President & Managing Director
Lenders Compliance Group
Advertising is often central to a loan originator’s
marketing plans. After all, if prospective borrowers can’t even find you when
they need mortgage loans, there’s nothing left but word of mouth, dropping off
bagels at real estate brokers, giving away pens and pads with your name on it,
offering occasional, educational and promotional presentations on loan
products, and hanging out a website shingle with the hopes that you will be
listed on Page 10 of Google Search.
Informing the public of loan products is a highly
regulated activity in mortgage banking and finance. Buzz words, restricted
words and phrases, and trigger terms can be a nasty nest of vipers that will
catch you up in a regulator’s net. The regulatory areas involving mortgage
banking advertising include the Fair Housing Act, Equal Credit Opportunity Act
(ECOA), Truth in Lending Act (TILA), Federal Trade Commission’s Mortgage
Advertising Rules, FHA mandates, Real Estate Settlement Procedures Act (RESPA),
Unfair, Deceptive, or Abusive Acts or Practices (UDAAP), fair lending, the SAFE
Act, the Fair Credit Reporting Act (FCRA), and state regulations. Clearly,
advertising compliance is complex!
My firm looks at thousands of potential
advertisements a year that are sent to us by our clients for clearance. Although
we provide them with our Advertising Manual, which is deep and broad in
application and contains many forms and formats, each advertisement still often
needs a review, especially at the commencement of a marketing campaign. Our
clients want to comply with federal and/or state advertising regulations;
however, they feel continually constrained as to how best to both stay within
bounds of regulatory compliance and also create appealing advertisements. Of
course, banking examiners don’t much care about how engaging and captivating an
advertisement is; these professionals are tasked with protecting the consumer
in accordance with required regulatory guidelines.
One of the very first requests a regulator asks at
the outset of an examination is to receive for audit all advertisements
involving contact with the public during the scope period. Woe be unto the
company that does not have each and every advertisement ready and available for
audit! And woe be unto the company that lets a regulator somehow uncover an
advertisement that was not disclosed at the time of an examination – even if
the advertisement had no violations in it, the trust factor with the auditor
will not be easily re-established!
As many of you know, Lenders Compliance Group’s
orientation is what I call “applied compliance” – not the theoretical approach
to compliance that seems to work in theory, but often becomes controversial in
the on-going implementation of regulatory compliance. In this article, I am
going to provide a practical approach to guiding you through the maze of certain
advertising compliance rules as well as regulatory expectations. Obviously, the
article is not meant to be comprehensive. But it is aimed at providing
suggested ways and means toward the kind of hands-on, applied compliance that
my firm handles every single day on behalf of our clients.
This is a two-part article. In this first part, I
will discuss some basics, give you the principal ways to prepare for
advertising compliance examinations, and highlight the banking examiner’s
expectations. In the second part, we’ll explore marketing campaign development,
the use of advertising checklists, triggering terms (the advertised words or
phrases that “trigger” the need for additional disclosures), and the way
advertisements impact fair lending.
Basics
First and foremost, let’s be clear about what is a viable
advertisement.
