Deceptive Mortgage Advertisers Warned By FTC: Too Little Too Late

The FTC this week announced a “crack down” on mortgage advertisers who use deceptive language in there solicitations. This comes on the heels of a statement earlier in the summer by Federal Reserve Chairman, Ben Bernanke, that the Fed plans to make changes to federal rules on mortgage marketing by the end of the year. This action and announcement seems “consumer friendly” and all, but it really is just…too little, too late.

Why?

First, you must realize that most of the ad campaigns are run by the big banks or their subsidiaries.

Second, most of the true, meaningful, consumer protection laws concerning mortgage ads are passed by state legislatures.

Third, big banks and their subsidiaries are not subject to state consumer protection laws!

Betcha didn’t know that, eh?

For example, a few years ago the California state legislature passed a mortgage advertising law that said using the phrase “No Cost” or “No Fee” in mortgage advertising was illegal since it was deceptive on it’s face and the consumer always pays the costs it’s just a matter of how. “No cost” or “no fee” mortgages pass the costs to the consumer through the use of a higher interest rate which ultimately could make the consumers payment much higher and generate revenues for the lender well in excess of the actual closing costs depending on how long the loan with the higher rate stays active.

The big banks were using the phrase “no cost” in their advertising and were told to stop. The banks got cover from the Office of the Comptroller of the Currency (OCC), a Federal agency in charge of regulating banks, which used it’s power of pre-emption claiming the banks or their mortgage lending subsidiaries (non FDIC insured companies) under their charge are not subject to state law.

This was tested recently in the courts and the Supreme Court ruled in the favor of the big banks.

As you may have guessed, the Federal rules that apply to big banks and their subsidiaries when it comes to using the phrase “no cost” are non-existent. They can use those deceptive phrases until the cows come home without violating any deceptive or false advertising laws, rules, or regulations. To this day there is no regulation prohibiting the use of “no cost” in mortgage advertising…not from HUD, FTC, OCC, FDIC, or the Federal Reserve.

So this announcement from FTC really is grand-standing…and too little, too late.

So in the end, the big bank advertisers can get yet another competitive advantage over the smaller mortgage broker companies who must indeed follow the state consumer protection laws or suffer fines and jail time if they don’t.

They also get to hoodwink the mortgage consumer with the most egregious example of false advertising yet to come down the pike: the “no cost” ad.

This is why I always say, “Never Use a Bank for a First Mortgage Loan”.

a. They are not the low cost provider with massive overhead, incompetent staff, and stockholders to appease.
b. They do not have to follow the consumer protection laws of your state which are much more powerful than the Federal laws.
c. They have been caught red-handed by every consumer protection group on the planet perpetrating “predatory lending practices”…they are not nice people.

Your best deal when shopping for a mortgage has been and always will be locating an ethical, local, expert mortgage broker. Granted it’s a little more work than walking into the corner branch bank, but not by much if you use a system for locating such a broker. For a systematic way to locate a local, ethical, expert mortgage provider bypassing these predatory bank lenders read more about The Mortgage Advantage™.

Never believe the mortgage ads from these big banks and never believe the Federal government will protect you from big business.

You must protect yourself and you do that with more information…so keep reading our website. We’ll see you get the information you need to protect yourself from whatever the deceptive advertisers put out next and let you in on what’s really happening on the “inside” of the mortgage industry.

Good Luck

Author: Rob K. Blake
Published September 12, 2007