FTC Guidance on Deceptive or Misleading Reverse Mortgage Advertising The Federal Trade Commission enforces the Federal Trade Commission Act (the FTC Act) which prohibits unfair or deceptive acts or practices by nonbank lenders and mortgage brokers. The Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), Board of Governors of the Federal Reserve System (FRB), and Federal Deposit Insurance Corporation (FDIC), enforce this provision of the FTC Act and any applicable regulations under authority granted in the FTC Act and section 8 of the Federal Deposit Insurance Act. The National Credit Union Administration (NCUA) enforces this provision of the FTC Act and any applicable regulations under authority granted in the FTC Act and sections 120 and 206 of the Federal Credit Union Act. Practices may be found to be deceptive and thereby unlawful under section 5 of the FTC Act generally if: (1) there is a representation, omission, act, or practice that is likely to mislead the consumer; (2) the act or practice would be deceptive from the perspective of a reasonable consumer; and (3) the representation, omission, act, or practice is because it is likely to affect a consumer's decision about a product or service. A practice may be found to be unfair and thereby unlawful under section 5 of the FTC Act if (1) the practice causes or is likely to cause substantial consumer injury; (2) the injury is not outweighed by benefits to the consumer or to competition; and (3) the injury caused by the practice is one that consumers could not reasonably have avoided. Further, the FTC generally has required that in mortgage advertising, the disclosure of material terms must be prominent, presented fairly, placed in a manner to draw the senior’s attention thereto, and proximate or near to the associated terms or conditions it is describing. Generally this guidance discourages the use of small print, or placing important material in footnotes or on the back of an advertising piece. FTC staff has also indicated that it disfavors and views with higher scrutiny ads that attempt to create a “sense of urgency” or an immediate call to action. FFIEC The Federal Financial Institutions Examination Council (“FFIEC”), which is comprised of the Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), Board of Governors of the Federal Reserve System (FRB), Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA) (the Agencies) recently issued guidance (Guidance) to assist their regulated financial institutions in managing risks presented by reverse mortgage products. The Guidance applies to all banks and their subsidiaries, bank holding companies (other than foreign banks) and their nonbank subsidiaries, savings associations and their subsidiaries, savings and loan holding companies and their subsidiaries, credit unions, U.S. branches and agencies of foreign banks engaged in reverse mortgage transactions, and any other entity supervised by those adopting the Guidance. The Guidance refers to all of those covered as “institutions.” However, some state mortgage banking regulators with authority over non‐bank mortgage lenders have posted notices that such agencies expect their non‐bank regulated entities also to follow the Guidance. And, as discussed in more detail below, at least one state mortgage regulator, Pennsylvania, has issued its own guidance on reverse mortgage marketing and lending. 37
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