Richard Cordray, director of the Consumer Financial Protection Bureau. (Joshua Roberts / Bloomberg…)
WASHINGTON -- Federal regulators said Monday they have opened investigations of 19 financial companies for possible violations of new mortgage advertising rules designed to keep firms from misleading consumers about reverse mortgages and other products.
In addition, the regulators have sent letters to 32 other firms warning them about ads that falsely imply a connection to a government program or provide other potentially misleading information.
The actions, announced Monday, came after a review by the Federal Trade Commission and the Consumer Financial Protection Bureau of about 800 advertisements by mortgage lenders, mortgage brokers and other firms outside the traditional banking system.
“Misrepresentations in mortgage products can deprive consumers of important information while making one of the biggest financial decisions of their lives,” said Richard Cordray, director of the consumer bureau, which shares enforcement of mortgage advertising rules with the FTC.
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"Baiting consumers with false ads to buy into mortgage products would be illegal. We will conduct a fair and rigorous investigation into these issues and will take appropriate action for any violations we find.”
The agencies did not identify the companies under formal investigation or those that received warning letters.
The FTC said it had launched investigations of 13 companies and sent 20 warning letters. The CFPB said it had opened six investigations and issued 12 warning letters. Violations could lead to civil penalties.
In 2011, the FTC enacted the Mortgage Acts and Practices Rule, which prohibits misrepresentations of consumer mortgages through ads or other communications.
The two agencies reviewed ads in newspapers, direct mail, email and online, including on Facebook.
Some ads featured the image of an eagle or official-looking seal or used abbreviations similar to those for federal programs, implying an affiliation with the government. Others simply promoted lower rates or touted guaranteed approval without being clear about the requirements.
Ads that simply were misleading, such as those containing notes in small type saying that the firm was not a government agency, resulted in warning letters, the agencies said.
"To the extent that something is clearly a misrepresentation and appears to us to be clearly false, that is something that is far more likely to result in opening an investigation," said Kent Markus, assistant director for enforcement at the consumer bureau.
The crash of the housing market has led to fewer mortgage solicitations in recent years, said Thomas B. Pahl, assistant director of the FTC's Division of Financial Practices. But ads could increase as the housing market recovers, and regulators said they wanted to be sure companies knew what was not allowed under the law.
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