Add one more regulator to the mix.

• Author: Pry, Carl G.
• Position: Unfair or Deceptive Acts or Practices

WE HAVE HEARD AN AWFUL LOT ABOUT UDAP (Unfair or Deceptive Acts or Practices) lately. The regulatory agencies have focused on UDAP concepts for years when it comes to advertising, and the Dodd-Frank Act upped the ante with the introduction of "abusive" into the mix.

But how can we get our arms around exactly what types of practices would be considered "unfair" or "deceptive," much less "abusive"? Fortunately (or unfortunately, as the case may be), we have a new source of information to consult. Specifically, the Federal Trade Commission (FTC) recently issued a proposal to institute the "Mortgage Acts and Practices (MAP)--Advertising Rule." The new rule "would prohibit any misrepresentation in any commercial communication regarding any term of any mortgage credit product." The rule would likely become final and effective sometime in 2011.

New regulator

Bank advertising has always been subject to FTC rules through section 5 of the FTC Act (a statute broadly spelling out UDAP violations), but it was enforced through banks' federal regulators. However, recent statutes, including the Credit CARD Act, give the FTC more direct power, meaning it can conduct investigations and bring enforcement actions against violators. Injunctive relief (meaning an order to stop certain conduct) and civil money penalties may be sought.

The rules

These new rules will add to existing requirements under Reg. Z that cover mortgage loan advertisements. They will cover any type of consumer mortgage loan (secured by a one-to-four-family residential structure) advertisement in any language, whether written or verbal, appearing in any medium including e-mail, direct mail, telemarketing, on the Internet and so forth. They will cover loan "terms," which include "fees, costs, obligations, or characteristics," as well as conditions or availability of mortgage products.

The goal is to ensure that consumers receive honest information allowing them to make informed...