Mortgage advertising that misrepresents terms, fees or the costs of loan products can trigger fines and enforcement actions under a final rule adopted by the Federal Trade Commission.

The FTC rule specifically bans deceptive advertising of residential mortgage products and includes a "non-exclusive list" of 19 types of misrepresentations that could violate the law.

For example, the rule "prohibits misrepresentation pertaining to the variability of interest, payments or other terms."  This includes advertising with the word "fixed" when terms are “variable or limited in duration."

The FTC rule was published late last week in the Federal Register and goes into effect August 19.

The prohibitions on false advertising apply mainly to nonbank lenders, mortgage brokers, and servicers.

Banks, thrifts and federal credit unions are exempt from FTC's jurisdiction, but the rule applies to advertising by bank-affiliated mortgage lenders and servicers.   

FTC as well as the Consumer Financial Protection Bureau and state regulators can enforce the advertising rule.

The Federal Trade Commission says it has experience in stopping deceptive mortgage advertising by subprime lenders. "Since 1995, the commission has brought 18 law enforcement actions against individuals and companies,” the agency said.

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