FTC Spots Illegal Mortgage Ads, Takes Action
How many times have you been watching TV, surfing the Internet, or taking in the mail when you're bombarded by a fast-talking announcer, blinking pop-ups, or brightly-colored pamphlets? If you're like most Americans, the answer is likely "too many times." Ads of this nature can be abrasive and annoying, but, according to NPR news reports, they might also be illegal.
The Truth in Lending Act of 1968 exists to ensure that credit advertisements provide ample information to the public, so that borrowers can make educated, sound decisions about their loans. Recent investigations into nationwide mortgage ads, however, have reportedly shown inadequate adherence to the act's terms.
Many Americans today are facing foreclosure and bankruptcy, often as a result of adjustable rate mortgages (ARMs) that have recently increased significantly. And the reason so many people had ARMs in the first place? Well, the preliminary investigations apparently blame-at least in part-the prevalence of illegal ads.
The mortgage ads in question have allegedly appeared in magazines, newspapers, direct mail, faxes, unsolicited email, and websites. NPR reports that the Federal Trade Commission (FTC) has warned both credit advertisers and those who run the ads to review and/or screen their ads, as it plans to investigate certain unnamed companies thoroughly.
As a consumer, knowledge is the best weapon against being trapped by these ads and their deceitful promises. Here are some characteristics of the illegal mortgage ads the FTC has found so far, according to Consumer Affairs News:
- Ads may be in English or Spanish.
- If on the radio, ads may be read too quickly to be understood and processed. If printed, the lettering may be too small to read without strain.
- The ads may promise a very low interest rate (one or two percent) or low monthly payments, but offer no other details.
In most cases, the details not given in the ads are the ones crucial to the consumer's decision-making process. For example, the super-low interest rates offered apply only for a short period. The small monthly payments last only for a limited time, and are followed by a much larger final payment.
The ads succeed in doing part of their jobs-grabbing the consumers' attention-but they fail miserably at complying with the legal requirements of informative mortgage advertising.
Reports from Consumer Affairs News indicate that more than $320 million has been returned to customers as the result of various legal actions taken against companies in the mortgage lending industry. Subprime lenders, in particular, have been targeted.
The digital world presented to us by the Internet can seem both exciting and transient. But, as mortgage lenders know, we can get involved in serious, long-lasting credit debt if carried away by the glamour of digital ads. Luckily, the FTC is taking action to prevent more loan advertising trickery from happening.
Even being aware that lenders are using illegal sales tactics is an invaluable tool in avoiding the disaster of being scammed. As a general rule of thumb, remember: if it sounds too good to be true, then it probably is.
