(Reuters) - Regulators have begun investigating 19 companies whose advertisements for mortgage products may mislead consumers, the Federal Trade Commission and the Consumer Financial Protection Bureau said on Monday.
Regulators also have sent letters to an additional 32 mortgage lenders, brokers, home builders and other companies warning that their ads may violate federal prohibitions against misleading mortgage-related claims. The agencies did not name the companies involved. Problematic ads contained official-looking logos that could have made consumers think they came from government agencies, offered "low" rates without explaining loan terms, or misrepresented the amount of cash or credit available.
"Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives," CFPB Director Richard Cordray said in a statement. "Baiting consumers with false ads to buy into mortgage products would be illegal."
Regulators have been trying to boost lending standards and improve industry transparency after millions of foreclosures occurred in the wake of the 2007-2009 financial crisis. The consumer bureau, which was created by the 2010 Dodd-
Frank financial law and is charged with watching over products such as mortgages, and the FTC share responsibility for enforcing a 2011 rule banning misleading claims about mortgage products. Regulators found the problematic claims during a review of about 800 newspaper, online and mail ads for mortgage loans, refinancing and reverse mortgages. The agencies did not say how many companies were reviewed. The rule applies to non-bank entities that advertise mortgages.
The warning letters instruct companies to review their ads to make sure they are not misleading. Companies that are under investigation could face enforcement actions if they are found to have violated bans on misleading advertising.
"It may well be that mortgage advertising and mortgage lending will be ramping up in the near future," said Thomas Pahl, assistant director of the FTC's financial practices division. "One of the things that we wanted to do through conducting this sweep was to make sure that ... they are aware of their obligation to make sure that none of those ads contain deceptive claims."
The CFPB is conducting six of the investigations, and the FTC is handling 13 investigations. Pahl said the agencies determined which companies to investigate by looking at how many seemingly misleading claims they made, how clearly false the claims were, and how much the claims might hurt consumers who saw them.
The CFPB said its review focused on mortgage ads that targeted older Americans or veterans. The FTC looked at home builders, realtors and lead generators.
