What We Know

CFPB Consent Orders Serve as a Reminder to Mortgage Industry on Advertising Practices

December 23, 2016 | by Caren D. Enloe

A recent series of CFPB consent orders should remind the mortgage industry to carefully monitor its advertising practices. The MAP Rule prohibits deceptive and misleading commercial communications regarding any term of any mortgage credit product.  12 CFR Part 1014.  The three orders, which were entered with reverse mortgage companies, include almost $800,000 in civil penalties and require remediation. Each of the consent orders will remain in place for five years. Each of the orders was entered with the consent, but without any admission of liability, by the reverse mortgage company.

Significantly for the mortgage industry, the consent orders provide insight into the CFPB’s expectations for compliance management as to advertising policies for mortgage products. The Orders require each respondent to develop a comprehensive compliance plan designed to ensure that each Respondent’s advertising complies with all applicable laws and regulations.

At a minimum, the Orders suggest a Compliance Management System should include:

  • A process for reviewing each advertisement for compliance with the MAP Rule and Dodd Frank’s general prohibition against unfair, deceptive, and abusive acts, and include:
    • A process requiring review of all telemarketing scripts;
    • A process for reviewing all advertisements and documenting each review;
  • Development of a compliance management policy designed to detect and prevent violations of law;
  • A description of the entity’s compliance organizational and reporting structure;
  • Written job descriptions for all employees with duties under the advertising compliance policy;
  • An allocation of resources to compliance commensurate with the size, complexity and business operations of the organization to ensure adequate compliance programs;
  • Mandatory ongoing training for employees and vendors involved in advertising regarding all relevant federal consumer financial laws and prohibitions tailored to each individual’s responsibilities and duties;
  • A plan for timely and corrective action to remedy any material non-compliance;
  • A requirement that the compliance plan be updated on a regular basis (the orders mandate at least every two years or as required by changes in laws or regulations);
  • An advertising retention policy which complies with 12 CFR 1014.5 and includes:
    • A requirement that all materially different commercial communications, as well as sales scripts, training materials, and marketing materials regarding any term of any mortgage credit product be stored in a central location accessible to personnel responsible for compliance;
    • A requirement that all material changes to any website operated by entity be documented to the extent it contains commercial communications;
    • A requirement that requires retention of all documents which describe or evidence all mortgage credit products available to consumers in the time period in which commercial communications were made regarding any term of any mortgage credit product, including the name and terms of each mortgage credit product;
    • A requirement that requires retention of documents describing or evidencing all additional products or services 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; and
    • Requires retention for twenty-four months from the last date of the commercial communication regarding any term of any mortgage credit product.

Mortgage industry players should carefully review their current policies and advertisements to ensure their compliance with the MAP Rule and are reminded to also shore up their vendor management in this regard, as well.

Caren Enloe leads Smith Debnam’ s consumer financial services litigation and compliance group. In her practice, she defends consumer financial service providers and members of the collection industry in state and federal court, as well as in regulatory matters involving a variety of consumer protection laws.  Caren also advises fintech companies, law firms, and collection agencies regarding an array of consumer finance issues. An active writer and speaker, Caren currently serves as chair of the Debt Collection Practices and Bankruptcy subcommittee for the American Bar Association’s Consumer Financial Services Committee. She is also a member of the Defense Bar for the National Creditors Bar Association, the North Carolina State Chair for ACA International’s Member Attorney Program and a member of the Bank Counsel Committee of the North Carolina Bankers Association. Most recently, she was elected to the Governing Committee for the Conference on Consumer Finance Law. In 2018, Caren was named one of the “20 Most Powerful Women in Collections” by Collection Advisor, a national trade publication. Caren oversees a blog titled: Consumer Financial Services Litigation and Compliance dedicated to consumer financial services and has been published in a number of publications including the Journal of Taxation and Regulation of Financial Institutions, California State Bar Business Law News, Banking and Financial Services Policy Report and Carolina Banker....LEARN MORE

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