(d) and (f)(2).
    \169\ For example, it is not clear that requiring disclosure of 
suggested ``take-home income'' applicable to an advertised mortgage 
credit product would be consistent with other Regulation Z 
requirements. See infra notes 175-76 and accompanying text; see 
also, e.g., 12 CFR 226.24(f)(3) (requiring various disclosures with 
equal prominence and in close proximity, in certain mortgage 
advertisements, when a monthly payment amount is stated); 12 CFR 
226.24(a) (providing that an advertisement for credit must state 
only those terms that actually are or will be arranged or offered).
---------------------------------------------------------------------------

    Thus, the Commission has determined not to require any affirmative 
advertising disclosure requirements in the Final Rule. It concludes 
that the Final Rule's prohibitions on misrepresentations in commercial 
communications regarding mortgage credit products will provide 
sufficient protection to consumers. Finally, the Commission is 
cognizant of the important interplay between existing Federal and state 
advertising and disclosure requirements and designed the Rule to avoid 
conflict or inconsistency with those other requirements.
b. Comments Recommending Specific Disclosures
    One commenter suggested requiring that any commercial communication 
about a reverse mortgage loan state that it relates to a reverse 
mortgage loan.\170\ The commenter indicated that this would allow 
consumers at the outset to identify the product being marketed as a 
reverse mortgage, which, the commenter stated, is important because 
reverse mortgages are a unique subset of mortgage credit products.\171\ 
As noted above, the Commission generally declines to adopt any 
affirmative disclosure requirements in the Final Rule to avoid conflict 
and inconsistency with other Federal and state disclosure requirements. 
Moreover, depending on the circumstances, if advertisements offering 
reverse mortgages misrepresent that they are offering another type of 
mortgage, or if advertisements offering other mortgage products 
misrepresent that they are offering reverse mortgages, such false or 
misleading claims would violate Sec.  321.3(i).
---------------------------------------------------------------------------

    \170\ See NRMLA at 3.
    \171\ Id.
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    The same commenter also recommended requiring that any commercial 
communication offering a reverse mortgage loan state whether the entity 
making the communication is the lender for the loan, and if not, state 
the role of the entity and its purpose in collecting information about 
the prospective borrower.\172\ An individual commenter similarly 
suggested that the Commission require mortgage companies to disclose in 
their advertising the name and state under which they are 
licensed.\173\ Another commenter proposed requiring mortgage brokers to 
disclose they are not mortgage lenders and do not fund loans.\174\ As 
noted above, the Commission generally declines to adopt any affirmative 
disclosure requirements in the Final Rule to avoid conflict and 
inconsistency with other Federal and

[[Page 43837]]

state disclosure requirements. Nonetheless, it is a violation of 
Sec. Sec.  321.3(n) or (o) if the advertisement misrepresents, 
respectively: (1) The association of the mortgage credit product or any 
provider of the product with any other person of program, or (2) the 
source of any commercial communication, such as whether it is made by 
on behalf of the consumer's current lender or servicer.
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    \172\ Id.
    \173\ See Coe at 1. The Commission notes that some states 
restrict companies from disseminating mortgage advertisements unless 
they have, and display, such license information. See Kan. Stat. 
Ann. 9-2208 (2010); Or. Admin. R. 441-870-0080 (2010); 7 Pa. Cons. 
Stat. 6121, 6135 (2010); 10 Va. Admin. Code 5-160-60 (2010); see 
also supra note 56 (SAFE Act requirements). The Commission also 
notes that lenders and mortgagees approved by the FHA must use their 
HUD-registered business names in all advertisements and promotional 
materials related to FHA programs. See supra note 53.
    \174\ See CSBS/ACSS/NACCA at 2. This commenter also indicated 
that while various states require this information to be provided 
after application, few rules exist requiring brokers to make this 
distinction in advertising. Id. The Commission notes that some 
states require disclosures in advertisements (or provide that it is 
deceptive not to include certain information) indicating that the 
entity is a mortgage broker only and not a mortgage lender or that 
it does not make or fund loans. See Conn. Gen. Stat. 36a-497 (2010); 
N.J. Admin. Code 3:2-1.4 (2010); N.Y. Banking Law 595-a; N.Y. Comp. 
Codes R. & Regs. tit. 3, 38.2 (2010); 209 Mass. Code Regs. 42.12A 
(2010).
---------------------------------------------------------------------------

    One individual commenter expressed concern that advertisements 
quoting a monthly payment amount do not offer guidance on how much a 
household should earn to afford that payment.\175\ The commenter 
proposed requiring that any home loan advertisement quoting a ``monthly 
price'' (presumably, a monthly payment amount) also must include a 
suggested ``take home income'' (after tax) needed for the consumer to 
afford that ``monthly price,'' to clarify to the consumer the 
connection between ``how much it will cost'' and ``how much I can 
spend.'' \176\ Again, the Commission generally declines to adopt any 
affirmative disclosure requirements in the Final Rule to avoid conflict 
and inconsistency with other Federal and state disclosure requirements. 
Nonetheless, Sec.  321.3 broadly prohibits misrepresentations about any 
term of any mortgage credit product, which would include 
misrepresentations about monthly payment amounts and other costs to the 
consumer.
---------------------------------------------------------------------------

    \175\ Swider at 1.
    \176\ See id. This commenter suggested that the required 
disclosure should be calculated by multiplying the advertised 
monthly payment by five. Thus, if the advertised monthly payment 
were $500, this would trigger disclosure of a ``suggested take home 
income'' (after tax) of $2,500. As indicated above, such a 
disclosure could conflict with Federal or other requirements. See 
supra note 169.
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3. Dodd-Frank Act and CFPB Considerations
    As noted above, the Dodd-Frank Act made substantial changes in the 
Federal regulatory framework for providers of financial products or 
services, including transferring to the CFPB, on the transfer date 
designated as July 21, 2011, the Commission's rulemaking authority 
under the Omnibus Appropriations Act, as clarified by the Credit CARD 
Act.\177\ The Commission received two comments that focus primarily on 
the Dodd-Frank Act and suggest that the Commission defer issuing a 
final rule in view of the upcoming transfer of rulemaking 
authority.\178\ These commenters suggested that the Federal banking 
agencies and the FTC should coordinate with the CFPB to implement one 
set of mortgage rules, or that these entities should engage in a 
coordinated review of regulatory initiatives and reevaluation of the 
goals and methods of financial regulation.\179\ According to the 
commenters, the fact that the CFPB does not assume rulemaking authority 
under the Omnibus Appropriations Act until the designated transfer date 
is merely a technicality.\180\ Another commenter representing a group 
of state-chartered credit unions suggested that the Commission issue a 
final rule but coordinate with the CFPB and defer mandatory compliance 
with the FTC's Final Rule until Titles X and XIV of the Dodd-Frank Act 
take effect.\181\
---------------------------------------------------------------------------

    \177\ See supra Part I.A.4. The FTC retains enforcement 
authority for these rules concurrently with the CFPB. See Dodd-Frank 
Act Sec. Sec.  1024, 1061.
    \178\ See generally ABA and CMC/MBA.
    \179\ See ABA at 1-2; CMC/MBA at 1. The commenters reference 
various provisions of the Dodd-Frank Act, including the requirement 
that the CFPB and FTC negotiate an agreement to facilitate 
coordination on rulemaking. See, e.g., CMC/MBA at 3; see also Dodd-
Frank Act Sec.  1061(b)(5)(D); see ABA at 2-3; see also Dodd-Frank 
Act Sec.  1097.
    \180\ See ABA at 3; CMC/MBA at 4.
    \181\ See PCUA at 1-2.
---------------------------------------------------------------------------

    The Commission declines to adopt any of these recommendations. The 
Dodd-Frank Act did not remove or revise the Commission's rulemaking 
authority prior to the July 21, 2011 transfer date, and the Commission 
concludes that it is in the public interest to implement this Rule 
now.\182\ The Final Rule essentially codifies existing deception law 
under Section 5 of the FTC Act, and thus does not pose a significant 
additional burden on covered entities. At the same time, the Final Rule 
will enhance consumer protection and deter deception because the 
Commission, the CFPB, and the states will be able to enforce it and 
obtain civil penalties for violations.\183\ The Commission will 
continue its coordination with the CFPB on mortgage-related issues to 
avoid the imposition of inconsistent standards.
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    \182\ Indeed, after the enactment of the Dodd-Frank Act, the 
Commission issued another final rule consistent with the directive 
under the Omnibus Appropriations Act. See supra note 7.
    \183\ See supra Parts I.A.3 and I.A.4.
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4. Substantial Assistance or Support
    The proposed rule did not include a ``substantial assistance'' 
provision. Some FTC rules prohibit a person from giving substantial 
assistance or support to others who violate the rule if that person 
knows or consciously avoids knowing of the violations. In the NPRM, the 
Commission asked what evidence exists of individuals or entities 
knowingly providing substantial assistance to those engaged in 
deceptive mortgage advertising and whether the Final Rule should 
specifically prohibit this conduct.
    The Commission received two comments opposing a substantial 
assistance provision.\184\ One of the commenters stated that the 
prohibition may create a disincentive for real estate professionals to 
provide advice and unintentionally result in consumers having less 
access to information.\185\ The other commenter suggested that, if the 
FTC did include such a prohibition, it should not hold lenders liable 
for violations committed by third parties, such as lead generators or 
brokers, that provided the substantial assistance or support.\186\
---------------------------------------------------------------------------

    \184\ AFSA at 2; NAR at 2. Neither comment specifically 
addressed the ``knows or consciously avoids knowing'' standard.
    \185\ NAR at 2.
    \186\ AFSA at 2.
---------------------------------------------------------------------------

    The Commission received one comment supporting the inclusion in the 
Final Rule of a substantial assistance or support provision.\187\ The 
commenter stated that this prohibition would prevent mortgage loan 
originators from evading the Rule by contracting their advertising to 
third parties.\188\ Another commenter generally stated that the Rule 
should cover third parties on whom companies rely for ``guidance'' 
regarding whether representations are prohibited by the Rule.\189\
---------------------------------------------------------------------------

    \187\ CSBS/ACSSS/NAACA at 1. This comment did not specifically 
address the ``knows or consciously avoids knowing'' standard.
    \188\ Id. The Commission notes that the Rule covers any person 
who ``make[s]'' a material misrepresentation in a commercial 
communication about any term of a mortgage credit product. Whether 
or not a lender or a third party is considered to have ``made'' the 
misrepresentation for purposes of the Rule, however, depends on the 
circumstances. See supra Part III.B.4.
    \189\ OMNI at 1.
---------------------------------------------------------------------------

    The Commission declines to add a substantial assistance provision 
to the Rule. Neither the Commission's law enforcement experience nor 
the public comments received indicate that the provision of knowing 
substantial assistance to those engaged in deceptive mortgage 
advertising is prevalent or poses significant risks to consumers. More 
specifically, the record does not identify any classes of persons that 
may provide substantial assistance or support to mortgage advertisers 
that would not already be subject to the Rule. To the extent that there 
are others who provide such assistance and support and are not covered 
by the Rule, they may be liable under Section 5 of the FTC Act,\190\ or 
the CFPB could

[[Page 43838]]

amend the Rule to bring them within its scope.
---------------------------------------------------------------------------

    \190\ For example, assume that a mortgage lender runs deceptive 
advertisements in violation of the Rule and submits the resulting 
charges through a payment processor who knows or should know of the 
lender's Rule violations. Having not incorporated a ``substantial 
assistance or support'' provision into the Rule, the Commission 
could not challenge the payment processor's conduct as a Rule 
violation. However, depending on the facts and circumstances, the 
Commission might be able to take law enforcement action against the 
payment processor's conduct as an unfair act or practice in 
violation of Section 5 of the FTC Act. See, e.g., FTC v. Your Money 
Access, LLC, No. 2:07-5147 (E.D. Pa. 2007).
---------------------------------------------------------------------------

5. Multiple Languages
    The proposed rule broadly prohibited material misrepresentations in 
commercial communications regardless of the language or languages 
through which the claim is made.\191\ In the NPRM, the Commission 
sought comment on several questions regarding the use of commercial 
communications that ``mix languages'' in connection with mortgage 
products, including whether such practices are unfair or deceptive, 
whether they are prevalent, and whether the Final Rule should address 
this conduct by adding disclosure requirements.
---------------------------------------------------------------------------

    \191\ The Commission has taken law enforcement action against 
those who have used a language other than English or multiple 
languages in deceiving consumers. These include actions against 
mortgage companies that allegedly deceptively offered loans to 
consumers whose primary language was a language other than English. 
One action challenged as deceptive a mortgage company's alleged 
practice of stating loan terms orally to Spanish-speaking consumers 
in Spanish, only to provide loan documents with different and less 
favorable terms in English. See FTC v. Mortgages Para Hispanos.com 
Corp., No. 4:06-cv19 (E.D. Tex. 2006). In another case, the company 
allegedly offered certain mortgage terms in both Chinese and English 
advertisements, but failed to disclose a large balloon payment. See 
In re Felson Builders, Inc., 119 F.T.C. 652 (1995).
---------------------------------------------------------------------------

    The Commission received several comments on this issue, most of 
which indicated that the Commission should not address multiple 
language issues in the Final Rule, beyond the general prohibition on 
misrepresentations in any language or combination of languages.\192\ 
One commenter stated that no additional protections are needed and that 
``only English should be used to keep costs down for institutions.'' 
\193\ Another commenter noted that the multiple languages issue relates 
to mortgage loan disclosures in general and recommended that the 
Commission coordinate with the CFPB to ensure a consistent 
approach.\194\ Specifically, to the extent that regulations may require 
disclosures in languages other than English, the commenter recommended 
that regulators provide model disclosure forms.\195\
---------------------------------------------------------------------------

    \192\ See AFSA at 2-3; HPC at 1-3; CMC/MBA at 6; OMNI at 2. 
Commenters acknowledged that the proposed rule already prohibited 
misleading claims in any language or combination of languages.
    \193\ OMNI at 2.
    \194\ CMC/MBA at 6.
    \195\ Id.
---------------------------------------------------------------------------

    Two commenters noted the benefits to consumers of advertising and 
communicating in languages other than English and were concerned about 
the disincentives that would result from requiring disclosures in those 
languages.\196\ These commenters emphasized that the proposed rule 
already covers bait and switch tactics (i.e., making claims about a 
product in an advertisement to encourage expression of consumer 
interest but then substituting a different product for the advertised 
product) and misrepresentations, regardless of the language used.\197\ 
These commenters opposed requiring disclosures in the consumer's 
preferred language, stating that the costs to business of maintaining 
all of the various disclosures and contracts in all of the different 
languages that consumers potentially use would outweigh the benefits to 
consumers, and would cause companies not to advertise in languages 
other than English to avoid the burdens of the Rule.\198\ According to 
one of the two commenters, lenders likely would not advertise in any 
languages other than English to avoid the risk of liability under state 
unfair trade practices statutes.\199\ The commenter indicated that 
providing any required contracts in a language other than English would 
falsely raise consumers' expectations that they will be provided 
support in that language throughout the rest of their relationship with 
the lender.\200\ The other commenter questioned whether transaction 
documents that states require to be publicly filed would be legally 
permitted in various county recorders' offices if they were in 
languages other than English.\201\
---------------------------------------------------------------------------

    \196\ AFSA at 2-3; HPC at 2.
    \197\ AFSA at 2; HPC at 2-3 (``Whether that misrepresentation is 
found in the foreign language, whether it is found in the English 
language or whether it is found in the mingling of the two languages 
is irrelevant; it is the misrepresentation that is significant and 
that is prohibited . * * *'').
    \198\ AFSA at 2-3; HPC at 2.
    \199\ AFSA at 2.
    \200\ Id.
    \201\ HPC at 2.
---------------------------------------------------------------------------

    In contrast, one commenter stated that a company that advertises in 
a language other than English should provide disclosure and other 
mortgage documents, including the loan contract, in that other language 
as well as in English.\202\ Another commenter described seeing several 
instances where borrowers with limited English proficiency were told 
one thing in their native language, but the written contract said 
something else.\203\ This commenter requested that the Commission 
``make it clear that anything that is deceptive when either or both 
languages or a `mix' of languages is considered should be prohibited by 
rule.'' \204\
---------------------------------------------------------------------------

    \202\ CSBS/ACSSS/NACCA at 2.
    \203\ ABLE at 6.
    \204\ Id.
---------------------------------------------------------------------------

    As noted above, the Final Rule prohibits misleading claims in any 
language or any combination of languages.\205\ The Commission believes 
that, based on the record, it is not necessary to add a specific 
provision requiring disclosures in languages other than English, or to 
add other such related requirements to the Final Rule. For example, the 
Final Rule already addresses the concern that arises where a mortgage 
advertiser represents a key feature in a print advertisement in a 
language other than English but makes an inconsistent representation 
elsewhere in the advertisement in English. Such an advertisement could 
be deceptive and thus prohibited by the Final Rule. It is also well-
established that the ``net impression'' to the consumer is a touchstone 
of FTC deception analysis, and that, consequently, a fine print or 
otherwise ineffective disclaimer may not cure an otherwise misleading 
advertisement.\206\ This principle, as applied to advertising that uses 
multiple languages, means that, in advertising targeting consumers in a 
language other than English, a disclaimer in English may not cure 
misleading claims in that other language.\207\
---------------------------------------------------------------------------

    \205\ See Final Rule Sec.  321.2(a). In comparison, for closed-
end credit, Regulation Z specifically bans providing information 
about some trigger terms or required disclosures only in a foreign 
language in the advertisement but, at the same time, providing 
information about other trigger terms or required disclosures only 
in English in that advertisement. See 12 CFR 226.24(i)(7).
    \206\ See, e.g., FTC v. Cyberspace.com, LLC, 453 F.3d 1196, 1200 
(9th Cir. 2006).
    \207\ See, e.g., 16 CFR 14.9 (under FTC rules, cease-and-desist 
orders, and guides that require ``clear and conspicuous'' disclosure 
of information, such disclosures must be made in the language of the 
target audience); 16 CFR 610.4(a)(3)(ii) (in marketing free credit 
reports, mandatory disclosures must be made in the same language as 
that principally used in the advertisement); 16 CFR 429.1(a) (in 
door-to-door sales, failure to furnish a completed receipt or 
contract in the same language as the oral sales presentation is an 
unfair and deceptive act or practice); 16 CFR 455.5 (where used car 
sales are conducted in Spanish, mandatory disclosures must be made 
in Spanish); 16 CFR 308.3(a)(1) (mandatory disclosures about pay-
per-call services must be made in the same language as that 
principally used in the advertisement); see also FTC, Free Annual 
File Disclosures, Final Rule, 75 FR 9726, 9733 (Mar. 3, 2010) 
(noting ``the Commission's belief that a disclosure in a language 
different from that which is principally used in an advertisement 
would be deceptive'').

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[[Page 43839]]

    The Rule generally focuses on misrepresentations, regardless of the 
language or languages used, rather than requiring affirmative mortgage 
advertising disclosures or regulating mortgage-related transaction 
documents. In addition, Congress recently directed the CFPB to develop 
streamlined mortgage disclosures,\208\ and the CFPB may be better 
situated to address non-English language disclosure issues in a more 
comprehensive fashion.
---------------------------------------------------------------------------

    \208\ See, e.g., Dodd-Frank Act, Sec.  1100A; see also Press 
Release TG-864, Dep't of the Treasury, Treasury Convenes Mortgage 
Disclosure Forum, Event Brings Together Stakeholders to Discuss Path 
Forward to Simplify Mortgages Disclosure Forms, Empower Consumers 
with Better, Easy-to-Understand Information (Sept. 21, 2010), 
available at http://www.treasury.gov/press-center/press-releases/Pages/tg864.aspx.
---------------------------------------------------------------------------

D. Section 321.4: Waiver Not Permitted

    Section 321.4 of the Final Rule, which includes only non-
substantive modifications to the proposed rule, provides that ``[i]t is 
a violation of this rule for any person to obtain, or attempt to 
obtain, a waiver from any consumer of any protection provided by or any 
right of the consumer under this rule.'' \209\ The Commission received 
one comment strongly supporting this prohibition, stating that 
``[t]here is never a justification for waivers of misrepresentations.'' 
\210\ The Commission did not receive any other comments addressing this 
provision. The Commission therefore confirms that a non-waiver 
provision is necessary to protect consumers from being deceived in 
making decisions about the most important financial product most of 
them will obtain in their lifetimes. The Commission is unaware of any 
circumstances under which it should condone material misrepresentations 
by allowing advertisers of mortgage loans to include purported waivers 
in their contracts or other agreements with consumers.\211\
---------------------------------------------------------------------------

    \209\ The modifications are designed to make this provision 
clearer and easier to understand. The changes also align this 
provision with the same provision used in the Commission's MARS 
Rule. See 16 CFR 322.8. The proposed provision stated that ``[a]ny 
attempt by any person to obtain a waiver from any consumer of any 
protection provided by or any right of the consumer under this rule 
constitutes a violation of this rule.'' MAP B--Advertising, NPRM, 75 
FR at 60370.
    \210\ ABLE at 5.
    \211\ Other consumer protection laws and regulations include 
prohibitions on requiring consumers to waive their statutory rights. 
See, e.g., 15 U.S.C. 1693l (Electronic Fund Transfer Act); 16 CFR 
322.8 (MARS).
---------------------------------------------------------------------------

E. Section 321.5: Recordkeeping Requirements

1. Final Recordkeeping Requirements
    Section 321.5 of the proposed rule set forth specific categories of 
records that persons covered by the proposed rule would be required to 
retain. A failure to keep such records would be an independent 
violation of the rule.\212\
---------------------------------------------------------------------------

    \212\ Final Rule Sec.  321.5(b); see also 16 CFR 322.9(d) 
(MARS); 16 CFR 310.5(b) (TSR).
---------------------------------------------------------------------------

    The Final Rule's recordkeeping provision is the same as the 
proposed rule's provision except for minor clarifying changes.\213\ 
Specifically, for a period of 24 months from the last date the person 
made or disseminated the applicable commercial communication regarding 
any term of any mortgage credit product, covered persons must retain 
the following information:
---------------------------------------------------------------------------

    \213\ This provision is similar in many respects to the 
recordkeeping requirements set forth in the FTC's MARS Rule and 
Telemarketing Sales Rule (TSR), including the mandate to retain 
scripts, advertisements, and promotional materials. See 16 CFR 322.9 
(MARS); 16 CFR 310.5 (TSR). The Telemarketing and Consumer Fraud and 
Abuse Prevention Act expressly authorized the Commission to impose 
recordkeeping requirements. 15 U.S.C. 6102(a)(3). Although the 
Omnibus Appropriations Act, as clarified by the Credit CARD Act, 
does not contain a specific provision on recordkeeping, the 
recordkeeping requirements here are reasonably related to the 
prevention of deception.
---------------------------------------------------------------------------

    (1) Copies of all materially different commercial communications as 
well as sales scripts, training materials, and marketing materials, 
regarding any term of any mortgage credit product, that the person made 
or disseminated during the relevant time period; \214\
---------------------------------------------------------------------------

    \214\ The Final Rule omits the phrase ``websites and weblogs,'' 
because that language is included in the definition of ``commercial 
communication.'' See Final Rule Sec.  321.2(a). This change is to 
provide clarity; no substantive change is intended.
---------------------------------------------------------------------------

    (2) Documents describing or evidencing all mortgage credit products 
available to consumers during the time period in which the person made 
or disseminated each commercial communication regarding any term of any 
mortgage credit product, including but not limited to the names and 
terms of each such mortgage credit product available to consumers; and
    (3) Documents describing or evidencing all additional products or 
services (such as credit insurance or credit disability insurance) that 
are or may be offered or provided with the mortgage credit products 
available to consumers during the time period in which the person made 
or disseminated each commercial communication regarding any term of any 
mortgage credit product, including but not limited to the names and 
terms of each such additional product or service available to 
consumers.
    The Rule permits entities to keep the records in any legible form 
and in the same manner, format, or place as they keep such records in 
the ordinary course of business.
2. Comments Received
    The Commission received several comments addressing different 
aspects of the proposed recordkeeping requirements. Two commenters 
supported the 24-month record retention period.\215\ Another commenter 
representing several groups of state financial institution regulators 
suggested that the Commission impose a three to four year requirement, 
stating that many states require that timeframe and that a longer 
period is more appropriate for ``such important records.'' \216\ The 
Final Rule retains the 24-month record retention period because it 
requires mortgage advertisers to retain sufficient documentation for 
efficient and effective compliance monitoring, while avoiding the 
imposition of unnecessary costs on advertisers.
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    \215\ AFSA at 3; OMNI at 2.
    \216\ CSBS/ACSSS/NACCA at 2.
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    One commenter stated that the recordkeeping provision describes the 
required categories of records adequately, but expressed concern that 
the proposed rule did not clarify whether the required records must be 
saved as hard copies or electronically. This commenter asserted that 
retaining records electronically would save money and storage 
space.\217\ Section 321.5(b) of the Final Rule adopts the language in 
the proposed rule permitting entities to keep the records in any 
legible form and in the same manner, format, or place as they keep such 
records in the ordinary course of business. This language permits 
electronic or hard copies.
---------------------------------------------------------------------------

    \217\ OMNI at 2.
---------------------------------------------------------------------------

    One commenter suggested that brokers who advertise rates and terms 
of loans purportedly offered by lenders should retain evidence that the 
rates and terms actually were being offered by specific lenders at the 
time of the advertisement.\218\ Section 321.5(a)(2) of the Final Rule, 
which is unchanged from the proposed rule, requires the retention of 
such documents.
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    \218\ CSBS/ACSSS/NACCA at 2.
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    Several commenters discussed the overall costs and burdens 
associated with recordkeeping requirements, particularly with respect 
to advertising agencies, real estate brokers, and real

[[Page 43840]]

estate agents.\219\ One commenter advocated for an exemption from the 
Rule for advertising agencies,\220\ stating that agencies create and 
place commercial communications for a wide variety of clients, making 
it burdensome to retain and keep track of all communications that the 
Rule covers.\221\ Another commenter, requesting an exemption from the 
Rule for real estate brokers and agents,\222\ stated that the 
recordkeeping requirement would be an ``onerous burden'' on such 
persons, because they would need to track weekly changes in mortgage 
rates even though they are not acting as or on behalf of loan 
originators.\223\
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    \219\ Gorbey at 1; HSA at 2-6; NAR at 2.
    \220\ See supra Part III.B.4.
    \221\ Gorbey at 1.
    \222\ See supra Part III.B.4.
    \223\ NAR at 2.
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    Another commenter stated that the combination of the risk of 
liability under Sec.  321.3 for providing mortgage-related information 
that proves to be inaccurate and the recordkeeping requirements under 
Sec.  321.5 would discourage real estate agents and brokers from 
providing general mortgage-related information to clients or 
prospective clients.\224\ This commenter suggested revising the 
definition of ``commercial communication'' to address this issue\225\ 
or, in the alternative, narrowing the recordkeeping requirements\226\ 
and adding a safe harbor'' or ``good-faith exception'' from the rule 
for an ``unintentional inaccuracy.'' \227\
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    \224\ HSA at 2-6.
    \225\ See supra Part III.B.3.
    \226\ Specifically, the commenter suggested the Commission add 
the following italicized language to the recordkeeping requirements: 
(1) Sec.  321.5(a)(1) would apply to ``commercial communications 
that advertise the availability of any specified mortgage credit 
product and are disseminated by such covered person'' (2) Sec.  
321.5(a)(2) would apply to ``mortgage credit products advertised by 
such covered person''; and (3) Sec.  321.5(a)(3) would apply to 
``additional products or services * * * that are or may be offered 
or provided by such covered person with the mortgage credit 
products.'' HSA at 5-6. As discussed infra, the Commission has added 
clarifying language to the Final Rule to address concerns about the 
scope of the recordkeeping requirement.
    \227\ HSA at 4-6. The commenter's proposed ``good-faith 
exception'' states: ``The provisions of this rule [Sec.  321.3] 
shall not apply to any unintentional inaccuracy in a commercial 
communication, provided that such inaccuracy is the product of a 
diligently maintained system or process that is reasonably 
calculated to provide accurate information in commercial 
communications.'' Id. at 6.
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    With respect to overall burden, the Commission believes that the 
record retention requirement is necessary to ensure that covered 
persons are complying with the requirements of the Final Rule.\228\ 
Specifically, the requirement that covered persons retain copies of 
their commercial communications will enable the FTC to review those 
communications for any misrepresentations that violate the Rule and to 
bring law enforcement actions as appropriate. Covered persons may offer 
consumers many different mortgage credit products and may also offer or 
provide additional products or services with the mortgage credit 
products, making it difficult for enforcement agencies to evaluate the 
veracity of claims in advertising for those products absent a 
recordkeeping requirement.
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    \228\ As noted in Part I.A.3, supra, the Omnibus Appropriations 
Act, as clarified by the Credit CARD Act, permits both the 
Commission and states to enforce the rules issued in connection with 
this rulemaking. See Credit CARD Act Sec.  511(a)(1)(C) and (a)(2). 
As noted in Part I.A.4, supra, effective July 21, 2011, both the 
Commission and the CFPB will have the authority to enforce these 
rules against specific categories of ``nondepository covered 
persons.'' See Dodd-Frank Act'' 1024, 1061, 1097.
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    The Commission recognizes that recordkeeping provisions impose 
compliance costs; however, many covered persons in the ordinary course 
of their business already retain the types of documents that the Final 
Rule requires be retained. As noted above, to further reduce burden, 
the Rule permits entities to keep the records in any legible form and 
in the same manner, format, or place as they keep such records in the 
ordinary course of business. The Final Rule also limits the retention 
requirements to avoid imposing any unnecessary burden. For example, 
covered entities need retain only commercial communications that are 
``materially different'' from each other.
    In response to commenters' concerns about the scope of the 
recordkeeping requirements, the Commission's Final Rule adds clarifying 
language throughout Sec.  321.5(a) that does not substantively change 
the provision. The Final Rule clarifies that the recordkeeping 
requirements, like the prohibition in Sec.  321.3, do not apply to all 
commercial communications; rather, they apply to any commercial 
communication ``regarding any term of any mortgage credit product.'' It 
also clarifies that the requirements apply only to commercial 
communications that the covered person ``made or disseminated.'' The 
Commission declines to make additional changes to the recordkeeping 
requirements, and specifically requires that records be retained by 
mortgage lenders and brokers, real estate brokers and agents, 
advertising agencies, and others that make representations about 
mortgage credit product terms in commercial communications. As noted 
above, the Rule is intended to be broad enough to cover commercial 
communications about mortgage credit products that are not necessarily 
offered or extended by the person who is making or disseminating the 
commercial communication.
    Similarly, the Commission has determined not to narrow the 
recordkeeping requirement by providing a good faith exception for 
unintentional deceptive claims.\229\ As explained above, the Final Rule 
generally requires retention of only a narrow class of records that, 
for the most part, advertisers are likely to keep in the ordinary 
course of business. In addition, an exemption for unintentional 
deception is contrary to the longstanding principle that a claim can be 
deceptive even though it was not the advertiser's intent to 
deceive.\230\ Finally, the challenges of proving an absence of good 
faith would frustrate Commission efforts to ensure compliance with the 
Final Rule.
---------------------------------------------------------------------------

    \229\ See supra notes 226-27 and accompanying text.
    \230\ The law is well-established that good faith is not a 
defense to liability under the FTC Act. See, e.g., FTC v. 
Cyberspace.com, LLC, 453 F.3d 1196, 1202 (9th Cir. 2006); FTC v. 
Freecom Communications, Inc., 401 F.3d 1192, 1202 (10th Cir. 2005) 
(``Because the primary purpose of Sec.  5 is to protect the consumer 
public rather than to punish the wrongdoer, the intent to deceive 
consumers is not an element of a Sec.  5 violation.''); Removatron 
Int'l Corp. v. FTC, 884 F.2d 1489, 1495 (1st Cir. 1989); FTC v. 
World Travel Vacation Brokers, Inc., 861 F.2d 1020, 1029 (7th Cir. 
1988) (``To be actionable under Section 5, these misrepresentations 
or practices need not be made with an intent to deceive.''); 
Chrysler Corp. v. FTC, 561 F.2d 357, 363 (DC Cir. 1977) (``An 
advertiser's good faith does not immunize it from responsibility for 
its misrepresentations.'').
---------------------------------------------------------------------------

F. Section 321.6: Actions by States

    The Omnibus Appropriations Act, as clarified by the Credit CARD 
Act, permits states to enforce the rules issued in connection with this 
rulemaking.\231\ States may enforce the rules, subject to the notice 
requirements of the Omnibus Appropriations Act, by bringing civil 
actions in Federal district court or another court of competent 
jurisdiction. Section 321.6 tracks the statute, indicating that states 
have the authority to file actions against those who violate the Rule. 
One commenter expressed appreciation for the Commission's recognition 
of the states' role in combating deceptive practices by including this 
provision in the proposed rule.\232\ Section 321.6 of the Final Rule 
includes only non-substantive modifications to the language that was 
used in this section of the proposed rule.
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    \231\ Credit CARD Act Sec.  511(a)(2).
    \232\ CSBS/ACSSS/NACCA at 1.

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[[Page 43841]]

G. Section 321.7: Severability

    Section 321.7 states that the provisions of the Rule are separate 
and severable from one another. This provision, which is modeled after 
a similar provision in the TSR,\233\ also states that if a court stays 
or invalidates any provisions in the Rule, the Commission intends the 
remaining provisions to continue in effect. The Commission included 
this provision in the proposed rule, and it did not receive any 
comments addressing it. The Commission has adopted the proposed 
provision as the Final Rule.
---------------------------------------------------------------------------

    \233\ See 16 CFR 310.9.
---------------------------------------------------------------------------

H. Effective Date

    The Final Rule becomes effective on August 19, 2011. This 30-day 
timeframe was included in the proposed rule. The Commission received 
two comments regarding the proposed effective date. One commenter 
supported this timeframe, provided the Final Rule is substantially the 
same as the proposed rule and does not include affirmative disclosure 
requirements.\234\ Another commenter suggested 60 days would be more 
appropriate to allow time to set up internal procedures to retain 
documents.\235\
---------------------------------------------------------------------------

    \234\ AFSA at 3.
    \235\ OMNI at 2.
---------------------------------------------------------------------------

    The Commission concludes that the August 19, 2011 effective date is 
appropriate. The Commission has adopted a Final Rule that is 
substantially the same as the proposed rule and prohibits deceptive 
claims that are already unlawful. The Commission recognizes that some 
covered persons may need time to implement new recordkeeping procedures 
but believes that 30 days, which is the same compliance period 
permitted in recent Commission rulemakings,\236\ will give covered 
persons sufficient time to modify their business practices to comply 
with the Rule.\237\
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    \236\ See 75 FR 75092 (MARS); 75 FR 48458 (TSR).
    \237\ See also supra Part III.E (discussing limitations on 
recordkeeping requirements).
---------------------------------------------------------------------------

IV. Paperwork Reduction Act \238\
---------------------------------------------------------------------------

    \238\ OMB Control Number: 3084-0156. The Commission is required 
to display the OMB Control Number assigned, and affected persons are 
not required to respond to the collection of information unless it 
displays a currently valid OMB control number.
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    The Commission is submitting this Final Rule and a Supplemental 
Supporting Statement to the OMB for review under the Paperwork 
Reduction Act (PRA), 44 U.S.C. 3501-21. The recordkeeping requirements 
\239\ of the Rule constitute a ``collection of information'' for 
purposes of the PRA.\240\ The Rule does not impose a disclosure 
requirement. The associated PRA burden analysis follows.
---------------------------------------------------------------------------

    \239\ Section 321.5 of the Final Rule sets forth the 
recordkeeping requirements.
    \240\ See 44 U.S.C. 3502(3)(A).
---------------------------------------------------------------------------

A. Recordkeeping Requirements

    As discussed above, the Final Rule requires covered persons to 
retain: (1) Copies of materially different commercial communications 
and related materials, regarding any term of any mortgage credit 
product, that the person made or disseminated during the relevant time 
period; (2) documents describing or evidencing all mortgage credit 
products available to consumers during the relevant time period; and 
(3) documents describing or evidencing all additional products or 
services (such as credit insurance or credit disability insurance) that 
are or may be offered or provided with the mortgage credit products 
available to consumers during the relevant time period.\241\ A failure 
to keep such records would be an independent violation of the Rule.
---------------------------------------------------------------------------

    \241\ See Final Rule Sec.  321.5(a)(1)-(3). The Final Rule's 
recordkeeping provision is substantially the same as the proposed 
rule's provision and merely adds clarifying language. See supra Part 
III.E.2.
---------------------------------------------------------------------------

    Commission staff believes these recordkeeping requirements pertain 
to records that are usual and customary and kept in the ordinary course 
of business for many covered persons, such as mortgage brokers, 
lenders, and servicers.\242\ As to these persons, the retention of 
these documents does not constitute a ``collection of information,'' as 
defined by OMB's regulations that implement the PRA.\243\ Other covered 
persons, however, such as real estate agents and brokers, advertising 
agencies, home builders, lead generators, rate aggregators, and others, 
may not currently maintain these records in the ordinary course of 
business. Thus, the recordkeeping requirements for those persons would 
constitute a ``collection of information.''
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    \242\ Some covered persons, particularly mortgage brokers and 
lenders, are subject to state recordkeeping requirements for 
mortgage advertisements. See, e.g., Fla. Stat. 494.00165 (2010); 
Ind. Code. Ann. 23-2-5-18 (2010); Kan. Stat. Ann. 9-2208 (2010); 
Minn. Stat. 58.14 (2010); Wash. Rev. Code 19.146.060 (2010). Many 
mortgage brokers, lenders, and servicers are also subject to state 
recordkeeping requirements for mortgage transactions and related 
documents, and these may include descriptions of mortgage credit 
products. See, e.g., Mich. Comp. Laws Serv. 445.1671 (2010); N.Y. 
Banking Law 597 (Consol. 2010); Tenn. Code Ann. 45-13-206 (2010). In 
addition, lenders and mortgagees approved by the FHA must retain 
copies of all print and electronic advertisements and promotional 
materials for a period of two years from the date the materials are 
circulated or used to advertise. See supra note 53.
    \243\ See 44 U.S.C. 3502(3)(A); 5 CFR 1320.3(b)(2).
---------------------------------------------------------------------------

B. Estimated Hours Burden and Associated Labor Costs

    Commission staff estimates that the Final Rule's recordkeeping 
requirements will affect approximately 1.3 million persons \244\ who 
would not otherwise retain such records in the ordinary course of 
business. As noted, this estimate includes real estate agents and 
brokers, advertising agencies, home builders, lead generators, rate 
aggregators, and others that may provide commercial communications 
regarding mortgage credit product terms.\245\
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    \244\ No general source provides precise numbers of the various 
categories of covered persons. Commission staff, therefore, has used 
the following sources and inputs to arrive at this estimated total: 
(1) 1.1 million real estate brokers and agents--from the National 
Association of Realtors, see http://www.realtor.org (last visited 
Feb. 17, 2011); (2) 160,000 home builders (this number is 15,000 
less than the estimate in the NPRM)--from the National Association 
of Home Builders, see http://www.NAHB.org (last visited Feb. 17, 
2011); (3) 350 finance companies--from the American Financial 
Services Association, see http://www.afsaonline.org (last visited 
Feb. 17, 2011); (4) 22,170 advertising agencies--from the North 
American Industry Classification System Association's database of 
U.S. businesses, see http://www.naics.com/naics54.htm (last visited 
Feb. 17, 2011); (5) 1,000 lead generators and rate aggregators--
based on staff's administrative experience. These inputs add to 
1,283,520 (this number is 15,000 less than the estimate in the NPRM; 
for rounding, and to account further for potentially unspecified 
other covered persons, however, staff has increased the resulting 
total to 1.3 million, which is the same as the estimate in the NPRM.
    \245\ The Commission does not know what percentage of these 
persons are, in fact, engaged in covered conduct under the Rule, 
i.e., providing commercial communications about mortgage credit 
product terms. For purposes of these estimates, the Commission has 
assumed all of them are covered by the recordkeeping provisions and 
are not retaining these records in the ordinary course of business.
---------------------------------------------------------------------------

    No comments specifically addressed or refuted this estimate or 
staff's associated PRA burden assumptions and calculations. Apart from 
revisiting data sources and including those updates in its 
information,\246\ staff retains its previously published estimates 
without modification.
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    \246\ See supra note 244.
---------------------------------------------------------------------------

    Although the Commission cannot estimate with precision the time 
required to gather and file the required records, it is reasonable to 
assume that covered persons will each spend approximately 3 hours per 
year to do these tasks, for a total of 3.9 million hours (1.3 million 
persons x 3 hours). Staff further assumes that office support file 
clerks will handle the Rule's record retention requirements at an 
hourly rate of $14.19.\247\ Based upon the above

[[Page 43842]]

estimates and assumptions, the total annual labor cost to retain and 
file documents is $55,341,000 (3.9 million hours x $14.19 per hour).
---------------------------------------------------------------------------

    \247\ This estimate is based on mean hourly wages for office 
file clerks provided by the Bureau of Labor Statistics. See U.S. 
Bur. of Labor Statistics, National Compensation Survey: Occupational 
Earnings in the United States, 2010, Bulletin 2753, May 2011, at 3-
23, tbl. 3, available at http://www.bls.gov/ncs/ncswage2010.htm.
---------------------------------------------------------------------------

    Absent information to the contrary, staff anticipates that existing 
storage media and equipment that covered persons use in the ordinary 
course of business will satisfactorily accommodate incremental 
recordkeeping under the Rule. Accordingly, staff does not anticipate 
that the Rule will require any new capital or other non-labor 
expenditures.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 \248\ requires the 
Commission to provide an Initial Regulatory Flexibility Analysis (IRFA) 
with a proposed rule, and a Final Regulatory Flexibility Analysis 
(FRFA) with a Final Rule, if any, unless the Commission certifies that 
the Rule will not have a significant economic impact on a substantial 
number of small entities.\249\
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    \248\ 5 U.S.C. 601-612.
    \249\ 5 U.S.C. 603-605. The definition of ``small entity'' 
refers to the definition provided in the Small Business Act, which 
defines a ``small-business concern'' as a business that is 
``independently owned and operated and which is not dominant in its 
field of operation.'' 5 U.S.C. 601(3); 15 U.S.C. 632(a)(1).
---------------------------------------------------------------------------

    As of the date of the NPRM, the Commission anticipated that the 
proposed Mortgage Acts and Practices--Advertising Rule would not have a 
significant economic impact on a substantial number of small 
entities.\250\ Nonetheless, the FTC published an IRFA and requested 
public comment on the impact on small businesses of its proposed Rule.
---------------------------------------------------------------------------

    \250\ In the NPRM, the Commission estimated that the proposed 
rule would cover approximately 1.35 million entities. It was not 
known, however, how many of those entities were small entities. 
Nonetheless, staff estimated minimal burden and expense for each 
entity to comply with the proposed rule's requirements. See MAP--
Advertising, NPRM, 75 FR at 60367 & nn.174-175.
---------------------------------------------------------------------------

    In response to the IRFA and questions in the NPRM, the Commission 
did not receive any comprehensive empirical data regarding the revenues 
of covered entities or the Rule's impact on small businesses. The Final 
Rule is substantially the same as the proposed rule. The number of 
entities that the Commission estimates the Final Rule will cover is 
1.325 million, which is about 25,000 less than the estimate provided in 
the NPRM.\251\ Staff's estimated minimal burden and expense for each 
entity's compliance is the same as it was in the NPRM.\252\ Thus, the 
Commission does not anticipate that the Final Rule will have a 
significant economic impact on a substantial number of small entities. 
Although the Commission certified under the RFA that the Final Rule 
will not have a significant impact on a substantial number of small 
entities, the Commission has determined, nonetheless, that it is 
appropriate to publish an FRFA in order to explain the impact of the 
Rule on small entities as follows:
---------------------------------------------------------------------------

    \251\ No general source provides precise numbers of the various 
categories of covered persons. Commission staff, therefore, has used 
the following sources and inputs to arrive at this estimated total: 
(1) 25,400 mortgage lenders and mortgage brokers (this number is 
25,600 less than the 51,000 estimate in the NPRM)--from various 
online state regulatory agency resources and the Nationwide Mortgage 
Licensing System and Registry Consumer Access, see http://www.nmlsconsumeraccess.org (last visited between Mar. 2-Mar. 25, 
2011); (2) 80 mortgage servicers (this number is 20 more than the 
estimate in the NPRM)--from several sources, including lists of 
servicers participating in various Federal programs available at 
http://makinghomeaffordable.gov/contact_servicer.html and http://hopenow.com/members.php (both last visited Feb. 15, 2011) (excluding 
lenders who are also servicers under these programs); and (3) 1.3 
million others--see supra note 244 (explaining estimate).
    \252\ Staff estimates that the annual labor cost for each 
covered person to file or retain documents under the recordkeeping 
provisions was $42.57 (3 hours x $14.19 per hour). See supra Part 
IV.B (discussing labor and equipment that staff estimates are needed 
for compliance). Cf. U.S. Small Bus. Admin. Office of Advocacy, A 
Guide for Government Agencies--How to Comply with the Regulatory 
Flexibility Act 19 (June 2010), available at http://www.sba.gov/advo/laws/rfaguide.pdf (citing 126 Cong. Rec. S10,938 (Aug. 6, 1980) 
(identifying 175 annual staff hours for recordkeeping as a 
``significant impact'')).
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A. Need for and Objectives of the Rule

    The Final Rule is intended to implement Section 626 of the Omnibus 
Appropriations Act, as amended by the Credit CARD Act, which directs 
the Commission to initiate a rulemaking related to unfair or deceptive 
acts or practices with respect to mortgage loans. As described in Parts 
II and III, above, the Commission seeks to prevent deceptive acts and 
practices in the mortgage advertising industry, which has been the 
subject of numerous law enforcement actions under Section 5 of the FTC 
Act and TILA.

B. Significant Issues Raised by Public Comments, Summary of the 
Agency's Assessment of These Issues, and Changes, If Any, Made in 
Response to Such Comments

    As discussed in Part III, above, comments to the NPRM raised 
concerns about burden primarily in connection with two issues: (1) 
Disclosures or other requirements concerning the use of multiple 
languages in offering mortgage credit products; and (2) recordkeeping 
requirements. For the reasons set forth below, the Final Rule is 
substantively the same as the proposed rule, with a few non-substantive 
clarifying edits.
1. Multiple Language Disclosures and Restrictions
    In the NPRM, the Commission sought comment on several questions 
regarding the use of commercial communications that ``mix languages'' 
in connection with mortgage products, including whether the Final Rule 
should address this conduct by adding disclosure requirements. The 
Commission received several comments addressing the burdens of 
potential multiple language disclosure requirements.\253\ One commenter 
stated that ``only English should be used to keep costs down for 
institutions.''\254\ Two commenters noted the benefits to consumers of 
advertising and communicating in non-English languages and were 
concerned about the disincentives that would result from a non-English 
disclosure requirement.\255\ These commenters opposed requiring 
disclosures in the consumer's preferred language, stating that the 
costs to business of maintaining all of the various disclosures and 
contracts in all of the potentially different languages that consumers 
use would outweigh the benefits to consumers, and would cause companies 
not to advertise in languages other than English to avoid the burdens 
of the Rule.\256\ According to one of the two commenters, lenders 
likely would not advertise in non-English languages to avoid the risk 
of liability under state unfair trade practices statutes.\257\ The 
commenter indicated that providing any required contracts in non-
English languages would falsely raise consumers' expectations that they 
will be provided non-English language support throughout the rest of 
their relationship with the lender.\258\
---------------------------------------------------------------------------

    \253\ This FRFA discusses only those comments that addressed 
burden concerns. For a full discussion of the multiple languages 
issue, see supra Part III.C.5.
    \254\ OMNI at 2.
    \255\ AFSA at 2-3; HPC at 2.
    \256\ AFSA at 2-3; HPC at 2.
    \257\ AFSA at 2.
    \258\ Id.
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    As noted above, the Final Rule prohibits misleading claims in any 
language or any combination of languages.\259\ The Commission did not 
add a specific non-English language

[[Page 43843]]

disclosure or other related requirements to the Final Rule. Thus, the 
Final Rule does not increase the economic burden in connection with the 
multiple language issue for any covered persons, including small 
entities.
---------------------------------------------------------------------------

    \259\ See Final Rule Sec.  321.2(a). In comparison, for closed-
end credit, Regulation Z specifically bans providing information 
about some trigger terms or required disclosures only in a foreign 
language in the advertisement but, at the same time, providing 
information about other trigger terms or required disclosures only 
in English in that advertisement. See 12 CFR 226.24(i)(7).
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2. Recordkeeping Requirements
    The Commission received several comments addressing burden concerns 
in connection with different aspects of the proposed recordkeeping 
requirements.\260\ Two commenters supported the 24-month record 
retention period,\261\ while another commenter suggested that the 
Commission impose a three to four year requirement.\262\ The Final Rule 
retains the 24-month record retention period because it requires 
mortgage advertisers to retain sufficient documentation for efficient 
and effective compliance monitoring, while avoiding the imposition of 
unnecessary costs on advertisers.
---------------------------------------------------------------------------

    \260\ This FRFA discusses only those comments that addressed 
burden concerns. For a full discussion of the recordkeeping issue, 
see supra Part III.E.
    \261\ AFSA at 3; OMNI at 2.
    \262\ CSBS/ACSSS/NACCA at 2.
---------------------------------------------------------------------------

    One commenter expressed concern that the proposed rule did not 
clarify whether the records must be saved as hard or electronic copies 
and asserted that electronic records would save money and storage 
space.\263\ Section 321.5(b) of the Final Rule adopts the language in 
the proposed rule and permits electronic or hard copies, which will 
limit the recordkeeping burden on all covered persons, including small 
entities.
---------------------------------------------------------------------------

    \263\ OMNI at 2.
---------------------------------------------------------------------------

    Several commenters discussed the overall costs and burden 
associated with recordkeeping requirements, particularly with respect 
to advertising agencies, real estate brokers, and real estate 
agents.\264\ One commenter advocated for an exemption from the Rule for 
advertising agencies, stating that agencies create and place commercial 
communications for a wide variety of clients, making it burdensome to 
retain and keep track of all communications that the Rule covers.\265\ 
Another commenter, requesting an exemption for real estate brokers and 
agents, stated that the recordkeeping requirement would be an ``onerous 
burden'' on such persons, because they would need to track weekly 
changes in mortgage rates even though they are not acting as or on 
behalf of loan originators.\266\
---------------------------------------------------------------------------

    \264\ Gorbey at 1; HSA at 2-6; NAR at 2.
    \265\ Gorbey at 1.
    \266\ NAR at 2.
---------------------------------------------------------------------------

    Another commenter stated that the combination of the risk of 
liability under Sec.  321.3 for providing mortgage-related information 
that proves to be inaccurate and the recordkeeping requirements under 
Sec.  321.5 would discourage real estate agents and brokers from 
providing general mortgage-related information to clients or 
prospective clients.\267\ This commenter suggested revising the 
definition of ``commercial communication'' to address this issue or, in 
the alternative, narrowing the recordkeeping requirements and adding a 
``safe harbor'' or ``good-faith exception'' from the rule for an 
``unintentional inaccuracy.'' \268\
---------------------------------------------------------------------------

    \267\ HSA at 2-6.
    \268\ See supra notes 226-27.
---------------------------------------------------------------------------

    With respect to overall burden, the Commission believes that the 
record retention requirement is necessary to ensure that covered 
persons are complying with the requirements of the Final Rule. 
Specifically, the requirement that covered persons retain copies of 
their commercial communications will enable the FTC, the CFPB, and the 
states to review those communications for any misrepresentations that 
violate the Rule and to bring law enforcement actions as appropriate. 
The Commission recognizes that recordkeeping provisions impose 
compliance costs; however, many covered persons in the ordinary course 
of their business already retain the types of documents that the Final 
Rule requires be retained. As noted above, to further reduce burden, 
the Rule permits entities to keep the records in any legible form and 
in the same manner, format, or place as they keep such records in the 
ordinary course of business. The Final Rule also limits the retention 
requirements to avoid imposing any unnecessary burden. For example, 
covered entities need retain only commercial communications that are 
``materially different'' from each other.
    In response to commenters' concerns about the scope of the 
recordkeeping requirements, the Commission's Final Rule adds clarifying 
language throughout Sec.  321.5(a) that does not substantively change 
the provision. The Final Rule clarifies that the recordkeeping 
requirements, like the prohibition in Sec.  321.3, do not apply to all 
commercial communications; rather, they apply to any commercial 
communication ``regarding any term of any mortgage credit product.'' It 
also clarifies that the requirements apply only to commercial 
communications that the covered person ``made or disseminated.'' The 
Commission did not make substantive changes to the recordkeeping 
requirements.\269\ Thus, the Final Rule does not increase the economic 
burden in connection with recordkeeping for any covered persons, 
including small entities.
---------------------------------------------------------------------------

    \269\ The Commission did not add a good faith exception for 
unintentional deceptive claims. See supra note 230. The Commission's 
changes to the recordkeeping requirements are clarifying edits.
---------------------------------------------------------------------------

C. Description and Estimate of Number of Small Entities Subject to the 
Final Rule or Explanation Why No Estimate Is Available

    The Final Rule applies to any person who makes any representation 
in any commercial communication regarding any term of any mortgage 
credit product. Based upon its knowledge of the industry, the 
Commission believes that a variety of individuals and companies under 
its jurisdiction will be covered by the Rule, including but not limited 
to mortgage lenders, mortgage brokers, mortgage servicers, real estate 
agents and brokers, advertising agencies, home builders, lead 
generators, and rate aggregators.
    In response to the IRFA and a request for comments in the ANPR, the 
Commission received no empirical data regarding the numbers or revenues 
of any of these types of entities. On the basis of other available 
data, however, Commission staff estimates that there are approximately 
1.325 million entities subject to the proposed rule.\270\ Determining a 
precise estimate of how many of these, if any, are small entities is 
not readily feasible because of the lack of available data.\271\
---------------------------------------------------------------------------

    \270\ See supra note 251.
    \271\ Covered entities are classified as small entities if they 
satisfy the Small Business Administrator's relevant size standards, 
as determined by the Small Business Size Standards component of the 
North American Industry Classification System (NAICS), available at 
http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf. Because a wide range of individuals and 
companies may make representations in commercial communications 
regarding any term of a mortgage product, no one classification is 
applicable to this Rule.
    The range in size standard for most of the relevant professional 
and support services is $7 million or less in annual receipts. This 
standard applies to, for example, real estate credit, mortgage and 
nonmortgage loan brokers, other nondepository credit intermediation, 
other activities related to credit intermediation (such as 
servicing), secondary market financing (such as Fannie Mae and 
Freddie Mac), marketing consulting services, advertising agencies, 
public relations agencies, display advertising, direct mail 
advertising, advertising material distribution services, other 
services related to advertising, and all other professional, 
scientific and technical services.
    The range in size standard varies greatly for the following 
other types of entities that are covered by the Rule: Offices of 
real estate agents and brokers ($2 million or less); housing 
construction/builders ($33.5 million or less); and credit unions 
($175 million or less).

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

[[Page 43844]]

D. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Rule, Including an Estimate of the 
Classes of Small Entities Which Will Be Subject to the Rule and the 
Type of Professional Skills That Will Be Necessary To Comply

    The Final Rule generally prohibits misrepresentations, consistent 
with the prohibition on deceptive claims that would violate Section 5 
of the FTC Act. The Rule elaborates on this prohibition by including 
specific examples of types of misrepresentations covered by the Rule, 
but it does not require affirmative disclosures. The entities subject 
to the Rule are within the Commission's jurisdiction under the FTC Act, 
and thus are already prohibited from such conduct. The classes of small 
entities covered by the rule are discussed in Part V.C, above.
    The Final Rule sets forth specific categories of records that 
covered persons are required to retain. The Commission believes that 
these recordkeeping requirements are necessary to ensure that covered 
entities are complying with the requirements of the Rule. They will 
enable the Commission, the CFPB, and the states to review copies of 
commercial communications for any misrepresentations that violate the 
Rule and to bring law enforcement actions as appropriate. The 
Commission recognizes that recordkeeping provisions impose compliance 
costs; however, many covered entities in the ordinary course of 
business already retain the types of documents that the Final Rule 
requires be retained. For those entities that may not already do so, 
staff estimates minimal burden and expense for each entity to comply 
with the requirements. The professional or other skills necessary for 
compliance with the Rule are discussed in the Paperwork Reduction Act 
analysis in Part IV.B, above. To further reduce any burden, the Rule 
permits covered entities to keep the records in any legible form and in 
the same manner, format, or place as they keep such records in the 
ordinary course of business. The Final Rule also attempts to avoid 
imposing any unnecessary burden by limiting the recordkeeping 
requirements only to, for example, ``materially different'' commercial 
communications. It also limits the timeframe for recordkeeping to 24 
months.

E. Steps the Agency Has Taken To Minimize Any Significant Economic 
Impact on Small Entities, Consistent With the Stated Objectives of the 
Applicable Statutes

    As previously noted, the Final Rule is intended to prevent 
deceptive acts and practices in mortgage advertising. In drafting the 
Rule, the Commission has made every effort to avoid unduly burdensome 
requirements for all entities. The Final Rule does not impose any 
affirmative disclosure requirements for advertisements. Further, as 
discussed above, Commission staff believes that many covered entities 
in the ordinary course of business already retain the types of 
documents that the Final Rule requires be retained. In addition, Sec.  
21.5(b) states that entities may keep such records in any legible form 
and in the same manner, format, or place as they keep such records in 
the ordinary course of business. The recordkeeping requirements are 
format-neutral; for example, they permit the use of electronic methods 
that might reduce compliance burdens.
    The Final Rule also limits the types of information that must be 
retained to avoid imposing any unnecessary burden. For example, covered 
persons must retain only ``materially different'' versions of 
commercial communications and related materials. Finally, the Rule 
calls for a 24-month record retention period, which the Commission 
believes requires mortgage advertisers to retain sufficient 
documentation for efficient and effective compliance monitoring, while 
avoiding the imposition of unnecessary costs on advertisers.
    The Commission is not aware of any feasible or appropriate 
exemptions for small entities. The protections afforded to consumers in 
the Rule are equally important regardless of the size of the entity 
making the commercial communication. Nonetheless, as discussed above, 
the Final Rule attempts to minimize compliance burdens and any 
significant economic impact for all entities, including small entities.

          Table A--List of Commenters and Short-Names/Acronyms
------------------------------------------------------------------------
        Short-Name/Acronym                        Commenter
------------------------------------------------------------------------
ABLE..............................  Advocates for Basic Legal Equality
AFSA..............................  American Financial Services
                                     Association
ABA...............................  American Bankers Association
BECU..............................  Boeing Employees' Credit Union
Britz.............................  Britz, Suzy
Coe...............................  Coe, D
CMC/MBA...........................  Consumer Mortgage Coalition and
                                     Mortgage Bankers Association
CUAO..............................  Credit Union Association of Oregon
CUNA..............................  Credit Union National Association
CSBS/ACSSS/NACCA..................  Conference of State Bank
                                     Supervisors, American Council of
                                     State Savings Supervisors, and
                                     National Association of Consumer
                                     Credit Administrators
Gorbey............................  Gorbey, Jacqueline
HSA...............................  HomeServices of America, Inc.
HPC...............................  Housing Policy Council of The
                                     Financial Services Roundtable
IDF...............................  Idaho Department of Finance
Johnson...........................  Johnson, Sondra
NAR...............................  National Association of REALTORS
NASCUS............................  National Association of State Credit
                                     Union Supervisors
NRMLA.............................  National Reverse Mortgage Lenders
                                     Association
OMNI..............................  OMNI Community Credit Union
PCUA..............................  Pennsylvania Credit Union
                                     Association
Swider............................  Swider, Keith
WCUL..............................  Washington Credit Union League
------------------------------------------------------------------------


[[Page 43845]]


      Table B--List of FTC Mortgage Advertising Enforcement Actions
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
 FTC v. Assocs. First Capital Corp., No. 1:01-00606 (N.D. Ga.
 2001)
 FTC v. Capital City Mortg. Corp., No. 1:98CV237 (D.D.C. 1998)
 FTC v. Chase Fin. Funding, Inc., No. SACV04-549 GLT (ANx) (C.D.
 Cal. 2004)
 FTC v. First Alliance Mortg. Co., No. SACV 00-964 DOC (EEx)
 (C.D. Cal. 2000)
 FTC v. Mortgages Para Hispanos.com Corp., No. 4:06-cv-19 (E.D.
 Tex. 2006)
 FTC v. Ranney, No. 04-F-1065 (MJW) (D. Colo. 2004)
 FTC v. Ryan, No. 1:09-cv-00535-HHK (D.D.C. 2009)
 FTC v. OSI Fin. Servs., Inc., No. 02-C-5078 (N.D. Ill. 2002)
 FTC v. Safe Harbour Found. of Fla., Inc., No. 08-C-1185 (N.D.
 Ill. 2008)
 FTC v. 30 Minute Mortg., Inc., No. 03-60021 (S.D. Fla. 2003)
 In re Am. Nationwide Mortg. Co., F.T.C. Dkt. No. C-4249 (2009)
 In re Felson Builders, Inc., 119 F.T.C. 642 (1995)
 In re FirstPlus Fin. Group, Inc., F.T.C. Dkt. No. C-3984 (2000)
 In re Lomas Mortg. U.S.A., Inc., 116 F.T.C. 1062 (1993)
 In re Michael Gendrolis, F.T.C. Dkt. No. C-4248 (2009)
 In re Shiva Venture Group, Inc., F.T.C. Dkt. No. C-4250 (2009)
 United States v. Mercantile Mortg. Co., No. 02-C-5079 (N.D.
 Ill. 2002)
 United States v. Unicor Funding, Inc., No. 9901228 (C.D. Cal.
 1999)
------------------------------------------------------------------------

VI. Final Rule

List of Subjects in 16 CFR Part 321

    Advertising, Communications, Consumer protection, Credit, 
Mortgages, Trade practices.
    For the reasons set forth in the preamble, the Federal Trade 
Commission amends title 16, Code of Federal Regulations, by adding a 
new part 321, to read as follows:

PART 321--MORTGAGE ACTS AND PRACTICES--ADVERTISING

Sec.
321.1 Scope of regulations in this part.
321.2 Definitions.
321.3 Prohibited representations.
321.4 Waiver not permitted.
321.5 Recordkeeping requirements.
321.6 Actions by states.
321.7 Severability.

    Authority:  Public Law 111-8, section 626, 123 Stat. 524, as 
amended by Pub. L. 111-24, section 511, 123 Stat. 1734.


Sec.  321.1  Scope of regulations in this part.

    This part implements the 2009 Omnibus Appropriations Act, Public 
Law 111-8, section 626, 123 Stat. 524 (Mar. 11, 2009), as amended by 
the Credit Card Accountability Responsibility and Disclosure Act of 
2009, Public Law 111-24, section 511, 123 Stat. 1734 (May 22, 2009). 
This part applies to persons over which the Federal Trade Commission 
has jurisdiction under the Federal Trade Commission Act.


Sec.  321.2  Definitions.

    (a) ``Commercial communication ''means any written or oral 
statement, illustration, or depiction, whether in English or any other 
language, that is designed to effect a sale or create interest in 
purchasing goods or services, whether it appears on or in a label, 
package, package insert, radio, television, cable television, brochure, 
newspaper, magazine, pamphlet, leaflet, circular, mailer, book insert, 
free standing insert, letter, catalogue, poster, chart, billboard, 
public transit card, point of purchase display, film, slide, audio 
program transmitted over a telephone system, telemarketing script, 
onhold script, upsell script, training materials provided to 
telemarketing firms, program-length commercial (``infomercial''), the 
Internet, cellular network, or any other medium. Promotional materials 
and items and Web pages are included in the term ``commercial 
communication.''
    (b) ``Consumer'' means a natural person to whom a mortgage credit 
product is offered or extended.
    (c) ``Credit'' means the right to defer payment of debt or to incur 
debt and defer its payment.
    (d) ``Dwelling'' means a residential structure that contains one to 
four units, whether or not that structure is attached to real property. 
The term includes any of the following if used as a residence: an 
individual condominium unit, cooperative unit, mobile home, 
manufactured home, or trailer.
    (e) ``Mortgage credit product'' means any form of credit that is 
secured by real property or a dwelling and that is offered or extended 
to a consumer primarily for personal, family, or household purposes.
    (f) ``Person'' means any individual, group, unincorporated 
association, limited or general partnership, corporation, or other 
business entity.
    (g) ``Term'' means any of the fees, costs, obligations, or 
characteristics of or associated with the product. It also includes any 
of the conditions on or related to the availability of the product.


Sec.  321.3  Prohibited representations.

    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:
    (a) The interest charged for the mortgage credit product, including 
but not limited to misrepresentations concerning:
    (1) The amount of interest that the consumer owes each month that 
is included in the consumer's payments, loan amount, or total amount 
due; or
    (2) Whether the difference between the interest owed and the 
interest paid is added to the total amount due from the consumer;
    (b) The annual percentage rate, simple annual rate, periodic rate, 
or any other rate;
    (c) The existence, nature, or amount of fees or costs to the 
consumer associated with the mortgage credit product, including but not 
limited to misrepresentations that no fees are charged;
    (d) The existence, cost, payment terms, or other terms associated 
with any additional product or feature that is or may be sold in 
conjunction with the mortgage credit product, including but not limited 
to credit insurance or credit disability insurance;
    (e) The terms, amounts, payments, or other requirements relating to 
taxes or insurance associated with the mortgage credit product, 
including but not limited to misrepresentations about:
    (1) Whether separate payment of taxes or insurance is required; or
    (2) The extent to which payment for taxes or insurance is included 
in the loan payments, loan amount, or total amount due from the 
consumer;
    (f) Any prepayment penalty associated with the mortgage credit 
product, including but not limited to misrepresentations concerning the 
existence, nature, amount, or terms of such penalty;
    (g) The variability of interest, payments, or other terms of the 
mortgage credit product, including but not limited to 
misrepresentations using the word ``fixed;''
    (h) Any comparison between:
    (1) Any rate or payment that will be available for a period less 
than the full length of the mortgage credit product; and
    (2) Any actual or hypothetical rate or payment;
    (i) The type of mortgage credit product, including but not limited 
to misrepresentations that the product is or involves a fully 
amortizing mortgage;
    (j) The amount of the obligation, or the existence, nature, or 
amount of cash or credit available to the consumer in connection with 
the mortgage credit product, including but not limited to

[[Page 43846]]

misrepresentations that the consumer will receive a certain amount of 
cash or credit as part of a mortgage credit transaction;
    (k) The existence, number, amount, or timing of any minimum or 
required payments, including but not limited to misrepresentations 
about any payments or that no payments are required in a reverse 
mortgage or other mortgage credit product;
    (l) The potential for default under the mortgage credit product, 
including but not limited to misrepresentations concerning the 
circumstances under which the consumer could default for nonpayment of 
taxes, insurance, or maintenance, or for failure to meet other 
obligations;
    (m) The effectiveness of the mortgage credit product in helping the 
consumer resolve difficulties in paying debts, including but not 
limited to misrepresentations that any mortgage credit product can 
reduce, eliminate, or restructure debt or result in a waiver or 
forgiveness, in whole or in part, of the consumer's existing obligation 
with any person;
    (n) The association of the mortgage credit product or any provider 
of such product with any other person or program, including but not 
limited to misrepresentations that:
    (1) The provider is, or is affiliated with, any governmental entity 
or other organization; or
    (2) The product is or relates to a government benefit, or is 
endorsed, sponsored by, or affiliated with any government or other 
program, including but not limited to through the use of formats, 
symbols, or logos that resemble those of such entity, organization, or 
program;
    (o) The source of any commercial communication, including but not 
limited to misrepresentations that a commercial communication is made 
by or on behalf of the consumer's current mortgage lender or servicer;
    (p) The right of the consumer to reside in the dwelling that is the 
subject of the mortgage credit product, or the duration of such right, 
including but not limited to misrepresentations concerning how long or 
under what conditions a consumer with a reverse mortgage can stay in 
the dwelling;
    (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;
    (r) The consumer's ability or likelihood to obtain a refinancing or 
modification of any mortgage credit product or term, including but not 
limited to misrepresentations concerning whether the consumer has been 
preapproved or guaranteed for any such refinancing or modification; and
    (s) The availability, nature, or substance of counseling services 
or any other expert advice offered to the consumer regarding any 
mortgage credit product or term, including but not limited to the 
qualifications of those offering the services or advice.


Sec.  321.4  Waiver not permitted.

    It is a violation of this part for any person to obtain, or attempt 
to obtain, a waiver from any consumer of any protection provided by or 
any right of the consumer under this part.


Sec.  321.5  Recordkeeping requirements.

    (a) Any person subject to this part shall keep, for a period of 
twenty-four months from the last date the person made or disseminated 
the applicable commercial communication regarding any term of any 
mortgage credit product, the following evidence of compliance with this 
part:
    (1) Copies of all materially different commercial communications as 
well as sales scripts, training materials, and marketing materials, 
regarding any term of any mortgage credit product, that the person made 
or disseminated during the relevant time period;
    (2) Documents describing or evidencing all mortgage credit products 
available to consumers during the time period in which the person made 
or disseminated each commercial communication regarding any term of any 
mortgage credit product, including but not limited to the names and 
terms of each such mortgage credit product available to consumers; and
    (3) Documents describing or evidencing all additional products or 
services (such as credit insurance or credit disability insurance) that 
are or may be offered or provided with the mortgage credit products 
available to consumers during the time period in which the person made 
or disseminated each commercial communication regarding any term of any 
mortgage credit product, including but not limited to the names and 
terms of each such additional product or service available to 
consumers.
    (b) Any person subject to this part may keep the records required 
by paragraph (a) of this section in any legible form, and in the same 
manner, format, or place as they keep such records in the ordinary 
course of business. Failure to keep all records required under 
paragraph (a) of this section shall be a violation of this part.


Sec.  321.6  Actions by states.

    Any attorney general or other officer of a state authorized by the 
state to bring an action under this part may do so pursuant to Section 
626(b) of the 2009 Omnibus Appropriations Act, Public Law 111-8, 
section 626, 123 Stat. 524 (Mar. 11, 2009), as amended by the Credit 
Card Accountability Responsibility and Disclosure Act of 2009, Public 
Law 111-24, section 511, 123 Stat. 1734 (May 22, 2009).


Sec.  321.7  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Commission's intention that the remaining provisions shall continue 
in effect.


    By direction of the Commission.
Donald S. Clark,
Secretary.


    Note:  The following appendices will not appear in the Code of 
Federal Regulations.

Appendix A--Concurring Statement of Commissioner Ramirez, in Which 
Chairman Leibowitz and Commissioner Brill Join

Final Rule: Mortgage Acts and Practices--Advertising

    We support the final rule the Commission issues today concerning 
the advertising of home mortgages (Mortgage Acts and Practices--
Advertising Rule or ``MAP Rule''). The MAP Rule is narrow in scope--
addressing only the advertising phase of the mortgage lifecycle by 
those subject to the Federal Trade Commission's jurisdiction--and 
does not render unlawful any conduct that is not already banned by 
the prohibition on deception in Section 5 of the FTC Act.\1\ At the 
same time, the MAP Rule accomplishes several important objectives 
by: (1) Giving the FTC and the states authority to seek civil 
penalties for deceptive mortgage advertising, broadly defined, by 
entities subject to the FTC's jurisdiction; (2) providing guidance 
and clarity as to what constitutes deceptive mortgage advertising; 
and (3) imposing record-keeping requirements on mortgage advertisers 
to facilitate law enforcement. We write separately to underscore the 
importance of one issue addressed by the MAP Rule: Communications 
about mortgages to consumers whose native language is not English.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 45(a).
---------------------------------------------------------------------------

    The United States population today is highly diverse, 
representing cultures and languages from all over the world. 
According to the Census Bureau, of the 281 million people age five 
and older in the United States in 2007, 55.4 million individuals, or 
nearly 20 percent, reported speaking a language

[[Page 43847]]

other than English at home.\2\ Marketers are well-aware of this 
trend, and today they often tout a wide array of products and 
services, including home loans, in languages other than English.
---------------------------------------------------------------------------

    \2\ U.S. Census Bureau, Language Use in the United States: 2007 
(Apr. 2010), available at http://www.census.gov/prod/2010pubs/acs-12.pdf.
---------------------------------------------------------------------------

    It is essential that our consumer protection laws keep pace with 
such marketplace realities, and we are pleased that the MAP Rule 
broadly bans deception in commercial communications concerning 
residential mortgages regardless of the language or languages in 
which they are made. For example, under the MAP Rule it can be 
unlawful to offer a consumer one set of terms in her native language 
but then deliver different terms in loan documents written in 
English.\3\ In addition, because the ``net impression'' of an 
advertisement is the lynchpin of deception analysis,\4\ a fine print 
disclaimer or qualifying statement may be insufficient to cure an 
otherwise misleading advertisement.\5\ This principle, as applied to 
advertising that uses multiple languages, means that, in advertising 
that targets consumers in a language other than English, a 
disclaimer in English may be insufficient to cure misleading claims 
in another language.\6\
---------------------------------------------------------------------------

    \3\ In fact, the FTC has challenged such a practice as deceptive 
under Section 5 of the FTC Act. See FTC v. Mortgages Para 
Hispanos.com Corp., No. 4:06-cv19 (E.D. Tex. 2006) (alleging 
mortgage broker engaged in deceptive practices by orally offering 
Spanish-speaking customers one thing in Spanish and then delivering 
something else in loan documents written entirely in English).
    \4\ See, e.g., FTC v. Cyberspace.com, LLC, 453 F.3d 1196, 1200 
(9th Cir. 2006); FTC v. Nat'l Urological Group, Inc., 645 F. Supp. 
2d 1167, 1189 (N.D. Ga. 2008), aff'd, 356 Fed. App'x (11th Cir. 
2009).
    \5\ See, e.g., Cyberspace.com, 453 F.3d at 1200.
    \6\ In 2008, the Board of Governors of the Federal Reserve 
System amended Regulation Z under the Truth in Lending Act to 
prohibit advertising certain information only in a foreign language 
while providing, in the same advertisement, other critical 
information in English. See Final Rule, Truth in Lending, 73 FR 
44522, 44601 (Jul. 30, 2008) (codified at 12 CFR 226.24(i)(7)). This 
approach is consistent with longstanding FTC requirements that 
mandatory disclosures be made in the language of the target 
audience. See 16 CFR 14.9 (under FTC rules, cease-and-desist orders, 
and guides that require the ``clear and conspicuous'' disclosure of 
information, such disclosure must be made in the language of the 
target audience); 16 CFR 610.4(a)(3)(ii) (in marketing free credit 
reports, mandatory disclosures must be made in the same language as 
that principally used in the advertisement); 16 CFR 429.1(a) (in 
door-to-door sales, failure to furnish a completed receipt or 
contract in the same language as the oral sales presentation is an 
unfair and deceptive act or practice); 16 CFR 455.5 (where used car 
sales pitches are conducted in Spanish, mandatory disclosures must 
be made in Spanish); 16 CFR 308.3(a)(1) (mandatory disclosures about 
pay-per-call services must be made in the same language as that 
principally used in the advertisement); see also FTC Final Rule, 
Free Annual File Disclosures, 75 FR 9726, 9733 (Mar. 3, 2010) 
(noting ``the Commission's belief that a disclosure in a language 
different from that which is principally used in an advertisement 
would be deceptive'').
---------------------------------------------------------------------------

    But there are many questions about the communication of mortgage 
loan terms that go beyond the scope of this rulemaking, among them 
whether mortgage disclosure documents should be provided to non-
English speakers in languages other than English.\7\ Congress has 
charged the Consumer Financial Protection Bureau with the long-
overdue task of simplifying and clarifying mortgage disclosure 
documents,\8\ and has granted the new agency broad rulemaking 
authority with respect to the advertising and communication of 
mortgage loan terms. We look forward to the results of the CFPB's 
work in this area, including its consideration of the needs of non-
native English speaking consumers when carrying out that important 
mandate.\9\
---------------------------------------------------------------------------

    \7\ The CFPB has begun testing draft prototype mortgage 
disclosure documents in English and Spanish in advance of a formal 
rulemaking process. See CFPB, Consumer Financial Protection Bureau 
Announces Initiative to Combine Mortgage Loan Disclosures (May 18, 
2011), available at http://www.consumerfinance.gov/pressrelease/consumer-financial-protection-bureau-announces-initiative-to-combine-mortgage-loan-disclosures/.
    \8\ See generally James M. Lacko & Janis K. Pappalardo, Federal 
Trade Commission Staff Report, Improving Consumer Mortgage 
Disclosures: An Empirical Assessment of Current And Prototype 
Mortgage Disclosure Forms (2007), available at http://www.ftc.gov/os/2007/06/P025505MortgageDisclosureReport.pdf.
    \9\ Our colleague, Commissioner Rosch, expresses concern that we 
may be advancing an argument about mortgage disclosures that is not 
supported by the record before us. But far from prejudging the 
outcome of any work to be performed by the CFPB, we are simply 
highlighting some of the important consumer protection issues that 
may arise in connection with mortgage advertisements targeting 
consumers whose primary language is not English. As we noted above, 
the matters before the Commission in this rulemaking were narrow, 
and the evidence received on the issue of the use of multiple 
languages in advertising--a mere four comments--does not address the 
questions to be examined by the CFPB concerning improvements to 
mortgage disclosure documents. While this limited record does not 
purport to address such issues, we have no doubt that in considering 
this and other questions, the CFPB will develop a full and complete 
record that properly takes into account the impact on all 
stakeholders of any measure that is designed to ensure that 
consumers receive clear and accurate information to assist them in 
making sound decisions about mortgages.
---------------------------------------------------------------------------

    More generally, given our country's changing demographics, we 
believe that government and industry alike will need to pay greater 
attention to ensuring that consumers, no matter what language they 
speak, have access to important information regarding their 
purchases and are protected from unfair and deceptive practices.

Appendix B--Response of Commissioner J. Thomas Rosch to the Concurring 
Statement of Commissioner Ramirez, in Which Chairman Leibowitz and 
Commissioner Brill Join

Final Rule: Mortgage Acts and Practices--Advertising

July 19, 2011

    I agree with the concurring statement of Commissioner Ramirez 
concerning the Mortgages Acts and Practices--Advertising Rule to the 
extent it reiterates the assertions of the Statement of Basis and 
Purpose that the ``net impression'' of an advertisement is a 
touchstone of FTC deception analysis regardless of the language or 
combination of languages. It is also axiomatic that government and 
industry need to be vigilant that all consumers, regardless of what 
language they speak, are not victims of unfair and deceptive 
practices.
    However, insofar as the concurring statement suggests that the 
Consumer Financial Protection Bureau should require that mortgage 
disclosure documents be provided to non-English speaking consumers 
in their native language, I disagree. There is no basis for making 
any recommendation to ``go beyond'' the MAP Rule or Section 5 as 
respects requirements that lenders furnish ``non-English speakers'' 
with disclosures that are not in English. See Concurring Statement 
at 3. Specifically, Census Bureau data showing that nearly 20 
percent of people in the United States in 2007 ``reported speaking a 
language other than English at home'' (id. at 1) does not suggest 
that they could not read or understand English. Indeed, so far as 
the rulemaking record for the MAP Rule is concerned, it is my 
understanding that a majority of the comments received favored 
making disclosures only in English. Thus, there is currently no 
basis for the Federal government to burden this industry with 
disclosure requirements that would oblige the industry to make 
disclosures in a language other than English except when the ``net 
impression'' left by not doing so would violate Section 5.
[FR Doc. 2011-18605 Filed 7-20-11; 11:15 am]
BILLING CODE 6750-01-P