He says he has heard that some regulators do not like statements that suggest customers can use reverse mortgages to buy a motorcycle or take a cruise. “Regulators see the reverse mortgage as a senior’s asset, and in some respects and instances, they see that as the senior’s last asset and that they should not be spending it on a cruise or a motorcycle,” Milano says. Regulators will look for certain “trigger terms,” as well, such as calculations of annual percentage rates. They also will look at the target audience. Under the Equal Credit Opportunity Act, lenders cannot discriminate, and regulators now examine how companies deploy social media, not just mailers. It will be a problem if lenders discourage some consumers from applying for loans or credit or avoid minority neighborhoods. One such case last year involved a Mississippibased lender the CFPB cited for discriminatory practices, according to the CFPB website. “We know in this business we want more loans and more applications,” Milano says. “But, when you are putting your marketing and advertising campaigns together, you have to think about this.” Monitoring Vendors and Business Partners The required due diligence means being aware of how vendors handle such advertising. Regulators do not see it as an excuse if a vendor violates the rules and a lender was unaware the vendor created and distributed the marketing and advertising. Smaller companies that rely on vendors have been cited for vendors’ mailers even though the lenders suggested it was not their responsibility to ensure compliance, he says. “You need to know who you are doing business with. You need to manage vendors and watch what they are doing,” Milano says. “It’s no excuse.” Along similar lines, companies must train call center workers to not make claims that violate advertising rules. In one case, regulators listened to recorded calls and found that employees were telling customers misleading information, Milano says. “That goes into training and knowing your product,” he says. Marketing materials that reach out to other professionals in a business-to-business setting, such as those targeted to real estate agents, must follow regulations, too, he says, while further noting that marketing and advertising materials must include the NMLS number of the lender. It is a mistake for materials to suggest that seniors can live in their homes forever, cannot lose their home or otherwise misstate how the loans work. In October 2021, one California lender paid a $1.1 million penalty after the CFPB determined that marketing materials inflated consumers’ estimated home values, according to CFPB’s website. Other Pitfalls Regulators also strongly monitor the use of celebrity spokespeople. One problematic mailer used the image of a celebrity financial guru who had not agreed to that use, Milano points out. Another pitfall is if materials routinely only depict white borrowers and not Black or Latino borrowers. And mailers and advertising cannot impersonate a government agency or another lender. Refinancing a home loan is public information, and some companies cull the basic information about the borrowers and then use it for marketing purposes. However, the new marketing materials cannot look like they are coming from the homeowner’s actual lender or a government agency. To the consumer, Milano says, “it looks like it is coming from your institution that you already have a relationship with.” One concern—particularly with the Federal Trade Commission (FTC)—is when materials create a false sense of urgency that a consumer must act quickly. “The false sense of urgency—the FTC hates that,” Milano says. He says several “garden variety” but problematic advertising claims stand out: that people can never lose their home without any mention of how that can happen if taxes and insurance are not paid; misrepresenting the costs associated with the loan; and suggesting a reverse mortgage can eliminate debt (a reverse mortgage is a loan). In addition, it is important to keep a copy and records of advertising materials. “Regulators want to see the ads, so you have to keep records,” Milano says. NRMLA’s Role As part of its duties, NRMLA has its “Code of Ethics & Professional Responsibility” that considers best practices, Schiffman says. Advertising Rules continued from page 29 30 REVERSE MORTGAGE / SEPTEMBER–OCTOBER 2022
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