Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 10707 

1 2009 Omnibus Appropriations Act, Pub. L. 111- 

8, 123 Stat. 524. 2 Id. § 626(a). 3 Id. Because Congress directed the Commission 

to use these APA rulemaking procedures, the FTC 

will not use the procedures set forth in Section 18 

of the FTC Act, 15 U.S.C. 57a. 

4 Credit Card Accountability Responsibility and 

Disclosure Act of 2009, Pub. L. 111-24, 123 Stat. 

1734 (Credit CARD Act). 

5 Id. § 511(a)(1)(B). 

6 Id. 

7 Unlike Section 18 of the FTC Act, 15 U.S.C. 57, 

the Omnibus Appropriations Act, as clarified by the 

Credit CARD Act, does not require that the 

Commission identify with specificity in the rule the 

unfair or deceptive acts or practices that the 

prohibitions will prevent. Omnibus Appropriations 

Act § 626(a); Credit CARD Act § 511(a)(1)(B); see 

also Katharine Gibbs Sch. v. FTC, 612 F.2d 658 (2d 

Cir. 1979). 

8 Credit CARD Act § 511(a)(1)(B). 

9 15 U.S.C. 45(a)(2). 

10 15 U.S.C. 44. Bona fide nonprofit entities are 

exempt from the jurisdiction of the FTC Act. 

Sections 4 and 5 of the FTC Act confer on the 

Commission jurisdiction over persons, 

partnerships, or corporations organized to carry on 

business for their profit or that of their members. 

15 U.S.C. 44, 45(a)(2). The FTC does, however, have 

jurisdiction over for-profit entities that provide 

mortgage-related services as a result of a contractual 

relationship with a nonprofit organization. See 

Nat’l Fed’n of the Blind v. FTC, 420 F.3d 331, 334- 

35 (4th Cir. 2005). In addition, the Commission 

asserts jurisdiction over ‘‘sham charities’’ that 

operate as for-profit entities in practice. See infra 

note 112 and accompanying text. 

reserve, and clearinghouse activities, 

and other activities related to credit 

intermediation); securities and 

commodity contracts intermediation 

and brokerage (including investment 

banking and securities dealing, 

securities brokerage, commodity 

contracts and dealing, and commodity 

contracts brokerage); securities and 

commodity exchanges; other financial 

investment activities (including 

miscellaneous intermediation, portfolio 

management, investment advice, and all 

other financial investment activities); 

insurance carriers; insurance agencies, 

brokerages, and other insurance related 

activities; insurance and employee 

benefit funds (including pension funds, 

health and welfare funds, and other 

insurance funds); other investment 

pools and funds (including open-end 

investment funds, trusts, estates, and 

agency accounts, real estate investment 

trusts, and other financial vehicles); and 

holding companies that own, or 

influence the management decisions of, 

firms principally engaged in the 

aforementioned activities. 

(d) Covered types of services. The BE– 

180 survey covers the following types of 

financial services transactions (sales or 

purchases) between U.S. financial 

companies and foreign persons: 

Brokerage services related to equity 

transactions; other brokerage services; 

underwriting and private placement 

services; financial management services; 

credit-related services, except credit 

card services; credit card services; 

financial advisory and custody services; 

securities lending services; electronic 

funds transfer services; and other 

financial services. 

* * * * * 

[FR Doc. 2010–4983 Filed 3–8–10; 8:45 am] 

BILLING CODE 3510–06–P 

FEDERAL TRADE COMMISSION 

16 CFR Part 322 

RIN 3084-AB18 

MORTGAGE ASSISTANCE RELIEF 

SERVICES 

AGENCY: Federal Trade Commission 

(FTC or Commission). 

ACTION: Notice of Proposed Rulemaking; 

request for public comment. 

SUMMARY: Pursuant to the 2009 

Omnibus Appropriations Act (Omnibus 

Appropriations Act), which was later 

clarified by the Credit Card 

Accountability and Responsibility and 

Disclosure Act of 2009 (Credit CARD 

Act), the Commission issues a Notice of 

Proposed Rulemaking (NPRM) 

concerning the practices of for-profit 

companies that, in exchange for a fee, 

offer to work with lenders and servicers 

on behalf of consumers to modify the 

terms of mortgage loans or to avoid 

foreclosure on those loans. The 

proposed Rule published for comment, 

among other things, would: prohibit 

providers of these services from making 

false or misleading claims; mandate that 

providers disclose certain information 

about these services; bar the collection 

of advance fees for these services; 

prohibit persons from providing 

substantial assistance or support to an 

entity they know or consciously avoid 

knowing is engaged in a violation of 

these Rules; and impose recordkeeping 

and compliance requirements. 

DATES: Comments must be received by 

March 29, 2010. 

ADDRESSES: Interested parties are 

invited to submit written comments 

electronically or in paper form by 

following the instructions in the 

Request for Comment part of the 

SUPPLEMENTARY INFORMATION section 

below. Comments in electronic form 

should be submitted at (http:// 

public.commentworks.com/ftc/MARSNPRM) (and following the instructions 

on the web-based form). Comments in 

paper form should be mailed or 

delivered to the following address: 

Federal Trade Commission, Office of the 

Secretary, Room H-135 (Annex W), 600 

Pennsylvania Avenue, NW, Washington, 

DC 20580, in the manner detailed in the 

SUPPLEMENTARY INFORMATION section 

below. 

FOR FURTHER INFORMATION CONTACT: 

Laura Sullivan, Evan Zullow, or Robert 

Mahini, Attorneys, Division of Financial 

Practices, Federal Trade Commission, 

600 Pennsylvania Avenue, NW, 

Washington, DC 20580, (202) 326-3224. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Statutory Authority 

On March 11, 2009, President Obama 

signed the Omnibus Appropriations 

Act.1 Section 626 of this Act directed 

the Commission to commence, within 

90 days of enactment, a rulemaking 

proceeding with respect to mortgage 

loans.2 Section 626 also directed the 

FTC to use notice and comment 

rulemaking procedures under Section 

553 of the Administrative Procedure Act 

(APA), 5 U.S.C. 553.3

On May 22, 2009, President Obama 

signed the Credit CARD Act.4 Section 

511 of this act clarified the 

Commission’s rulemaking authority 

under the Omnibus Appropriations Act. 

First, Section 511 specified that the 

rulemaking ‘‘shall relate to unfair or 

deceptive acts or practices regarding 

mortgage loans, which may include 

unfair or deceptive acts or practices 

involving loan modification and 

foreclosure rescue services.’’5 The 

Omnibus Appropriations Act, as 

clarified by the Credit CARD Act, does 

not specify any particular types of 

provisions that the Commission should 

or should not include in a rule 

addressing loan modification and 

foreclosure rescue services but rather 

directs the Commission to issue rules 

that ‘‘relate to’’ unfairness or deception.6

Accordingly, the Commission interprets 

the Omnibus Appropriation Act to 

allow it to issue rules prohibiting or 

restricting conduct that may not be 

unfair or deceptive itself but would be 

reasonably related to the goal of 

preventing unfairness or deception.7

Second, Section 511 of the Credit 

CARD Act clarified that the 

Commission’s rulemaking authority was 

limited to entities that are subject to 

enforcement by the Commission under 

the FTC Act.8 The rules the Commission 

promulgates to implement the Omnibus 

Appropriations Act, therefore, cannot 

cover the practices of banks, thrifts, 

federal credit unions,9 or certain 

nonprofits.10

The Omnibus Appropriations Act, as 

clarified by the Credit CARD Act, also 

permits both the Commission and the 

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10708 Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 

11 Omnibus Appropriations Act § 626; Credit 

CARD Act § 511(a)(1)(B). 

12 Note, however, that most mortgage assistance 

relief service (MARS) providers likely will fall 

within the jurisdiction of the FTC. 

13 Mortgage Assistance Relief Services, 74 FR 

26130 (June 1, 2009) (MARS ANPR). 

14 Id. On the same date, the Commission issued 

another ANPR, the Mortgage Acts and Practices 

Rulemaking, which addresses more generally 

activities that occur throughout the life-cycle of 

mortgage loans, i.e., practices with regard to the 

marketing, advertising, and servicing of mortgage 

loans. Mortgage Acts and Practices, 74 FR 26118 

(June 1, 2009). The Commission anticipates that it 

will publish an NPRM relating to other mortgage 

practices in the near future. 

15 MARS ANPR, 74 FR at 26137-38. The Credit 

CARD Act requires the FTC to consult with the 

Federal Reserve Board (Board) concerning any 

portion of the proposed Rule that addresses acts or 

practices covered under the Truth in Lending Act, 

15 U.S.C. 1601-1667f. Credit CARD Act 

§ 511(a)(1)(B). In this rulemaking, the Commission 

has consulted with and will continue to consult 

with the Board and, as appropriate, other federal 

banking agencies. 

16 The comments are available at (http:// 

www.ftc.gov/os/comments/mars/index.shtm). In 

addition, a list of commenters cited in this Notice, 

along with their short citation names or acronyms 

used throughout the Notice, is attached to this 

Notice as Appendix A. 

17 One of these comments was from The National 

Loss Mitigation Association (TNLMA), which 

claims to be ‘‘the premier national association’’ 

advocating for the for-profit MARS industry. See 

TNLMA at 1. The Commission has alleged that 

TNLMA is controlled by a named defendant in an 

on-going FTC law enforcement action. See FTC v. 

Loss Mitigation Servs., Inc., No. SACV09-800 

DOC(ANX) (C.D. Cal. filed July 13, 2009). 

18 See, e.g., NAAG at 2 (‘‘With a nationwide rule, 

states could bring actions in federal court to stop 

violators from operating in any jurisdiction.’’); MA 

AG at 2 (‘‘We applaud. . . [the FTC’s] current step 

toward regulating foreclosure-rescue and advancefee schemes.’’); MN AG at 4 (‘‘Although several 

states, including Minnesota, have passed laws 

regulating loan modification and/or foreclosure 

rescue companies, a national rule targeting such 

companies would be beneficial....’’); OH AG at 2 

(‘‘[O]ur office believes that a national rule targeting 

rescue companies is needed.’’); CRC at 1 (‘‘[We] 

strongly urge the FTC to develop effective rules to 

address the new cottage industry of fee for service 

loan modification providers.); NCLC at 2 (‘‘We urge 

the FTC to enact strong rules to end abusive and 

deceptive practices by for-profit mortgage assistance 

relief companies.’’); CMC at 1 (‘‘The CMC strongly 

supports the concept of prohibiting specific unfair 

or deceptive practices of MARS providers.’’); Chase 

at 1 (‘‘Chase strongly supports the proposed 

regulations because it has witnessed MARS entities 

engage in patterns of abusive and deceptive 

practices to the detriment of borrowers....’’); NCRC 

at 4 (‘‘The FTC should act aggressively to 

promulgate a rule with all possible haste.’’); OTS at 

1 (stating its support of ‘‘FTC efforts in this 

important area’’); HPC at 1 (‘‘HPC supports issuance 

of a rule directed at mortgage relief providers.’’); 

Shriver at 4 (‘‘[W]e commend the FTC on the 

proposed regulation....’’). 

19 See, e.g., CRC at 4 (‘‘Banning advance fees is 

a crucial component to any effort to reduce. . . unfair 

and deceptive practices in the loan modification 

industry and will likely push many scam artists out 

of our communities. The FTC should ban the 

collection of advance fees outright....’’); NCLC at 5 

(‘‘NCLC encourages the FTC to ban mortgage 

assistance relief services from seeking up-front 

payments. Prohibiting up-front payments will curb 

the injury and unfairness caused when companies 

take large payments from borrowers and fail to 

obtain loan modifications on their behalf, whether 

the outfit is an outright scam or merely 

ineffective.’’); Shriver at 2 (recommending 

prohibition on up-front fees); NCLR at 1 

(recommending that up-front fees be banned). 

20 See, e.g., CMC at 8 (‘‘The CMC would support 

a ban or limitation on the collection of advance fees 

by MARS providers.’’); Chase at 3 (‘‘[T]he payment 

of advance fees should be banned because there is 

no guarantee the MARS provider will be 

successful....’’); AFSA at 6 (‘‘[U]p-front fees should 

be restricted, fees should be reasonable, and only 

be permitted where services were actually 

provided’’); HPC at 2 (arguing that consumers 

should not be required to pay up-front fees). 

21 See, e.g., NAAG at 9 (‘‘A ban on advance 

fees. . . is necessary for any meaningful mortgage 

consultant regulation. . . . A key provision of any 

rule regulating mortgage consultants is that no fee 

may be charged or collected until after the mortgage 

consultant has fully performed each and every 

service the mortgage consultant contracted to 

perform or represented that he or she would 

perform.’’); MN AG at 4 (‘‘The only way to ensure 

that loan modification and foreclosure rescue 

companies are working for the benefit of the 

distressed homeowner is to ban the collection of 

any fees until all promised services have been 

performed.’’); MA AG at 2 (urging the Commission 

to ‘‘[b]an advance-fee schemes related to foreclosure 

assistance’’); see also NYC DCA at 4 (‘‘The FTC 

rulemaking should ban foreclosure rescue services 

from collecting up-front fees from consumers. 

Collecting fees in advance gives these businesses an 

easy opportunity to swindle consumers by failing 

to provide adequate service, or not providing any 

service at all.’’); OH AG at 3-4 (‘‘A prohibition or low 

fee cap on up-front fees is of primary importance 

in regulating foreclosure rescue services.’’). 

22 See, e.g., NCLC at 5; NAAG at 4; MN AG at 

1-2. 

23 See, e.g., NCLC at 3; OH AG at 4; ABA at 7; 

Chase at 3. 

24 Delinquency and foreclosure start rates are at 

record highs. In the third quarter of 2009, the 

Mortgage Bankers Association’s quarterly National 

Delinquency Survey found that 14.41% of all 

mortgage loans were either in foreclosure or 

delinquent by at least one payment, the highest 

percentage recorded in the survey’s history. 

Mortgage Bankers Association, Delinquencies 

Continue to Climb in Latest MBA National 

Delinquency Survey (Nov. 19, 2009), available at 

(http://www.mbaa.org/NewsandMedia/PressCenter/ 

71112.htm). In December 2008, Credit Suisse Bank 

forecasted a total of 9 million foreclosures for the 

period 2009 through 2012. See Credit Suisse Fixed 

Income Research 2 (2008), available at (http:// 

states to enforce the rules the FTC 

issues.11 The Commission can use its 

powers under the FTC Act to investigate 

and enforce the rules, and the FTC can 

seek civil penalties under the FTC Act 

against those who violate the rules. In 

addition, states can enforce the rules by 

bringing civil actions in federal district 

court or another court of competent 

jurisdiction to obtain civil penalties and 

other relief. Before bringing such an 

action, however, states must give 60 

days advance notice to the Commission 

or other ‘‘primary federal regulator’’12 of 

the proposed defendant, and the 

regulator has the right to intervene in 

the action. 

B. The Advance Notice of Proposed 

Rulemaking 

On June 1, 2009, the Commission 

published in the Federal Register an 

Advance Notice of Proposed 

Rulemaking (ANPR) addressing the acts 

and practices of for-profit companies 

that offer to work with lenders or 

servicers on behalf of consumers 

seeking to modify the terms of their loan 

or to avoid foreclosure on the loan.13

The ANPR described these services 

generically as ‘‘Mortgage Assistance 

Relief Services,’’ and the rulemaking 

proceeding was entitled the Mortgage 

Assistance Relief Services (MARS) 

Rulemaking.14 The MARS ANPR sought 

public comment on: (1) the mortgage 

assistance relief services industry; (2) 

unfair or deceptive acts or practices in 

which providers of these types of 

services are engaged; and (3) 

prohibitions and restrictions on 

providers of these services that are 

needed to prevent harm to consumers.15

In response to the ANPR, the 

Commission received a total of 46 

comments.16 Forty-six state attorneys 

general, federal banking agencies, 

consumer advocacy groups, nonprofit 

MARS providers, and mortgage lenders 

and brokers filed individual or group 

comments. In addition, a few comments 

were received from entities on behalf of 

the for-profit MARS providers that the 

Rule would cover.17

The institutional comments the FTC 

received overwhelmingly supported the 

issuance of a rule governing the 

activities of MARS providers.18 Notably, 

a wide spectrum of these commenters, 

including 46 state attorneys general, 

consumer and community 

organizations,19 and financial service 

providers,20 strongly urged the 

Commission to propose a rule 

prohibiting or restricting the collection 

of fees for mortgage relief services until 

the promised services have been 

completed.21 Additionally, a majority of 

the comments expressed concern 

regarding pervasive deception and 

abuse observed in the marketing of 

MARS, including the failure of MARS 

providers to perform promised 

services22 and their misrepresentation 

of affiliation with the government, 

nonprofits, lenders, or loan servicers.23

II. Mortgage Assistance Relief Services 

A. The Mortgage Crisis and Assistance 

for Consumers 

As discussed in the ANPR, historic 

levels of consumer debt, increased 

unemployment, and a stagnant housing 

market have contributed to high rates of 

mortgage loan delinquency and 

foreclosure.24 As a result, many 

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www.chapa.org/pdf/ 

ForeclosureUpdateCreditSuisse.pdf); see also 

NAAG at 2 (‘‘An estimated 8.1 million mortgages are 

anticipated to be in foreclosure within the next four 

years.’’). 

25 See Appendix B (list of FTC actions against 

MARS providers). 

26 Section II.C of the ANPR described the ongoing 

federal, state, and local efforts to educate 

consumers, to assist consumers in working with 

their lenders and servicers, and to make loan 

modifications available to a larger number of 

consumers struggling to stay current on their 

mortgage. See MARS ANPR, 74 FR at 26135-36. 

27 For example, the program offers servicers that 

modify loans according to its guidelines an up-front 

fee of $1,000 for each modification,‘‘pay for success’’ 

fees on still-performing loans of $1,000 per year, 

and one-time bonus incentive payments of $1,500 

to lender/investors and $500 to servicers for 

modifications made while a borrower is still current 

on mortgage payments. U.S. Dep’t of Treasury, 

Making Home Affordable Summary of Guidelines 2, 

available at (http://www.treas.gov/press/releases/ 

reports/guidelines_summary.pdf). 

28 Renae Merle, Lenders to Get Push to Help 

Homeowners, Wash. Post, Nov. 29, 2009, at A4, 

available at (http://www.washingtonpost.com/wpdyn/content/article/2009/11/28/ 

AR2009112802436.html). 

29 See, e.g., FTC, Mortgage Payments Sending 

You Reeling? Here’s What to Do, available at 

(http://www.ftc.gov/bcp/edu/pubs/consumer/ 

homes/rea04.pdf) (2009) (describing various credit 

counselor alternatives); Foreclosure Prevention 

Workshops for Consumers, available at (http:// 

www.freddiemac.com/avoidforeclosure/ 

workshops.html) (last visited Dec. 22, 2009) 

(describing local credit counseling events by local 

governments, nonprofits, and other organizations). 

30 See, e.g., Press Release, Making Home 

Affordable, Making Home Affordable Program on 

Pace to Offer Help to Millions of Homeowners (Aug. 

4, 2009), available at (http:// 

makinghomeaffordable.gov/pr_08042009.html). 

31 See Ruth Simon & James R. Hagerty, One in 

Four Borrowers Is Underwater, Wall St. J., Nov. 24, 

2009, at A1, available at (http://online.wsj.com/ 

article/SB125903489722661849.html). 

32 See, e.g., Brady Dennis & Renae Merle, 

Democrats Push More Mortgage Aid, Wash. Post, 

Dec. 8, 2009, at A19, available at (http:// 

www.washingtonpost.com/wp-dyn/content/article/ 

2009/12/07/AR2009120703903.html) (noting that ‘‘6 

percent of borrowers enrolled in the [MHA] 

program so far have moved from trial modification 

to permanent adjustment’’); Renae Merle, Banks 

Slow to Modify Mortgages, Wash. Post, Aug. 5, 

2009, available at (http:// 

www.washingtonpost.com/wp-dyn/content/article/ 

2009/08/04/AR2009080401134.html) (‘‘Less than 10 

percent of delinquent borrowers eligible for the 

Obama administration’s foreclosure prevention 

program have received help so far, according to 

Treasury Department estimates....’’). 

33 See, e.g., NCLC at 2 (noting that servicers have 

failed to meet borrower demand for loan 

modifications); NAAG at 7 (noting that borrowers 

have had a difficult time reaching servicers and 

obtaining their assistance); Peter S. Goodman, A 

Plan to Stem Foreclosures, Buried in a Paper 

Avalanche, N.Y. Times, July 29, 2009, at A1, 

available at (http://www.nytimes.com/2009/06/29/ 

business/29loanmod.html). 

34 See MARS ANPR, 74 FR at 26134-35. 

35 Another foreclosure prevention method that 

MARS providers have used is ‘‘sale-leaseback’’ or 

‘‘title reconveyance’’ transactions. In these 

transactions, MARS providers instruct financially 

distressed consumers to transfer title to their homes 

to the providers and then lease the property back 

from the providers. The providers promise to 

reconvey title to the homes at some later date, yet 

often do not do so, thereby giving the providers the 

equity in the homes. The incidence of such sale 

leaseback and title reconveyance transactions 

appears to have declined, in part because many 

consumers do not have significant equity in their 

homes. 

36 See, e.g., NAAG at 2 (‘‘[T]he [loan modification] 

consulting business model is dominating the 

marketplace. Consultants are by far the most 

common source of consumer complaints received 

by our offices in the area of mortgage assistance 

services.’’); OH AG at 2 (‘‘For those companies that 

actually do put some effort into helping the 

consumer, the most common business model is an 

offer to negotiate a loan modification or repayment 

plan with the consumer’s servicer.’’); CRC at 1 (‘‘In 

California, advertisements promising loan 

modification success are inescapable.’’); see also 

Appendix B. 

37 See id. 

38 See, e.g., NAAG at 3 (‘‘It is difficult to gather 

exact empirical data on companies providing loan 

modification and foreclosure rescue services due to 

the predominance of internet-based companies and 

their ephemeral nature. The difficulty of gathering 

information is increased due to the fact many of 

these companies operate primarily over the internet 

and do not maintain a physical presence in the 

states in which they do business.’’); OH AG at 2 

(‘‘There is little reliable data about the foreclosure 

rescue industry.’’). 

39 See, e.g., NAAG at 4 (noting that state attorneys 

general have investigated more than 450 mortgage 

assistance relief services). 

40 Id.; see also, e.g., CRC at 3 (‘‘The average fee 

that we are seeing borrowers charged is $3,000; we 

have seen fees as high as $9,500.’’); NCRC at 3 

(‘‘NCRC documented a median fee of $2,900. . . for 

our testing study. Fees ranged as high as 

Continued 

consumers struggling to make their 

mortgage payments are in search of 

ways to avoid foreclosure. There are a 

number of options that may be available 

to consumers, including: (1) short sales 

or deeds-in-lieu of foreclosure 

transactions in which the proceeds of a 

sale of the home or the receipt of the 

deed to the home is treated as 

repayment of the outstanding mortgage 

balance; (2) forbearance or repayment 

plans that do not reduce the amount 

that consumers pay but give them more 

time to bring their payments current; 

and (3) loan modifications to reduce the 

amount of consumers’ monthly 

payments. Because loan modifications 

allow consumers to stay in their homes 

and reduce their overall debt, this 

possible solution often has great appeal 

to consumers. The Commission’s law 

enforcement actions suggest that loan 

modifications may currently be the most 

frequently marketed and sold mortgage 

assistance relief service.25

In response to the recent mortgage 

crisis, a number of government and 

private sector programs have been 

initiated to assist distressed 

homeowners in modifying or 

refinancing their mortgages.26 In March 

2009, for example, the Obama 

Administration launched the Making 

Home Affordable (MHA) program, 

which provides mortgage owners and 

servicers with financial incentives to 

modify and refinance loans.27 More than 

650,000 loans have been modified 

pursuant to this program.28 In addition, 

state and local governments, nonprofit 

organizations, housing counselors, and 

private sector entities have offered a 

variety of other programs and services to 

help homeowners in distress.29

Despite these public and private 

efforts, consumers continue to seek 

assistance from for-profit companies in 

obtaining loan modifications. Many 

consumers who are seeking loan 

modifications are not eligible for the 

MHA program or other government and 

private assistance programs. For 

example, while the Department of the 

Treasury has estimated that the MHA 

program will help 3-4 million borrowers 

by February 2012,30 industry surveys 

report that roughly 7.5 million 

households are at least 30 days behind 

on their mortgage payments or already 

are in foreclosure.31 Even among 

consumers who may be eligible for the 

program, it appears many are failing to 

meet other requirements necessary to 

qualify for a permanent loan 

modification.32 In addition, even if 

consumers are eligible for government 

and private assistance programs, many 

housing counselors and servicers have 

struggled to respond in a timely manner 

to the sheer number of consumers who 

are seeking loan modifications,33

leaving consumers who are desperate to 

save their homes waiting anxiously for 

assistance. 

Many consumers who have been 

unable to obtain assistance have turned 

to MARS providers. These for-profit 

companies have widely promoted their 

ability to help consumers in negotiating 

with lenders or servicers and in taking 

other steps to prevent foreclosure.34

Responding to consumer demand, these 

providers focus their advertising mainly 

on their capacity to obtain mortgage 

loan modifications35 as opposed to 

other forms of foreclosure relief, such as 

a short sale or loan forbearance.36

Mortgage assistance services based on 

negotiating with the lender or servicer 

to obtain a loan modification or some 

other type of foreclosure relief have 

mushroomed in the past two years.37

Given that there are many small and 

relatively new MARS providers, it is 

difficult to estimate the total number of 

such providers,38 but comments suggest 

that there are at least 450.39

Typically, MARS providers charge 

consumers advance fees in the 

thousands of dollars.40 Some providers 

mstockstill on DSKH9S0YB1PROD with PROPOSALS

10710 Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 

$5,600....’’); NCLR at 1 (observing fees as high as 

$8,000); NCLC at 6 (estimating fees to be between 

$2,000 and $4,000). 

41 See, e.g., FTC v. Infinity Group Servs., No. 

SACV09-00977 DOC (MLGx) (C.D. Cal. filed Aug. 

26, 2009); FTC v. Freedom Foreclosure Prevention 

Specialists, LLC, No. 2:09-cv-01167-FJM (D. Ariz. 

June 1, 2009); FTC v. Fed. Loan Modification Law 

Ctr., LLP, No. SACV09-401 CJC (MLGx) (C.D. Cal. 

filed Apr. 3, 2009). 

42 See, e.g., FTC v. Truman Foreclosure 

Assistance, LLC, No. 09-23543 (S.D. Fla. filed Nov. 

23, 2009); FTC v. Washington Data Res., Inc., No. 

8:09-cv-02309-SDM-TBM (M.D. Fla. filed Nov. 12, 

2009); FTC v. First Universal Lending, LLC, No. 09- 

CV-82322, Mem. TRO at 5 (S.D. Fla. filed Nov. 24, 

2009). 

43 See, e.g., NAAG at 5; see also, e.g., FTC v. Debt 

Advocacy Ctr., LLC, No. 1:09CV2712 (N.D. Ohio 

filed Nov. 19, 2009). 

44 See, e.g., FTC v. Fed. Housing Modification 

Dep’t, No. 09-CV-01753 (D.D.C. filed Sept. 15, 

2009); FTC v. LucasLawCenter ‘‘Inc.,’’ No. 09-CV-770 

(C.D. Cal. filed July 7, 2009). 

45 See, e.g., NCLC at 11 (‘‘Mortgage brokers–often 

cited as one of the driving forces in the growth of 

bad subprime loans–are in demand to work for loan 

modification companies. One MARS advertised for 

consultants with mortgage and real estate 

experience to join its cadre of loan modification 

specialists.’’). 

46 See, e.g., FTC v. Loss Mitigation Servs., Inc., 

No. SACV09-800 DOC (ANX), Mem. Supp. Pls. Ex 

Parte App. at 3 (Aug. 3, 2009) (alleging that 

defendants engaged in ‘‘misrepresentations 

prohibited by the TRO, behind a new facade: the 

‘Walker Law Group,’’’ which was ‘‘nothing more 

than a sham legal operation designed to evade state 

law restrictions on the collection of up-front fees for 

loan modification and foreclosure relief’’); FTC v. 

LucasLawCenter ‘‘Inc.,’’ No. SACV-09-770 DOC 

(ANX) (C.D. Cal. filed July 7, 2009); FTC v. Data 

Med. Capital Inc., No. SA-CV-99-1266 AHS (Eex) 

(C.D. Cal., contempt application filed May 27, 

2009); FTC v. US Foreclosure Relief Corp., No. 

SACV09-768 JVS (MGX) (C.D. Cal. filed July 7, 

2009); FTC v. Fed. Loan Modification Law Ctr., LLP, 

No. SACV09-401 CJC (MLGx) (C.D. Cal. filed Apr. 

3, 2009); see also, e.g., Cincinnati Bar Assoc. v. 

Mullaney, 119 Ohio St. 3d 412 (2008) (disciplining 

attorneys involved in mortgage assistance relief 

services); Press Release, North Carolina Dep’t of 

Justice, AG Cooper Targets California Schemes that 

Prey on NC Homeowners (July 15, 2009), available 

at (http://www.ncdoj.com/News-and-Alerts/NewsReleases-and-Advisories/Press-Releases/AGCooper-targets-California-schemes-that-prey-on- 

.aspx); Press Release, Colorado Attorney General’s 

Office, Attorney General Announces Actions 

Against Seven Loan-Moficiation Companies As Part 

of Multistate Sweep (July 15, 2009), available at 

(http://www.coloradoattorneygeneral.gov/press/ 

news/2009/07/15/attorney_general_announces_ 

actions_against_seven_loan_modification 

_companies_p); Press Release, Illinois Attorney 

General, Illinois Attorney General Sues 14th 

Company for Mortgage Rescue Fraud (Aug. 28, 

2009), available at (http:// 

www.illinoisattorneygeneral.gov/pressroom/ 

2008_08/20080828.html). 

47 See, e.g., FTC v. Data Med. Capital Inc., No. 

SA-CV-99-1266 AHS (Eex), Mem. Supp. App. 

Contempt at 18 (C.D. Cal. filed May 27, 2009); FTC 

v. Fed. Loan Modification Law Ctr., LLP, No. 

SACV09-401 CJC (MLGx) (C.D. Cal. filed Apr. 3, 

2009); California Dep’t of Real Estate, Consumer 

Alert 6 (warning consumers of ‘‘forensic loan 

reviews’’), available at (http://www.dre.ca.gov/ 

pdf_docs/FraudWarningsCaDRE03_2009.pdf). 

48 See supra notes 46-47; see also IL AG at 2 

(‘‘Attorneys are using the [state] exemption to 

market and sell the same mortgage consulting 

services provided by non-attorneys.’’). 

49 Press Release, Office of the Attorney General, 

California Dep’t of Justice, Brown Alerts 

Homeowners that New Law Prohibits Up-front Fees 

for Foreclosure Relief Services (Oct. 15, 2009), 

available at (http://ag.ca.gov/newsalerts/ 

release.php?id=1821). 

50 See State Bar of California, Ethics Alert: Legal 

Services to Distressed Homeowners and Foreclosure 

Consultants on Loan Modifications 2, Ethics 

Hotliner (Feb. 2, 2009), available at (http:// 

www.calbar.ca.gov/calbar/pdfs/ethics/Ethics-AlertForeclosure.pdf) (‘‘California State Bar Ethics 

Alert’’); see also Florida Bar, Ethics Alert: Providing 

Legal Services to Distressed Homeowners at 1, 

available at (http://www.floridabar.org/TFB/ 

TFBResources.nsf/Attachments/ 

872C2A9D7B71F05785257569005795DE/$FILE/ 

loanModification20092.pdf?OpenElement) (‘‘The 

Florida Bar’s Ethics Hotline recently has received 

numerous calls from lawyers who have been 

contacted by non-lawyers seeking to set up an 

arrangement in which the lawyers are involved in 

loan modifications, short sales, and other 

foreclosure-related rescue services on behalf of 

distressed homeowners. . . . The [Florida] 

Foreclosure Rescue Act. . . imposed restrictions on 

non-lawyer loan modifiers to protect distressed 

homeowners. The new statute appears to be the 

impetus for these inquiries.’’). 

51 Cal Civ. Code § 2944.7; see also Press Release, 

Office of the Attorney General, California Dep’t of 

Justice, Brown Alerts Homeowners that New Law 

Prohibits Up-front Fees for Foreclosure Relief 

Services (Oct. 15, 2009), available at (http:// 

ag.ca.gov/newsalerts/release.php?id=1821). 

52 See Appendix B. 

53 As stated above, the Commission received few 

comments from MARS providers in response to its 

ANPR. Therefore, to ensure that it has complete and 

accurate information concerning mortgage 

assistance service providers, the effect of their 

activities on consumers, and the impact of proposed 

restrictions in their operations, the Commission is 

especially interested in receiving comments from 

MARS providers in response to this NPRM. 

54 See, e.g., FTC v. First Universal Lending, LLC, 

No. 09-CV-82322, Mem. TRO at 4-5 (S.D. Fla. filed 

Nov. 24, 2009); FTC v. 1st Guar. Mortgage Corp., 

No. 09-DV-61846 (S.D. Fla. filed Nov. 17, 2009); 

FTC v. Freedom Foreclosure Prevention Specialists, 

LLC, No. 2:09-cv-01167-FJM (D. Ariz. filed June 1, 

2009); FTC v. Fed. Loan Modification Law Ctr., LLP, 

No. SACV09-401 CJC (MLGx) (C.D. Cal. filed Apr. 

3, 2009). 

collect their entire fee at the beginning 

of the transaction,41 and others request 

two to three large installment payments 

from consumers.42 One commenter 

stated that many MARS providers have 

begun to offer their services piecemeal, 

collecting fees upon reaching various 

stages in the process, such as 

assembling the documentation required 

by the lender or servicer, mailing 

paperwork to the lender or servicer, and 

negotiating with a lender’s loss 

mitigation department.43

As discussed in the ANPR, MARS 

providers often claim to possess 

specialized knowledge of the mortgage 

lending industry,44 sometimes hiring 

former mortgage brokers and real estate 

agents45 to support their claims. In 

addition, a growing number of MARS 

providers are employing or affiliating 

with lawyers.46 The providers often tout 

the expertise of these attorneys in 

negotiating with lenders and servicers. 

In some cases, MARS providers also 

offer ‘‘forensic audits,’’ purported 

reviews of mortgage loans to determine 

lender and servicer compliance with 

federal and state law, thereby 

supposedly helping the consumer to 

acquire the leverage needed to obtain 

better loan modifications.47 Providers 

also may use their relationship with 

attorneys to assert that they are not 

covered by state laws that prohibit nonattorneys from collecting advance fees 

for loan modification services.48 For 

example, a previous California law that 

imposed a number of restrictions on 

‘‘foreclosure consultants’’ also allowed 

‘‘licensed attorneys. . . [to] charge 

advance fees under certain limited 

circumstances.’’49 The State Bar of 

California subsequently observed that 

‘‘foreclosure consultants may be 

attempting to avoid the statutory 

prohibition on collecting a fee before 

any services have been rendered by 

having a lawyer work with them in 

foreclosure consultations.’’50 California 

has since passed a new law that 

removes this exemption.51

B. Observed Consumer Protection 

Abuses 

The FTC has extensive law 

enforcement experience with MARS 

providers. In the past two years, the 

Commission has filed 28 law 

enforcement actions against providers of 

loan modification and foreclosure 

rescue services.52 This extensive law 

enforcement experience, as well as the 

information received in response to the 

ANPR,53 strongly suggests that the 

deceptive practices of MARS providers 

are widespread and are causing 

substantial harm to consumers. MARS 

providers often misrepresent the 

services that they will perform and the 

results they will obtain for consumers. 

Indeed, providers frequently fail to 

perform even the most basic of 

promised services. As a result, 

consumers not only lose the thousands 

of dollars they pay to the providers, but 

may also lose their homes. 

Typically, MARS providers initiate 

contact with prospective customers 

through Internet, radio, television, or 

direct mail advertising. The ads instruct 

consumers to call a toll-free telephone 

number or e-mail the company. 

Customary claims in the ads and 

ensuing telemarketing and email pitches 

include representations that the MARS 

provider: (1) will obtain for the 

consumer a substantial reduction in a 

mortgage loan’s interest rate, principal 

amount, or monthly payments; (2) will 

achieve these results within weeks;54 (3) 

has special relationships with lenders 

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55 See, e.g., FTC v. Debt Advocacy Ctr., LLC, No. 

1:09CV2712 (N.D. Ohio filed Nov. 19, 2009); FTC 

v. 1st Guar. Mortgage Corp., No. 09-DV-61846 (S.D. 

Fla filed Nov. 17, 2009); FTC v. LucasLawCenter 

‘‘Inc.,’’ No. SACV-09-770 DOC (ANX) (C.D. Cal. filed 

July 7, 2009); FTC v. US Foreclosure Relief Corp., 

No. SACVF09-768 JVS (MGX) (C.D. Cal. filed July 

7, 2009). 

56 See, e.g., FTC v. Washington Data Res., Inc., 

No. 8:08-cv-02309-SDM-TBM (M.D. Fla. filed Nov. 

12, 2009) (alleging that defendants falsely 

represented that they were affiliated with the 

United States government); FTC v. Fed. Housing 

Modification Dep’t, No. 09-CV-01753 (D.D.C. filed 

Sept. 15, 2009); FTC v. Sean Cantkier, No. 1:09-cv00894 (D.D.C. filed July 10, 2009) (alleging 

defendants placed advertisements on Internet 

search engines that refer consumers to websites that 

deceptively appear to be affiliated with government 

loan modification programs); FTC v. Thomas Ryan, 

No. 1:09-00535 (HHK) (D.D.C. filed Mar. 25, 2009); 

FTC v. Fed. Loan Modification Law Ctr., LLP, No. 

SACV09-401 CJC (MLGx) (C.D. Cal. filed Apr. 3, 

2009) (charging defendant with misrepresenting 

that it is part of or affiliated with the federal 

government); see also OH AG at 4 (‘‘Our office has 

seen many companies that have names or 

advertisement that make it sound like they are 

government sponsored.’’); NCLC at 3 (‘‘One website, 

USHUD.com, even claims to be ‘America’s Only 

Free Foreclosure Resource’ even though HUDcertified agencies also offer free assistance 

regardless of income.’’). 

57 See FTC v. New Hope Prop. LLC, No. 1:09-cv01203-JBS-JS (D.N.J. filed Mar. 17, 2009); FTC v. 

Hope Now Modifications, LLC, No. 1:09-cv-01204- 

JBS-JS (D.N.J. filed Mar. 17, 2009). 

58 See, e.g., FTC v. Kirkland Young, LLC, No. 09- 

23507 (S.D. Fla. filed Nov. 18, 2009) (alleging that 

defendants falsely represented an affiliation with 

borrowers’ lenders); FTC v. Loss Mitigation Servs., 

Inc., No. SACV-09-800 DOC (ANX) (C.D. Cal. filed 

July 13, 2009); see also ABA at 7 (‘‘They often 

misuse the intellectual property of lenders and 

servicers by claiming in mailings, on websites, and 

in other communications that they either are 

affiliated with the lenders and servicers or have 

special relationships with them that do not exist. 

They use the names, trademarks and logos of these 

lenders and servicers in their advertising to deceive 

consumers into believing they can obtain 

modification relief for them that these consumers 

could not otherwise obtain for themselves at no 

cost.’’); Chase at 3 (‘‘These MARS entities also may 

lead the borrower to believe that they are associated 

with the servicer or that they have special 

agreements with the servicer for processing loan 

modifications, when, in fact, they do not.’’). 

59 See, e.g., FTC v. Truman Foreclosure 

Assistance, LLC, No. 09-23543 (S.D. Fla. filed Nov. 

23, 2009) (alleging that defendant falsely claims to 

provide ‘‘100% money back guarantee’’); Debt 

Advocacy Ctr., LLC, No. 1:09CV2712 (N.D. Ohio 

filed Nov. 19, 2009) (alleging that defendants falsely 

represent they would refund borrower fee if 

unsuccessful); FTC v. Infinity Group Servs., No. 

SACV09-00977 DOC (MLGx) (C.D. Cal. filed Aug. 

26, 2009); FTC v. Loan Modification Shop, Inc., No. 

3:09-cv-00798 (JAP), Mem. Supp. TRO at 1 (D.N.J. 

amended complaint filed Aug. 4, 2009) (alleging 

defendants represented that advance fees were fully 

refundable); FTC v. Freedom Foreclosure Prevention 

Specialists, LLC, No. 2:09-cv-01167-FJM (D. Ariz. 

June 1, 2009) (alleging defendants promised ‘‘100% 

money-back guarantee’’ but then failed to provide 

refunds). 

60 See, e.g., FTC v. Truman Foreclosure 

Assistance, LLC, No. 09-23543 (S.D. Fla. filed Nov. 

23, 2009) (alleging defendants falsely claimed 

success rate of 97 to 100%); FTC v. Debt Advocacy 

Ctr., LLC, No. 1:09CV2712 (N.D. Ohio filed Nov. 19, 

2009) (alleging defendants falsely claimed a 90% 

success rate); FTC v. Loss Mitigation Servs., Inc., 

No. SACV09-800 DOC (ANX) (C.D. Cal. filed July 

13, 2009) (alleging ‘‘[d]efendants have told 

homeowners that their success rate is above ninety 

percent’’); FTC v. LucasLawCenter ‘‘Inc.,’’ No. SACV09-770 DOC (ANX) (C.D. Cal. filed July 7, 2009) 

(alleging ‘‘[d]efendants’ representatives tell 

consumers that Defendants have a success rate in 

the ninetieth percentile with their lender’’); FTC v. 

Freedom Foreclosure Prevention Specialists, LLC, 

No. 2:09-cv-01167-FJM (D. Ariz. filed June 1, 2009) 

(alleging defendants claimed to have 97% success 

rate); FTC v. Data Med. Capital Inc., No. SA-CV-99- 

1266 AHS (Eex), Mem. Supp. App. Contempt at 8 

(C.D. Cal. filed May 27, 2009) (alleging defendants 

represented 100% success rate to consumers). 

61 See, e.g., infra note 123-27; CMC at 1 (‘‘CMC 

members and other mortgage servicers found that 

MARS providers consistently misrepresent their 

ability to obtain concessions from servicers....’’); 

Chase at 3 (‘‘They collect their fees up-front and 

promise the borrower they can get a loan 

modification or other foreclosure relief, when, in 

fact, this is only a determination that the servicer 

can make after reviewing the borrower’s financial 

information and investor agreements.’’). 

62 See, e.g., FTC v. Truman Foreclosure 

Assistance, LLC, No. 09-23543 (S.D. Fla. filed Nov. 

23, 2009) (alleging that defendant often failed to 

return borrowers’ phone calls and failed to contact 

and negotiate with lenders); FTC v. Apply2Save, 

Inc., No. 2:09-cv-00345-EJL-CWD (D. Idaho filed 

July 14, 2009) (complaint alleging that ‘‘[m]any 

consumers learned from their lenders that 

Defendants had not even contacted the lender or 

that Defendants had only minimal, non-substantive 

contact with the lender’’); FTC v. Loss Mitigation 

Servs., Inc., No. SACV09-800 DOC (ANX) (C.D. Cal. 

filed July 13, 2009) (alleging that ‘‘Defendants have 

misrepresented that negotiations were underway, 

although Defendants had not yet contacted the 

lender’’); FTC v. LucasLawCenter ‘‘Inc.,’’ No. SACV09-770 DOC (ANX), Mem. Supp. App. TRO at 19 

(C.D. Cal. filed July 7, 2009) (alleging that 

consumers who contact their lenders ‘‘learn that 

[Defendant] never even contacted the lender, or 

merely verified the consumer’s loan information’); 

FTC v. Freedom Foreclosure Prevention Specialists, 

LLC, No. 2:09-cv-01167-FJM (D. Ariz. June 1, 2009) 

(alleging that defendants failed to act on 

homeowners’ cases for longer than four to six weeks 

without completing – or in some cases, even 

starting – negotiations and ’’failed to return 

consumers’ repeated telephone calls, even when 

homeowners were on the brink of foreclosure′). 

63 See, e.g., FTC v. Truman Foreclosure 

Assistance, LLC, No. 09-23543 (S.D. Fla. filed Nov. 

23, 2009); FTC v. Kirkland Young, LLC, No. 09- 

23507 (S.D. Fla filed Nov. 18, 2009); FTC v. 

Washington Data Res., Inc., No. 8:09-cv-02309- 

SDM-TBM (M.D. Fla. filed Nov. 12, 2009); FTC v. 

Loss Mitigation Servs., Inc., No. SACV09-800 DOC 

(ANX) (C.D. Cal. filed July 13, 2009); FTC v. US 

Foreclosure Relief Corp., No. SACV09-768 JVS 

(MGX) (C.D. Cal. filed July 7, 2009). 

64 See, e.g., FTC v. Truman Foreclosure 

Assistance, LLC, No. 09-23543 (S.D. Fla. filed Nov. 

23, 2009) (‘‘When consumers speak with their 

lenders directly, they often discover that 

Defendants had not yet contacted the lender or only 

had left messages or had non-substantive contacts 

with the lender.’’); FTC v. Loss Mitigation Servs., 

Inc., No. SACV09-800 DOC (ANX), Mem. In Supp. 

of Ex Parte TRO at 18-19 (C.D. Cal. filed July 13, 

2009) (detailing ‘‘devastating effects’’ of consumers 

learning too late of lack of effort by loan 

modification company); CRC at 7 (‘‘People who do 

have a chance of keeping the home are being 

steered away from legitimate, free homeowner 

counseling services or are failing to take any action 

before it is too late because they have been assured 

everything is being taken care of for them already. 

All too often, it is not.’’). 

65 See, e.g., FTC v. First Universal Lending, LLC, 

No. 09-CV-82322 (S.D. Fla. filed Nov. 24, 2009); 

FTC v. Fed. Housing Modification Dep’t, No. 09-CV01753 (D.D.C. filed Sept. 15, 2009); FTC v. 

LucasLawCenter ‘‘Inc.,’’ No. SACV-09-770 DOC 

(ANX)(C.D. Cal. filed July 9, 2009) (‘‘In numerous 

instances, Defendants’ representative [allegedly] 

encourages consumers to stop paying their 

mortgages, telling consumers that delinquency will 

demonstrate the consumers’ hardship to the lender 

and make it easier to obtain a loan modification.’’); 

see also NAAG at 10 (‘‘In some cases, the mortgage 

consultants will actually counsel the consumer not 

to make a mortgage payment, which of course frees 

up funds for the consultants’ fee.’’). 

66 See, e.g., FTC v. Fed. Housing Modification 

Dep’t, No. 09-CV-01753 (D.D.C. filed Sept. 16, 2009) 

(alleging that defendants falsely claim to have 

attorneys or forensic accountants on staff); FTC v. 

Continued 

and servicers;55 and (4) is closely 

affiliated with the government,56

various nonprofit programs,57 or the 

consumer’s own lender or servicer.58 In 

some cases, MARS providers also entice 

consumers to make substantial up-front 

payments with false promises of a 

refund if they do not receive the 

promised results.59 Providers typically 

also represent that there is high 

likelihood, and in some instances a 

‘‘guarantee,’’ of success.60 Despite these 

promises of extremely high success 

rates, the vast majority of consumers do 

not receive the promised results.61

Even if the services of MARS 

providers could deliver the promised 

results, many providers do not provide 

even the most basic services they 

claimed they would perform. After 

collecting their up-front fees, MARS 

providers often fail to make initial 

contact with the lender or servicer for 

months, if at all. They frequently neglect 

to commence negotiations or have 

substantive discussions with the 

consumer’s lender or servicer.62 In 

many cases, the consumer harm from 

this failure to perform as promised is 

exacerbated because MARS providers 

often instruct consumers to stop 

communicating with their lenders.63

Because consumers sever their contact 

with lenders and servicers, they may not 

discover that their MARS provider is 

doing little or nothing on their behalf; 

may never learn of concessions that 

their lender or servicer is willing to 

make; or, worst of all, may never 

discover that foreclosure is imminent.64

In some cases, MARS providers advise 

consumers to discontinue making their 

mortgage payments, without informing 

them that doing so can result in the loss 

of their homes and damage to their 

credit ratings.65 Because of this advice, 

consumers who otherwise could have 

avoided becoming delinquent may 

damage their credit rating or end up in 

foreclosure. 

In addition, some MARS providers 

make the specific claim that they offer 

legal services,66 when, in fact, no 

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Loan Modification Shop, Inc., No. 3:09-cv-00798 

(JAP), Mem. Supp. TRO at 14 (D.N.J. filed Aug. 4, 

2009) (alleging that defendants misrepresent ‘‘that it 

is an attorney-based company’’); see also FTC v. 

LucasLawCenter ‘‘Inc.,’’ No. SACV-09-770 DOC 

(ANX), Mem. Supp. App. TRO at 19 (C.D. Cal. filed 

July 7, 2009) (alleging that ‘‘[d]espite promises to 

the contrary, consumers have no contact with the 

purported attorneys who are supposed to be 

negotiating with their lenders’’). 

67 See, e.g., FTC v. Truman Foreclosure 

Assistance, LLC, No. 09-23543 (S.D. Fla. filed Nov. 

23, 2009); FTC v. Washington Data Res., Inc., No. 

8:09-cv-02309-SDM-TBM (M.D. Fla. filed Nov. 12, 

2009); see also, e.g., FTC v. US Foreclosure Relief 

Corp., No. SACV09-768 JVS (MGX), Prelim. Rep. 

Temp. Receiver at 2-3 (C.D. Cal. filed July 7, 2009) 

(stating that defendants’ ‘‘relationship with two 

different lawyers was nominal at best and served 

primarily as a cover to dignify the business and 

invoke the attorney exception to advance fee 

prohibitions’’). 

68 See, e.g., IL AG at 1 (noting that ‘‘33 percent 

of the [MARS] companies we have dealt with are 

owned by attorneys, while 38 percent have some 

link to the legal profession’’); CRC at 2 (‘‘An 

increasing number of attorneys are involving 

themselves in these unethical practices without 

providing any legal (or other) services....’’); MN AG 

at 5 (‘‘This Office is aware of several loan 

modification and foreclosure rescue companies that 

have affiliated with licensed attorneys in other 

states in an effort to circumvent state law.’’); NAAG 

at 4 (‘‘Attorneys. . . have an increasing presence in 

this industry and have been found working in 

conjunction with or serving as referral sources for 

mortgage consultants.’’); see also, e.g., Legislative 

Solutions for Preventing Loan Modification and 

Foreclosure Rescue Fraud, 111th Cong. 1st Sess., 

Testimony of Scott J. Drexel (State Bar of California) 

at 2, 4 (Drexel Testimony) (noting that attorney 

misconduct in connection with MARS ‘‘is a problem 

of extremely significant – if not crisis – proportions 

in California,’’ and that the state bar has initiated 

over 175 associated investigations of attorneys); 

Polyana Da Costa, Record Number of Complaints 

Target Florida Loan Modification Lawyers, Law.com 

(Oct. 1, 2009) (‘‘The [Florida] state attorney general 

has received a record 756 complaints through 

August of this year about loan modifications 

involving attorneys.’’), available at (http:// 

www.law.com/jsp/law/ 

LawArticleFriendly.jsp?id=1202434223147). 

69 See Appendix B. 

70 16 CFR 310.1, et seq. (2003); see, e.g., FTC v. 

Kirkland Young, LLC, No. 09-23507 (S.D. Fla. filed 

Nov. 18, 2009); FTC v. Washington Data Res., Inc., 

No. 8:09-cv-02309-SDM-TBM (M.D. Fla. filed Nov. 

12, 2009); FTC v. First Universal Lending, LLC, No. 

09-CV-82322 (S.D. Fla. filed Nov. 24, 2009);FTC v. 

Fed. Housing Modification Dep’t, No. 09-CV-01753 

(D.D.C. filed Sept. 15, 2009); FTC v. Hope Now 

Modifications, LLC, No. 1:09-cv-01204-JBX-JS 

(D.N.J. filed Sept. 14, 2009); FTC v. US Foreclosure 

Relief Corp., No. SACV09-768 JVS (MGX) (C.D. Cal. 

filed July 7, 2009). 

71 See Press Release, FTC, Federal and State 

Agencies Target Mortgage Foreclosure Rescue and 

Loan Modification Scams (July 15, 2009), available 

at (http://www.ftc.gov/opa/2009/07/loanlies.shtm); 

Press Release, FTC, Federal and State Agencies 

Crack Down on Mortgage Modification and 

Foreclosure Rescue Scams (Apr. 6, 2009), available 

at (http://www.ftc.gov/opa/2009/04/hud.shtm). 

72 Press Release, FTC, Federal and State Agencies 

Target Mortgage Relief Scams (Nov. 24, 2009), 

available at (http://www.ftc.gov/opa/2009/11/ 

stolenhope.shtm). 

73 Press Release, FTC, Federal and State Agencies 

Target Mortgage Foreclosure Rescue and Loan 

Modification Scams (July 15, 2009), available at 

(http://www.ftc.gov/opa/2009/07/loanlies.shtm). 

74 Press Release, FTC, Federal and State Agencies 

Crack Down on Mortgage Modification and 

Foreclosure Rescue Scams (Apr. 6, 2009), available 

at (http://www.ftc.gov/opa/2009/04/hud.shtm). In 

connection with these joint efforts, the Commission 

also sent warning letters to 71 companies for 

marketing potentially deceptive mortgage loan 

modification and foreclosure assistance programs. 

Id. 

75 NAAG at 4; see also IL AG at 1 (noting that 

Illinois has over 240 open investigations of MARS 

providers and filed 28 lawsuits against them). 

76 To date, at least 29 states and the District of 

Columbia have enacted such statutes or regulations. 

See, e.g., Cal. Civ. Code §§ 2944.7 & 2945, et seq.; 

Colo. Rev. Stat. § 6-1-1101, et seq.; 2009 Conn. Gen. 

Stat. § 36a-489; 6 Del. Code Ann. § 2400B, et seq.; 

D.C. Code § 42-2431, et seq.; Fla. Stat. § 501.1377; 

Haw. Rev. Stat. § 480E-1, et seq.; Idaho Code Ann. 

§ 45-1601, et seq.; 765 Ill. Comp. Stat. Ann. 940/1, 

et seq.; 24 Ind. Admin. Code § 5.5-1-1, et seq.; Iowa 

Code § 741E.1, et seq.; Me. Rev. Stat. Ann. tit. 32, 

§§ 6171, et seq. & 6191, et seq.; Md. Code Ann., Real 

Property § 7-301, et seq.; 940 Mass. Code Regs. 

§ 25.01, et seq.; Mich. Comp. Law § 445.1822, et 

seq.; Minn. Stat. § 325N.01, et seq.; Mo. Rev. Stat. 

§ 407.935, et seq.; Neb. Rev. Stat. § 76-2701, et seq.; 

Nev. Rev. Stat. § 645F.300, et seq.; N.H. Rev. Stat. 

Ann. § 479-B:1, et seq.; N.Y. Real Prop. Law § 265- 

b; N.C. Gen. Stat. § 14-423, et seq.; 2008 Or. Laws 

Ch. 19; R.I. Gen. Laws § 5-79-1, et seq.; Tenn. Code 

Ann. § 47-18-5501, et seq.; Va. Code Ann. § 59.1- 

200.1; Wash. Rev. Code § 19.134.010, et seq.; Wis. 

Stat. § 846.45. 

attorneys are employed at the company 

or, even if there are, they do little or no 

legal work for consumers.67 The 

Commission’s law enforcement 

experience, state law enforcement, the 

comments received in response to the 

ANPR, and state bar actions indicate 

that a growing number of attorneys 

themselves are engaged in deceptive 

and unfair practices in the marketing 

and sale of MARS.68

C. Continued Law Enforcement and 

Other Responses 

The Commission has taken aggressive 

action to protect consumers from 

deceptive MARS providers. As part of 

that effort, the FTC has filed 28 

lawsuits69 in the last two years against 

entities in this industry for engaging in 

deceptive practices in violation of the 

FTC Act and, in several instances, the 

Commission’s Telemarketing Sales Rule 

(TSR).70 The FTC has coordinated with 

state law enforcement and federal 

agencies, including the Department of 

Justice, the Department of Housing and 

Urban Development (HUD), the 

Treasury Department, and the Office of 

the Special Inspector General for the 

Troubled Asset Relief Program (SIGTARP), in these efforts.71 For example, 

the FTC has conducted two nationwide 

sweeps: ‘‘Operation Stolen Hope’’ 

(November 24, 2009), in which the 

Commission joined with 20 states 

collectively to file over one hundred 

lawsuits against MARS providers,72 and 

‘‘Operation Loan Lies’’ (July 15, 2009), in 

which the FTC coordinated with 25 

federal and state agencies to bring 189 

actions against MARS defendants.73

Previously, the Commission, jointly 

with the Justice Department, the 

Treasury Department, HUD, and the 

Illinois Attorney General’s office, had 

announced several law enforcement 

actions.74

In addition to coordination with the 

Commission, the states have continued 

to engage in their own aggressive law 

enforcement. For example, the National 

Association of Attorneys General 

(NAAG) reports that, as of July 2009, its 

members had investigated 450 MARS 

providers and sued hundreds of them 

for alleged state law violations.75 The 

states also have continued to enact laws 

and regulations to address practices 

related to MARS.76

III. Discussion of the Proposed Rule 

A. Section 322.1: Scope 

As detailed in Section I, the scope of 

this rulemaking is set forth in the 

Omnibus Appropriations Act, as 

clarified by the Credit CARD Act. These 

statutes direct the Commission to 

commence a rulemaking proceeding to 

enact rules ‘‘related to unfair or 

deceptive acts or practices’’ that address, 

among other things, mortgage assistance 

relief services. As noted earlier, the 

Commission interprets this language to 

allow it to issue rules that not only 

restrict practices that are themselves 

unfair or deceptive, but also to restrict 

other practices that may not themselves 

be unfair or deceptive but the restriction 

of which is reasonably related to the 

goal of preventing unfairness or 

deception. The Commission’s 

rulemaking authority is limited by the 

Credit CARD Act to persons over whom 

the FTC has enforcement power under 

the FTC Act. 

B. Section 322.2: Definitions 

1. Section 322.2(h): Mortgage Assistance 

Relief Service 

As discussed, the proposed Rule is 

intended to regulate for-profit providers 

of mortgage assistance relief services. 

The controlling definition of the 

proposed Rule, which informs the 

parameters of its scope, is that of 

‘‘mortgage assistance relief service.’’ 

Proposed § 322.2(h) defines ‘‘mortgage 

assistance relief service’’ to include ‘‘any 

service, plan or program, offered or 

provided in exchange for consideration 

on behalf of the consumer, that is 

represented, expressly or by 

implication, to assist or attempt to assist 

the consumer’’ negotiate a modification 

of any term of a loan or obtain other 

types of relief to avoid delinquency or 

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77 In some states, mortgagors have the right to 

‘‘redeem,’’ i.e., regain possession of, a property for 

a period of time following foreclosure. 

78 See supra note 35; see also NAAG at 2. 

79 See supra note 76. For example, some laws 

mandate that before doing a title transfer the 

foreclosure rescue operator must verify that the 

consumer can reasonably afford to repurchase the 

home. See, e.g., Minn. Stat. § 325N.17(a)(1). 

80 See NAAG at 11-12 (‘‘We have already seen 

complaints in which mortgage brokers charge 

consumers for mortgage consulting services and 

then failed to provide services or provided fewer 

services that originally promised. The trend of 

mortgage brokers providing services is likely to 

continue, especially if the market for mortgage loan 

origination remains soft.’’). 

81 Mortgage brokers typically are paid by the 

lender, and sometimes the borrower, from the 

closing costs of the loan transaction. See, e.g., 

National Association of Mortgage Brokers FAQs, 

available at (http://www.namb.org/namb/ 

FAQs1.asp?SnID=498395277); see also NAAG at 12 

(noting that brokers ‘‘are traditionally paid. . . at the 

closing of a consumer’s loan, after all services have 

been provided’’); NCLC at 29 (‘‘[B]rokers are 

normally paid only when a sale or mortgage 

transaction is completed.’’). 

82 Consumers who otherwise would not consider 

themselves eligible to refinance their mortgage 

might have a different perspective because 

publicized government programs such as the MHA 

program offer consumers the opportunity to 

refinance at lower interest rates, even though they 

are delinquent or owe more than what the home is 

worth. 

83 ‘‘Consumer’’ is broadly defined to include ‘‘any 

natural person who owes on any loan secured by 

a dwelling.’’ Proposed § 322.2(b). The Commission 

intends to cover consumers at every stage of the 

process, and does not limit the proposed Rule to 

those who are in default or foreclosure. 

Commenters observed that many consumers seek 

assistance from MARS providers before they are 

delinquent on their loans. See CMC at 8 (‘‘Many of 

the abuses that servicers have encountered have 

occurred before the consumer has received a notice 

of default. MARS providers sometimes solicit 

customers who are not in default but who live in 

areas with high numbers of distressed borrowers. 

Any rule should apply to MARS providers at any 

stage of the process.’’); CFA at 4 (‘‘Many 

homeowners have sought help from MARS before 

entering default, though sometimes the MARS then 

encourages a default. . . . The mortgage servicing 

industry and others have urged homeowners to seek 

help before they go into default.’’); NCRC at 2 

(noting that there are ‘‘[c]ompanies claiming to offer 

assistance with loan modifications, to consumers 

who may or may not be in default’’); see also NAAG 

at 11 (‘‘The [state] requirement that consumers be 

in default before statutory protections begin made 

sense when mortgage consultants solicited business 

based on foreclosure filings, as those consumers 

would necessarily be in default. Mortgage 

consultants are now able to mine public 

information to target consumers who are not yet in 

default. Consultants may rely on an internet 

presence to draw in consumers who may also not 

be in default. As consumers have grown more 

concerned about the state of the economy, these 

solicitations are proving increasingly attractive. 

Based on these reasons, a rule should provide as 

much coverage for consumers as possible.’’). 

84 Proposed § 322.2(d). The definition for 

dwelling is based on that used in Regulation Z, 12 

CFR 226, which implements the Truth in Lending 

Act, 15 USC 1601 et seq. 12 CFR 226.2(a)(19) 

(2009). 

85 This language is derived from Regulation Z. 

See 12 CFR at 226.2(a)(12) (definition of ‘‘consumer 

credit’’). 

foreclosure. Proposed § 322.2(h)(2) 

provides that the term ‘‘mortgage 

assistance relief services’’ includes any 

service marketed to ‘‘stop[], prevent[], or 

postpone[] any (i) mortgage or deed of 

trust foreclosure sale for a dwelling or 

(ii) repossession of the consumers’ 

dwelling; or otherwise save the 

consumer’s home from foreclosure or 

repossession.’’ Proposed §§ 322.2(h)(3)- 

(7) further define these services to 

include offers purported to assist 

consumers in obtaining: (1) a 

forbearance or repayment plan; (2) an 

extension of time to cure default, 

reinstate a loan, or redeem a property;77

(3) a waiver of an acceleration clause or 

balloon payment; and (4) a short sale, 

deed-in-lieu of foreclosure, or any other 

disposition of the property except a sale 

to a third-party that is not the loan 

holder. Accordingly, proposed 

§ 322.2(h) is intended to apply to every 

solution that may be marketed by 

covered providers to financially 

distressed consumers as a means to 

avoid foreclosure or save their homes. 

One example of this coverage is the 

marketing of sale-leaseback or titlereconveyance transactions, which 

commonly are touted to consumers as a 

means to avert foreclosure or its 

consequences.78 As a general matter, the 

FTC does not intend the proposed Rule 

to address how title-transfer 

transactions are regulated. The 

Commission recognizes that there are 

many comprehensive state laws that 

govern these types of transactions and 

impose specific requirements when title 

transfers occur.79 To the extent saleleaseback and title-reconveyance 

transactions are marketed as a means to 

avoid foreclosure, however, these 

purported services would be covered by 

the proposed Rule. The Commission 

specifically solicits comment on how 

the proposed Rule should apply to these 

types of transactions, especially in light 

of existing state laws. 

As a general matter, mortgage brokers 

are covered by the proposed Rule to the 

extent that they market ‘‘mortgage 

assistance relief services.’’80 The 

Commission does not intend the 

proposed Rule to apply to bona fide 

loan origination or refinancing services 

that mortgage brokers frequently offer. 

To obtain a new loan or refinance an 

existing loan, consumers can work 

either with the lender directly or with 

a mortgage broker who acts as an 

intermediary between the consumer and 

lender. Mortgage brokers can provide 

the benefit of offering consumers a 

wider choice of loan products from 

different lenders, without consumers 

having to deal with each lender 

separately.81 Homeowners who are 

delinquent on their loans may be among 

the consumers whom mortgage brokers 

assist by helping them refinance their 

loans. 

The Commission is mindful that 

consumers at risk of foreclosure could 

benefit from assistance in refinancing, 

and does not wish the proposed Rule to 

reduce the availability of legitimate 

services of this kind. At the same time, 

the Commission is concerned that 

services purported to help consumers 

obtain refinancing could be marketed 

deceptively as a means to avoid 

foreclosure.82 Mortgage brokers or 

others could deceive consumers into 

paying large, up-front fees for loan 

origination or refinancing services based 

on false promises that consumers will 

be able to save their homes. Thus, the 

Commission solicits comment on how 

the proposed Rule should treat offers 

from mortgage brokers to work with 

lenders to negotiate new loans or 

refinance existing loans. 

Finally, mortgage assistance relief 

services are limited to services that are 

marketed to consumers83 who owe on 

loans secured by a ‘‘dwelling’’ or 

residence. A ‘‘dwelling’’ is defined to be 

a residential structure containing four or 

fewer units, whether or not it is attached 

to real property. The term dwelling also 

includes individual condominium 

units, cooperative units, mobile homes, 

or trailers.84 On the other hand, the 

proposed Rule is not intended to cover 

MARS offered to borrowers whose loans 

are secured by commercial properties. 

The definition of ‘‘dwelling’’ applies 

only to residences that are ‘‘primarily for 

personal, family, or household 

purposes.’’85 Based on its law 

enforcement experience, the 

Commission believes that there are 

consumers who may own a second 

home or a rental property and seek help 

to avoid foreclosure on these properties. 

Therefore, the Commission intends the 

proposed Rule to apply to mortgage 

assistance relief services marketed to 

these consumers. 

2. Section 322.2(c): ‘‘Clear and 

Prominent’’ 

The proposed Rule mandates that 

disclosures be made with clarity and 

prominence in various types of media. 

As discussed in more detail in Section 

III.D, the proposed disclosures are 

intended to prevent deception and 

allow consumers to make purchasing 

decisions about mortgage assistance 

relief services based on truthful 

information. The proposed Rule sets 

forth general requirements to ensure 

that the disclosures made in commercial 

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86 As defined in the proposed Rule, ‘‘commercial 

communication’’ is intended to include any written 

or verbal statement, illustration, or other depiction 

used to induce the purchase of goods or services. 

See Proposed § 322.2(a). 

87 Where possible, in formulating the 

requirements of the proposed Rule, the Commission 

has drawn from comparable FTC rules requiring 

clear and prominent disclosures. See Disclosure 

Requirements and Prohibitions Concerning 

Franchising, 16 CFR 436.6 (2007) (Franchise Rule); 

Disclosure Requirements and Prohibitions 

Concerning Business Opportunities, 16 CFR 437.1 

(2007) (Business Opportunity Rule); Regulations 

Under Section 4 of the Fair Packaging and Labeling 

Act, 16 CFR 500.4 (1994) (Fair Packaging and 

Labeling Act Regulations); Trade Regulation 

Pursuant to the Telephone Disclosure and Dispute 

Resolution Act of 1992, 16 CFR 308.2 (1993) (900 

Rule); Rule Concerning Cooling-Off Period for Sales 

Made at Home or at Certain Other Locations, 16 

CFR 429.1 (1988) (Door-to-Door Sales Rule). The 

disclosure requirements also are consistent with 

those in many FTC orders. See, e.g., Sears Holding 

Mgmt. Co., Docket No. C-4264, File No. 082-3099 

(FTC Sept. 9, 2009), available at (http:// 

www.ftc.gov/os/caselist/0823099/ 

090604searsdo.pdf). 

88 See 900 Rule, 16 CFR 308.3(a)(5); Franchise 

Rule, 16 CFR 436.9(a); Business Opportunity Rule, 

16 CFR 437.1(a)(21) (prohibits making any oral, 

visual, or written representation that contradicts the 

information required to be disclosed by the Rule). 

89 See, e.g., Tender Corp., Docket No. C-4261, File 

No. 082-3188 (FTC July 17, 2009), available at 

(http://www.ftc.gov/os/caselist/0823188/ 

090717tenderdo.pdf) (stating that disclosures must 

appear ‘‘in print that contrasts with the background 

against which it appears’’); Budget Rent-A-CarSystem, Inc., Docket No.C-4212, File No. 062-3042 

(FTC Jan. 4, 2008), available at (http://www.ftc.gov/ 

os/caselist/0623042/080104do.pdf) (same); see also 

FTC, Dot Com Disclosures: Information about 

Online Advertising 12 (2000), available at (http:// 

www.ftc.gov/bcp/edu/pubs/business/ecommerce/ 

bus41.pdf) (‘‘Dot Com Disclosures’’) (‘‘A disclosure 

in a color that contrasts with the background 

emphasizes the text of the disclosure and makes it 

more noticeable. Information in a color that blends 

in with the background of the advertisement is 

likely to be missed.’’). 

90 See, e.g., 900 Rule, 16 CFR 308.3(a)(1). If the 

ad has substantial material in more than one 

language, the proposed MARS Rule requires that 

the disclosure be delivered in each such language. 

Proposed § 322.2(c)(1). 

91 See, e.g., Swisher Int’l, Inc., Docket No. C-3964, 

File No. 002-3199 (FTC Aug. 25, 2000), available at 

(http://www.ftc.gov/os/2000/08/swisherdo.htm) 

(finding that warnings for cigars must appear 

‘‘parallel. . . to the base of the. . . advertisement’’); Fair 

Packaging and Labeling Act Regulations, 16 CFR 

500.4(b) (requiring that identification for packaged 

goods must appear ‘‘in lines generally parallel to the 

base on which the packaging or commodity rests as 

it is designed to be displayed’’). 

92 There are additional and qualifying 

requirements for disclosures mandated in 

§§ 322.4(b) and (c) of the proposed Rule. 

93 See 900 Rule, 16 CFR 308. 

94 See, e.g., Sears Holding, Docket No. C-4264 

(stating that audio disclosures must be made ‘‘in a 

volume and cadence sufficient for an ordinary 

consumer to hear and comprehend them’’); Darden 

Rests., Inc., Docket No. C-4189, File No. 062-3112 

(FTC May 11, 2009), available at (http:// 

www.ftc.gov/os/caselist/0623112/ 

070510do0623112c4189.pdf) (same); In re Kmart 

Corp., Docket No. C-4197, File No. 062-3112 (FTC 

Aug. 15, 2007), available at (http://www.ftc.gov/os/ 

caselist/0623088/0623088do.pdf) (same); In re 

Palm, Inc., Docket No. C-4044, File No. 002-3222 

(FTC Apr. 19, 2002), available at (http:// 

www.ftc.gov/os/caselist/0023332/index.shtm) 

(same); Dot Com Disclosures at 14 (explaining that 

audio disclosures should be ‘‘in a volume and 

cadence sufficient for a reasonable consumer to 

hear and comprehend it’’). 

95 Disclosures are more effective if they are made 

in both the visual and audio part of a consumer 

communication. See generally Maria Grubbs Hoy & 

J. Craig Andrews, Adherence of Prime-Time 

Televised Advertising Disclosures to the ‘‘Clear and 

Conspicuous’’ Standard: 1990 Versus 2002, 23 J. 

Mktg. Pub. Pol. 170 (2004) (stating that ‘‘dual 

modality’’ disclosures – oral and visual together – 

are more effective at communicating information to 

consumers); see also In re Kraft, Inc., 114 F.T.C. 40 

(1991), aff’d, 970 F.2d 311 (7th Cir. 1992) (finding 

that a visual disclosure alone was unlikely to be 

effective as a corrective measure in light of ‘‘the 

distracting visual and audio elements and the brief 

appearance of a complex superscript in the middle 

of the commercial’’). 

96 See Federal Election Commission Rules: 

Contributions and Expenditure Limitations and 

Prohibitions, 11 CFR 110.11(c)(3)(iii)(B)-(C) 

(statement concerning funding source for political 

ads ‘‘must appear in letters equal to or greater than 

four (4) percent of the vertical picture height’’ and 

‘‘be visible for a period of at least (4) four seconds’’). 

communications86 are sufficiently clear 

and prominent for consumers to notice 

and comprehend them.87 In all cases, 

disclosures are required to use syntax 

and wording that consumers easily can 

understand, and cannot be accompanied 

with statements that contradict or 

confuse their meaning.88 The proposed 

Rule intends to prevent MARS 

providers from undermining required 

disclosures with contradictory or 

obscuring information. In addition, as 

described below, there are clear and 

prominent requirements that are 

specific to the particular media in 

which disclosures appear. In the 

Commission’s view, the extensive 

record of deception in the MARS 

industry makes it necessary to articulate 

with specificity how MARS providers 

must make required disclosures to 

consumers. 

a. Written Disclosures 

Proposed § 322.2(c)(1) sets forth 

various requirements for disclosures 

disseminated in print or written form. 

This includes consumer 

communications that appear in print 

publications or on a computer screen. 

For such disclosures, the proposed Rule 

specifies that the disclosure must be in 

a color that readily contrasts with the 

background of the consumer 

communication,89 be in the same 

language predominant in the 

communication,90 and appear parallel 

to the base of the communication.91

Unless otherwise specified in the 

proposed Rule, the text size must be the 

larger of 12-point font or one-half the 

size of the largest letter or numeral of 

any company website or telephone 

number that is displayed in the 

consumer communication.92 If there is 

no website or telephone number 

displayed in a communication touting 

mortgage assistance relief services, the 

disclosures must be in at least 12-point 

type. The text-size requirements of the 

proposed Rule are comparable to those 

of the FTC’s Trade Regulation Rule 

Pursuant to the Telephone Disclosure 

and Dispute Resolution Act of 1992 

(‘‘900 Number Rule’’), except for the 12- 

point type default.93

b. Audio Disclosures 

Proposed § 322.2(c)(2) addresses the 

use of disclosures in audio 

communications such as broadcast radio 

or streaming radio. The disclosure must 

be delivered in a slow and deliberate 

manner, at a reasonable volume, and at 

a slow enough pace to be heard and 

understood.94

c. Video Disclosures 

Proposed § 322.2(c)(3) imposes 

requirements for consumer 

communications disseminated through 

video means. This includes video 

communications that appear on 

television or are streamed over the 

Internet. As a threshold matter, these 

communications must be delivered in 

accordance with the requirements for 

written and audio disclosures in 

proposed §§ 322.2(c)(1) and (2). In 

addition, the communication must 

include a simultaneous audio and visual 

disclosure,95 the latter of which must be 

displayed for at least the duration of the 

oral disclosure and comprise four 

percent of the vertical picture height of 

the screen.96

d. Interactive Media 

Proposed § 322.2(c)(4) addresses how 

disclosures must be made in interactive 

media formats, such as software, the 

Internet, or mobile media. The 

disclosures must conform with the 

requirements for written, audio, and 

video disclosures set forth in other parts 

of the ‘‘clear and prominent’’ definition. 

In addition, the disclosure must appear 

on a separate landing page immediately 

prior to the consumer incurring a 

financial obligation, be visible to the 

consumer without the need to scroll 

down any page, and be at least twice the 

type size of any hyperlink to the 

company’s website. Further, the landing 

page cannot contain any information 

other than the disclosure statement. 

These requirements are intended to 

ensure that consumers see the 

information conveyed in the disclosures 

mandated by the proposed Rule at the 

time they are deciding whether to 

purchase a mortgage relief assistance 

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Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 10715 

97 See Dot Com Disclosures at 11 (explaining that 

disclosures are more likely to be effective if they are 

provided when the consumer is considering the 

purchase). 

98 See, e.g., Tom Espiner, Web Users Ignoring 

Security Certificate Warnings, CNET.com (July 28, 

2009), available at (http://news.cnet.com/8301- 

1009_3-10297264-83.html) (‘‘In an online study 

conducted among 409 participants, the [Carnegie 

Mellon University] researchers found that the 

majority of respondents would ignore [pop-up] 

warnings about an expired Secure Sockets Layer 

(SSL) certificate.’’). 

99 Section 308.3(a)(6) of the 900 Rule has a nearly 

identical requirement. 16 CFR 308.3(a)(6). 

100 The proposed Rule defines ‘‘dwelling loan 

holder’’ to mean ‘‘a person that holds a loan secured 

by a dwelling.’’ Proposed § 322.2(f). 

101 ‘‘Servicer’’ is defined in proposed § 322.2(j) as 

‘‘the person responsible for receiving any scheduled 

periodic payments from a consumer pursuant to the 

terms of any dwelling loan, including amounts for 

escrow accounts under Section 10 of the Real Estate 

Settlement Procedures Act (RESPA), 12 U.S.C. 

2609, and making the payments to the owner of the 

loan or other third parties of principal and interest 

and such other payments with respect to the 

amounts received from the borrower as may be 

required pursuant to the terms of the mortgage 

servicing loan documents or servicing contract.’’ 

This definition tracks that of the servicer definition 

in the Real Estate Settlement Procedures Act. See 

12 U.S.C. 2605(i). 

102 MARS ANPR, 74 FR at 26131. Note that the 

Commission is currently engaged in the MAP 

Rulemaking, which will address servicing practices. 

103 See, e.g., CMC at 5 (‘‘Servicers are increasingly 

turning to third-party service-providers to assist 

them in processing loan modifications and in other 

loss-mitigation activities.’’); ABA at 4-6; AFSA at 3, 

5; MBA at 4. 

104 See, e.g., David Lawder, Few US mortgage 

modifications made permanent, Reuters, available 

at (http://www.reuters.com/article/ 

idUSN1021463420091210) (Dec. 10, 2009) (referring 

to a company that ‘‘has been hired by some of the 

largest U.S. banks to assist in modification efforts’’). 

105 See, e.g., ABA at 6; AFSA at 3; HPC at 2; see 

also NAAG at 13 (‘‘We are unaware of any banks, 

thrifts or federal credit unions engaged in for-profit 

loan modification or foreclosure rescue services, 

aside from negotiating loan modifications for 

consumers whose loans they are servicing.’’); OH 

AG at 5. 

106 See, e.g., ABA at 5; AFSA 3-4; CMC at 4-5; 

MBA at 4; HPC at 2. 

107 See, e.g., MBA at 4. 

108 Further, application of the advance fee ban 

provision, discussed infra § III.E, to servicers could 

interfere with their primary business function, 

collecting and processing scheduled loan payments 

on behalf of lenders. See Proposed § 322.5. 

109 Note that proposed § 322.2(i) does not exempt 

agents of loan holders and servicers if they ‘‘claim, 

demand, charge, collect, or receive any money or 

other valuable consideration from the borrower for 

the agent’s benefit.’’ The limiting language ensures 

that MARS providers do not evade the Rule by 

styling themselves as ‘‘agents’’ of the lender or 

servicer. Thus, the exemption only applies to 

functions an agent undertakes on behalf of the 

lender or servicer but not on its own behalf. 

110 Section 5(a)(2) of the FTC Act states: ‘‘The 

Commission is hereby empowered and directed to 

prevent persons, partnerships, or 

corporations. . . from using unfair or deceptive acts 

or practices in or affecting commerce.’’ 15 U.S.C. 

45(a)(2). Section 4 of the Act defines ‘‘corporation’’ 

to include: ‘‘any company, trust, so-called 

Massachusetts trust, or association, incorporated or 

unincorporated, which is organized to carry on 

business for its own profit or that of its 

members. . . .’’ 15 U.S.C. 44 (emphasis added). 

111 These nonprofit services are described in 

more detail in Section II.C. of the ANPR. MARS 

ANPR, 74 FR 26135. 

112 See, e.g., AMA v. FTC, 638 F.2d 443 (2d Cir. 

1980), aff’d by equally divided Court, 455 U.S. 676 

(1982); FTC v. Ameridebt, Inc., 343 F. Supp. 2d 451 

(D. Md. 2004). 

service.97 Without the use of a separate 

landing page, the Commission is 

concerned that the disclosure could be 

presented in such a way that the 

consumer might not see it or would be 

distracted with competing messages. For 

example, consumers often close out 

pop-up screens without actually 

viewing them.98 The Commission seeks 

comment on whether use of a separate 

landing page is an effective method of 

conveying the required disclosures to 

consumers or whether another means 

should be used. 

e. Program-length media 

Proposed § 322.2(c)(6) requires that 

disclosures in program-length 

television, radio, and Internet-based 

advertisements for mortgage assistance 

relief services be presented at the 

beginning, near the middle, and at the 

end of the advertisement.99 Requiring 

that disclosures be delivered at different 

stages of the broadcast better ensures 

that consumers who tune in at various 

times will receive them. 

3. Section 322.2(i): ‘‘Mortgage Assistance 

Relief Service Provider’’ 

Under proposed § 322.2(i), any person 

who ‘‘provides, offers to provide, or 

arranges others to provide, any mortgage 

assistance relief service’’ is a ‘‘mortgage 

assistance relief provider’’ subject to the 

proposed Rule. Proposed §§ 322.2(i)(1) 

and (2), however, generally exclude loan 

holders,100 servicers,101 and the agents 

of such holders and servicers, from the 

definition of a MARS provider. In the 

ANPR, the Commission stated that this 

rulemaking would address ‘‘the 

practices of entities (other than 

mortgage servicers) who offer assistance 

to consumers in dealing with owners or 

servicers of their loans to modify them 

or avoid foreclosure.’’102 A number of 

the public comments expressed concern 

that servicers (who are bona fide 

intermediaries between the loan holder 

and the consumer) may offer loss 

mitigation services that fall within the 

scope of the proposed Rule.103 For 

example, a servicer may notify a 

consumer of her eligibility for a 

mortgage loan modification under the 

MHA Program and assist her in 

submitting the necessary paperwork. In 

addition, lenders and servicers may 

outsource these functions to other 

parties, especially given the current 

large number of consumers needing 

assistance.104

Commenters asserted that loan 

owners and servicers should be exempt 

from the proposed Rule for several 

reasons. First, servicers tend not to be 

engaged in the types of deceptive and 

unfair conduct described in the ANPR 

and this document, and are not likely to 

engage in such activities in the 

future.105 Second, servicers do not 

commonly charge significant up-front 

fees in exchange for working with 

consumers.106 Third, application of the 

proposed Rule to servicers could restrict 

or interfere with lenders’ and servicers’ 

efforts to inform consumers of loss 

mitigation options and handle their 

requests for relief.107 The Commission 

wishes to avoid discouraging 

foreclosure solutions that may be 

beneficial to consumers.108 Thus, the 

proposed Rule generally exempts loan 

holders and servicers and their 

agents.109 The Commission seeks 

comment on the exemption, including 

whether servicers have engaged in 

covered conduct that warrants 

encompassing them within the 

proposed Rule. 

Finally, § 322.2(e)(3) exempts 

nonprofit entities excluded from the 

FTC’s jurisdiction under the FTC Act.110

The Commission intends for this 

exemption to include bona fide 

nonprofit housing counselors presently 

offering mortgage assistance relief 

services.111 The FTC, however, does 

have jurisdiction over purported 

nonprofits that, in reality, operate for 

the profit of their members,112 and 

proposed § 322.2(e)(3) does not exempt 

these entities. 

C. Section 322.3: Prohibited 

Representations 

Proposed § 322.3 addresses deceptive 

or unfair representations that MARS 

providers commonly make in marketing 

their services. 

1. Section 322:3(a): Prohibited 

Statements 

Proposed § 322.3(a) prohibits MARS 

providers from instructing consumers to 

cease communicating with their lenders 

or servicers. As discussed above, if 

consumers comply with this instruction 

and stop communicating with their 

lenders and servicers, consumers may 

not discover that their MARS provider 

is doing little or nothing on their behalf, 

may never learn of concessions their 

lender or servicer is willing to make, or, 

worst of all, may never be informed that 

foreclosure is imminent. The 

Commission is not aware of any benefits 

to consumers or competition from 

MARS providers directing consumers to 

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113 In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 

164-66, 175-76 (1984). Information is ‘‘material’’ if 

it is ‘‘likely to affect a consumer’s choice of or 

conduct regarding a product.’’ Id. at 165. 

114 Id. at 182-83. 

115 The disclosure must be made in a manner that 

conforms with the definition of ‘‘clear and 

prominent’’ in proposed § 322.2(c). See supra 

§ III.B.2. 

116 As discussed in Section II.B, often MARS 

providers disseminate advertisements that instruct 

consumers to call a telephone number or contact an 

email address, and once consumers do so MARS 

providers begin to interact with them on an 

individual level. 

117 See, e.g., FTC v. Fed. Loan Modification Law 

Ctr., LLP, No. SACV09-401 CJC (MLGx) (C.D. Cal. 

filed Apr. 3, 2009) (false success rate claims and 

other deceptive claims often made during 

telemarketing calls with consumers); FTC v. Loss 

Mitigation Servs., Inc., No. SACV09-800 DOC (ANX) 

(C.D. Cal. filed July 13, 2009) (same). 

118 See supra note 56. 

119 An incidental benefit of requiring that MARS 

providers disclose total cost clearly and 

prominently is that such transparency may facilitate 

the efforts of consumers to comparison shop among 

MARS providers based on cost, which would be 

beneficial to consumers and competition. 

stop communicating with their lenders 

or servicers. Consumers cannot 

reasonably avoid the injury from this 

practice because many of them do not 

know of the potentially adverse 

consequences that could occur from 

ceasing such communications. Nor are 

there any countervailing benefits to 

consumers or competition from this 

practice. Accordingly, the Commission 

believes that it is an unfair practice for 

MARS providers to convey such an 

instruction to consumers. In addition, 

prohibiting this practice is reasonably 

related to the goal of preventing MARS 

providers from deceiving consumers by 

hiding from them the actions they have 

or have not taken on consumers’ behalf. 

2. Section 322.3(b): Prohibited 

Misrepresentations 

Proposed § 322.3(b) prohibits 

misrepresentations of any material 

aspect of any mortgage assistance relief 

service. Proposed §§ 322.3(b)(1)-(8) sets 

forth a non-exclusive list of specific 

aspects of a mortgage assistance relief 

service about which misrepresentations 

would violate the proposed Rule. These 

aspects include the likelihood and time 

to provide services or obtain results; the 

affiliation of the provider with public or 

private entities; payment and other 

obligations under existing mortgage 

loans; the MARS provider’s refund and 

cancellation policies; and the 

completion of promised services. This 

list tracks the types of false or 

misleading claims that the Commission 

and the states have challenged in law 

enforcement actions, as described 

above. 

A claim is ‘‘deceptive’’ under Section 

5 of the FTC Act if there is ‘‘a 

representation or omission of fact that is 

likely to mislead consumers acting 

reasonably under the circumstances, 

and that representation or omission is 

material.’’113 Misrepresentations of 

material fact are deceptive practices 

under Section 5. The aspects of MARS 

specified in §§ 323.3(b)(1)-(7) of the 

proposed Rule are material to 

consumers because they pertain to the 

cost, central characteristics, efficacy or 

other attributes of such services that are 

important to consumers.114 Thus, the 

misrepresentations proposed § 323.3(b) 

prohibits constitute deceptive practices 

under the FTC Act. 

D. Section 322.4: Required Disclosures 

Section 322.4 of the proposed Rule 

requires that MARS providers disclose 

information to consumers to assist them 

in making decisions about mortgage 

assistance relief services. First, 

proposed § 322.4(a) requires MARS 

providers to disclose clearly and 

prominently115 in all of their 

commercial communications with 

consumers that they are for-profit 

businesses not associated with the 

government, and that neither the 

government nor the lender has approved 

the MARS provider’s offer of services. 

The Commission intends for this 

disclosure to apply to all advertisements 

and other marketing materials directed 

at a general audience. 

In addition, proposed § 322.4(b) 

requires that MARS providers disclose 

in all commercial communications 

directed to specific consumers, clearly 

and prominently and prior to 

consummating any agreement with the 

consumer, that: (1) the provider is a forprofit business not associated with the 

government, and neither the 

government nor the consumer’s lender 

endorses its service; (2) the total amount 

consumers will have to pay to purchase, 

receive, and use the service; and (3) 

even if consumers buy the provider’s 

service, there is no guarantee that their 

lender will agree to change their loan 

terms. The Commission intends these 

three disclosures to be made in every 

promotional communication between 

the MARS provider and a specific 

consumer that occurs prior to such 

consumer incurring any financial 

obligations.116 The Commission believes 

it is appropriate to require the 

disclaimer disavowing any affiliation 

with the government or the consumer’s 

lender not only in general advertising, 

but in ensuing promotional 

communications with consumers as 

well. Otherwise, MARS providers could 

qualify or contradict this disclaimer 

during subsequent telemarketing calls or 

other communications with individual 

consumers, which the FTC’s 

enforcement experience indicates is 

common practice.117

First, as described above, there are 

many government, nonprofit, and forprofit programs operating in the 

marketplace that provide a wide array of 

mortgage assistance relief services. In 

addition, the Commission and state law 

enforcement officials have brought 

numerous law enforcement actions 

against MARS providers who have 

misrepresented their affiliation with a 

government agency, a lender, a servicer, 

or others in connection with offering 

mortgage assistance relief services. 

These providers have used a variety of 

techniques to create such 

misimpressions, including adopting 

trade names that resemble the names of 

legitimate government programs.118

Given the variety of entities that provide 

such services and the prevalence of 

these deceptive claims, the Commission 

believes that the requirement that 

MARS providers disclose their for-profit 

status and nonaffiliation with 

government or other programs is 

reasonably related to the goal of 

preventing deception. 

Second, the total cost of the mortgage 

assistance relief services is perhaps the 

most material information for 

consumers in making well-informed 

decisions whether to purchase those 

services. Requiring the clear and 

prominent disclosure of total cost 

information in every communication 

directed at a specific consumer prior to 

the consumer entering into an 

agreement makes it less likely that 

MARS providers will deceive 

prospective customers with incomplete, 

inaccurate, or confusing cost 

information.119 The Commission 

therefore believes that requiring MARS 

providers to disclose total cost 

information clearly and prominently is 

reasonably related to the prevention of 

deception. 

Third, in light of the history of 

deceptive success claims in this 

industry and the many widelypublicized government programs to help 

consumers seeking relief from lenders, 

consumers are likely to overestimate 

their abilities to obtain substantial loan 

modifications or other mortgage relief 

from MARS providers, even in the 

absence of specific misrepresentations 

of success. Therefore, the Commission 

believes that requiring MARS providers 

to disclose clearly and prominently in 

all commercial communications with 

prospective customers that their lenders 

may not agree to change their loan even 

if consumers purchase the services the 

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120 Supra notes 18-21. 

121 15 U.S.C. 45(n) (codifying the Commission’s 

unfairness analysis); see also In re Int’l Harvester 

Co., 104 F.T.C. 949, 1079, 1074 n.3 (1984), 

reprinting Letter from the FTC to Hon. Wendell 

Ford and Hon. John Danforth, Committee on 

Commerce, Science and Transportation, United 

States Senate, Commission Statement of Policy on 

the Scope of Consumer Unfairness Jurisdiction 

(Dec. 17, 1980). 

122 See, e.g., NCRC at 3 (‘‘The high costs of loan 

modification and foreclosure rescue services may 

also prevent financially stressed consumers from 

being able to pay their regular mortgage payment, 

if they buy into companies’ promises. If the 

company does not deliver, they may be unable to 

correct the delinquency for lack of these funds.’’); 

NAAG at 10 (‘‘Paying the fee upfront likely means 

that some of the consumer’s other bills will not be 

paid or that the consumer will have to use credit 

cards or funds from friends or family.’’); MN AG at 

2 (‘‘These advance fees often make it even more 

difficult for the homeowner – and the loan 

modification or foreclosure rescue consultant – to 

effectively resolve the homeowner’s financial 

dilemma.’’). 

123 See, e.g., Data Med. Capital, Inc., No. SA-CV99-1266 AHS (Eex), Rep. Temp. Receiver at 4 (C.D. 

Cal. filed June 19, 2009) (stating the defendants’ 

records show that they provided loan modifications 

to only 0.37% – 3/8ths of one percent – of their 

customers); see also, e.g., FTC v. US Foreclosure 

Relief Corp., No. SACV09-768 JVS (MGX), Prelim. 

Rep. Temp. Receiver at 2 (C.D. Cal. filed July 15, 

2009) (‘‘[O]n [defendants’] applications taken since 

November 2008, only 11% have resulted in closed 

modifications.’’); FTC v. LucasLawCenter ‘‘Inc.,’’ No. 

SACV-09-770 DOC (ANX), Mem. Supp. App. TRO 

at 19 (C.D. Cal. filed July 7, 2009) (‘‘Nearly every 

consumer who is promised a loan modification 

never received any offer to modify their home 

loans.’’); FTC v. Freedom Foreclosure Prevention 

Specialists, LLC, No. 2:09-cv-01167-FJM (D. Ariz. 

June 1, 2009) (alleging defendants only completed 

loan modifications for about 6% of consumers). 

124 As noted in Section II, since January 1, 2008, 

the Commission has filed twenty-eight actions 

against MARS providers for deceptive and other 

unlawful practices that typically resulted in their 

failure to provide the promised results. See 

Appendix B. 

125 See, e.g., NAAG at 4 (‘‘As of July 1, 2009, over 

450 companies are or have been investigated for 

providing foreclosure rescue services that violated 

state laws. Collectively, the states participating in 

the NAAG group have sued at least 130 of these 

companies.’’); id. at 6. 

126 See, e.g., NAAG at 3 (‘‘As of July 1, 2009, the 

Office of the Illinois Attorney General had 

identified roughly 170 companies operating in 

Illinois that appeared to have offered or were 

presently offering foreclosure rescue services that 

violated Illinois state laws. The majority of these 

companies take impermissible up-front fees and 

then fail to deliver promised services....’’); MN AG 

at 2 (‘‘As a general rule, these companies provide 

no service, or at most, simply submit paperwork to 

the homeowner’s mortgage company.’’); Chase at 1 

(‘‘Chase’s experience has been that MARS entities 

disrupt the loan modification process and provide 

little value in exchange for the high fees they 

charge.’’). 

127 NAAG at 6. 

128 See, e.g., each case in Appendix B. 

129 See, e.g., Manuel Adelino et al., Why Don’t 

Lenders Renegotiate More Home Mortgages? 

Redefaults, Self-Cures, and Securitization 3 (July 

2009), available at (http://www.bos.frb.org/ 

economic/ppdp/2009/ppdp0904.pdf) (finding that 

lender provided monthly payment-lowering 

modifications to only 3% of seriously delinquent 

loans in 2007and 2008); NCLC at 6 (pointing to 

‘‘[o]ne analysis of statistics for modifications made 

Continued 

MARS provider offers is reasonably 

related to preventing deception. 

The Commission has not conducted 

any empirical research into whether the 

disclosures that are specified in the 

proposed Rule would be an effective 

means of conveying information about 

the status, cost, and limitations of 

MARS. The Commission intends to 

study the effectiveness of any proposed 

disclosures in preventing consumer 

deception. To aid its analysis, the 

Commission seeks comment and data 

bearing on the costs and benefits of the 

disclosure requirements articulated in 

the proposed Rule. 

E. Section 322.5: Prohibition on 

Collection of Advance Fees 

The Commission proposes to ban 

MARS providers from requiring that 

consumers pay in advance for their 

services, i.e., prior to the provider doing 

or accomplishing what it promised. This 

remedy is justified on two independent 

grounds: (1) that the collection of 

advance fees by MARS providers is an 

unfair act or practice and (2) that the 

prohibition is reasonably related to the 

goal of preventing deception. It is also 

strongly supported by the public 

comments submitted by law enforcers, 

consumer groups, and financial service 

businesses.120

1. Advance Payments as an Unfair Act 

or Practice 

Under Section 5(n) of the FTC Act, an 

act or practice is unfair if: (1) it causes 

or is likely to cause substantial injury to 

consumers; (2) that injury is not 

outweighed by countervailing benefits 

to consumers or competition; and (3) the 

injury is not reasonably avoidable by 

consumers themselves.121 Section 5(n) 

also provides that the Commission may 

consider established public policies in 

determining whether an act or practice 

causes substantial injury, but may not 

use such policies as a primary basis for 

determining that an act or practice is 

unfair. The Commission believes that 

requiring that consumers pay advance 

fees for mortgage assistance relief 

services meets the standard for an unfair 

practice under Section 5(n) of the FTC 

Act, a conclusion that is supported by 

established public policies already 

incorporated into federal and state laws. 

a. Substantial Injury to Consumers 

The comments received and the 

Commission’s law enforcement 

experience support the conclusion that 

MARS providers generally do not 

achieve the results that they cause 

consumers to expect, yet retain the 

money they collect in advance fees; 

thus, allowing providers to collect their 

fees in advance of achieving those 

results causes or is likely to cause 

substantial injury to consumers. 

Consumers pay up-front fees for 

mortgage assistance relief services in 

amounts that range from hundreds to 

thousands of dollars – fees that many 

consumers in financial distress find 

difficult to pay.122 Yet, few MARS 

providers perform the services or 

deliver the results they promise.123 Law 

enforcement, both at the federal124 and 

state levels,125 as well as comments on 

the record of this proceeding,126

indicate that there is a widespread 

failure of MARS providers to perform 

promised services or achieve promised 

results. NAAG’s written comment, 

representing the views of state attorneys 

general who have monitored the activity 

of MARS providers throughout the 

country, details these failures in stark 

terms: 

In our experience, we have found that 

services provided by foreclosure 

rescue services companies result only 

in costs to consumers. There are no 

benefits. The companies collect an 

upfront fee that consumers can illafford to pay. Consumers then submit 

financial information to the 

companies and the companies 

promise to forward the information to 

the consumers’ loan servicers and 

obtain a loan modification offer. In 

the majority of cases, the companies 

do nothing with the consumers’ 

information. The consumers then end 

up turning to a non-profit for help, 

calling their servicers themselves, or 

falling further behind on their 

mortgage payments as they wait for 

the promised loan modification offer 

that never materializes.127

The marketplace does not appear to 

provide an adequate deterrent to MARS 

providers failing to perform on their 

contracts. MARS providers are often 

new entrants or ephemeral operations 

with little or no good will in their 

businesses and rarely provide repeat 

services to their customers. In these 

circumstances, the reputational harm 

from not providing promised services 

appears to provide little disincentive to 

nonperformance by MARS providers. 

Consumers are especially unlikely to 

obtain the claimed services or results if 

the MARS provider has promised to 

obtain a mortgage loan modification that 

lowers consumers’ monthly 

payments.128 Many consumers who seek 

mortgage assistance from MARS 

providers are not eligible for the 

mortgage loan modifications that 

various government programs offer.129

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in May 2009 [which] showed that only 12% 

reduced the interest rate or wrote-off fees or 

principal’’). 

130 Id.; see also, e.g., Alan M. White, 

Deleveraging the American Homeowner: The 

Failure of 2008 Voluntary Mortgage Contract 

Modifications, 41 Conn. L. Rev. 1107, 1111(2009) 

(arguing, inter alia, that ‘‘[n]o single servicer or 

group of servicer. . . has any incentive to organize a 

pause in foreclosures or organized deleveraging 

program to benefit the group’’). 

131 See supra notes 62-64. 

132 TNLMA at 5 (‘‘Nearly all professions, from 

attorneys to accountants to personal trainers, charge 

advance fees. . . . The reason these other professions 

charge fees ‘up-front’ is to avoid the risk of being 

‘stiffed’ at the end of a laboriously costly effort.’’). 

Relatedly, one commenter expressed concern that 

consumers could ‘‘game’’ a back-end fee model by 

rejecting the loan modification secured by the 

provider (in exchange for the fee) and then simply 

approaching the lender directly to obtain the very 

same modification for free. Id. 

133 See, e.g., Gutner at 1 (‘‘[L]oan modification is 

not as simple as filling out a few forms and then 

it is done. Loan modification is a long and involved 

process. . . . Loan modification companies have 

expenses just like any other company – payroll, 

lease, insurance, equipment etc.’’); TNLMA at 5 

(‘‘[MARS providers] incur significant costs before 

the consumer’s mortgage is ready to be modified.’’). 

134 In particular, the Commission seeks comment 

on the costs and benefits of allowing providers to 

request or require that consumers place advance 

fees in an independent third-party escrow or trust 

to eliminate the risk of nonpayment. 

135 See In re Int’l Harvester Co., 104 F.T.C. at 

1073 (Unfairness Policy Statement); In re Orkin 

Exterminating Co., Inc., 108 F.T.C. 263 at 366 

(1986), aff’d, FTC v. Orkin, 849 F.2d 1354 (11th Cir. 

1988). 

136 In re Orkin Exterminating Co., Inc., 108 F.T.C. 

at 374-75 (Oliver, Chm., concurring). 

137 Specifically, in its law enforcement actions, 

the Commission has not observed any MARS 

providers that did not charge up-front fees to 

consumers. See Appendix B. Additionally, none of 

the comments submitted in response to the ANPR 

cite any example of MARS providers employing a 

different fee model. 

138 See supra note 59. 

139 Even if a MARS provider gave refunds, 

consumers would have been deprived of the use of 

the money they paid for their advance fee for the 

period of time from when the contract was signed 

until the refund was provided. Financially 

distressed consumers facing the prospect of losing 

their homes suffer injury from being deprived of the 

use of hundreds or thousands of dollars during this 

critical period of time when they are trying to stay 

current on their mortgages and pay other expenses. 

Thus, a refund would not eliminate the injury from 

having to make advance payments. It is established 

law under Section 5 that offering a refund is not a 

defense to a charge that a marketer misrepresented 

its product or service. See, e.g., FTC v. Think 

Achievement Corp., 312 F.3d 259, 261-62 (7th Cir. 

2002); FTC v. Pantron I Corp., 33 F.3d 1088, 1103 

(9th Cir. 1994); In re Sears, Roebuck and Co., 95 

F.T.C. 406, 518 (1980), aff’d, 676 F.2d 385 (9th Cir. 

1982). 

Apart from these programs, lenders and 

servicers often are unwilling to modify 

the terms of mortgage loans or forgive 

fees and penalties as an alternative to 

foreclosure.130 Even if lenders and 

servicers might be amenable to a 

modification, many MARS providers do 

little or no work for their customers, 

neglecting to contact their lenders or 

servicers or failing to respond to their 

requests for basic information.131

b. Countervailing Benefits to Consumers 

and Competition 

In analyzing whether an act or 

practice is unfair, the Commission 

considers its benefits to consumers and 

competition in comparison to its harms. 

The comments received do not 

demonstrate that paying in advance for 

mortgage assistance relief services has 

any benefits to consumers. MARS 

providers, however, have argued 

generally that charging fees in advance 

is needed to protect them against the 

risks of nonpayment by consumers after 

delivery of the services.132 These 

providers point out that most consumers 

who purchase MARS are in financial 

distress, so they may not be willing or 

able to pay the amount owed, and that 

any judicial remedy against consumers 

for nonpayment is costly. MARS 

providers also argue that they require 

advance fees to pay their ongoing 

operating costs – e.g., for payroll, office 

space, and equipment – as well as the 

direct costs of seeking modifications for 

consumers, all of which they incur prior 

to obtaining the modifications.133 In 

short, MARS providers claim that it 

would be impossible or extremely 

difficult to provide mortgage assistance 

relief services if they could not charge 

advance fees, thus depriving consumers 

of the benefits of those services. 

The Commission concludes that the 

record to date does not show that 

charging advance fees provides a benefit 

to consumers. As discussed above, few 

MARS providers perform the services or 

obtain the results promised and, 

therefore, consumers who pay in 

advance typically get nothing in return 

for their payments. The FTC also 

concludes that the record to date does 

not demonstrate that charging advance 

fees benefits competition or the extent 

of any such benefits, much less that any 

benefits to competition exceed the 

harms to consumers from the payment 

of advance fees. Nothing in the record 

bears on the nature and extent of the 

costs, if any, to MARS providers if they 

cannot operate without charging 

advance fees, e.g., by capitalizing their 

business. For example, the record does 

not address whether MARS providers 

would be unable to recoup their costs 

relatively quickly – by achieving 

promised results for some consumers 

and collecting the associated fees – even 

if they were prohibited from charging 

advance fees. The information the 

Commission has received and reviewed 

also does not address the extent to 

which consumers would not pay the 

money they are obligated to pay once 

the services are rendered, or that there 

are no other means by which providers 

could protect themselves from the risk 

of nonpayment.134 The Commission 

seeks comment and data bearing on the 

costs to MARS providers if they cannot 

charge advance fees for MARS, and the 

extent to which these costs would 

prevent them from offering services to 

consumers. 

c. Reasonable Avoidability of Injury 

In considering whether an act or 

practice is unfair, the Commission also 

considers whether the harm from the 

practice is reasonably avoidable by 

consumers. Consumers can only 

reasonably avoid harm if they 

understand the risk of injury from an act 

or practice.135 Consumers also must 

have available to them an alternative 

means of avoiding the injury that is not 

unduly costly to them.136

There is nothing in the record that 

suggests consumers could reasonably 

avoid the substantial injury caused by 

having to pay advance fees for MARS. 

Consumers can avoid the injury only if 

they are aware of the risks of paying in 

advance. Especially in light of the 

prevalence of deception surrounding 

these services, consumers are unlikely 

to know of the substantial risk that the 

provider will not perform as promised. 

MARS providers also do not appear to 

compete on the basis of when fee 

collection takes place. Based on the 

current record, it appears that nearly all 

MARS providers charge up-front fees for 

their services.137 Thus, even if 

consumers were aware of the risk that 

MARS providers will not perform, as a 

practical matter they might not have the 

option of protecting themselves by 

choosing a provider that charges only 

after services are rendered. At the very 

least, the search costs in identifying 

such providers would pose a significant 

deterrent for consumers in financial 

distress. Thus, consumers who seek 

mortgage assistance relief services 

cannot reasonably avoid the substantial 

harm associated with being charged an 

advance fee for those services. 

In addition, consumers who have paid 

in advance, only to discover that the 

providers have not provided the 

promised services or result, typically 

cannot mitigate their harm by seeking a 

refund. Most MARS providers do not 

provide refunds to consumers;138

indeed, providers commonly make false 

claims about the availability of 

refunds.139 Ultimately, many consumers 

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140 See, e.g., Door-to-Door Sales Rule Statement 

of Basis and Purpose, 40 FR at 53523 (‘‘Consumers 

are clearly injured by a system which forces them 

to bear the full risk and burden of sales related 

abuses. There can be little commercial justification 

for such a system.’’). 

141 In re Orkin Exterminating Co., 108 F.T.C. 263 

at 374-75 (Oliver, Chmn., concurring) (suing for 

breach of contract is not a reasonable means for 

consumers to avoid injury). 

142 See Telemarketing Sales Rule Statement of 

Basis and Purpose, 68 FR 4580, 4614 (Jan. 29, 2003) 

(TSR Statement of Basis and Purpose). 

143 See 16 CFR 310.4(a). Note that, although the 

TSR declares the charging of advance fees in this 

context to be ‘‘abusive’’ – the term used in the 

Telemarketing Act – the Commission used the 

unfairness analysis set forth in Section 5(n) of the 

FTC Act to support this declaration. See TSR: 

Notice of Proposed Rulemaking, 67 FR 4492, 4511 

(Jan. 30, 2002). 

144 See supra note 76. 

145 See NAAG at 9; MN AG at 4; MA AG at 2; 

OH AG at 3. 

146 The Commission exercises similar discretion 

in crafting orders to resolve law violations. Cf. FTC 

v. National Lead Co., 352 U.S. 419, 428 (1957) 

(‘‘[T]he Commission is clothed with wide discretion 

in determining the type of order that is necessary 

to bring an end to the unfair practices found to 

exist.’’); FTC v. Ruberoid, 343 U.S. 470, 473 (1952) 

(‘‘If the Commission is to attain the objectives 

Congress envisioned, it cannot be required to 

confine its road block to the narrow lane the 

transgressor has traveled; it must be allowed 

effectively to close all roads to the prohibited goal, 

so that its order may not be by-passed with 

impunity.’’); Jacob Seigel Co. v. FTC, 327 U.S. 608, 

611-12 (1946) (‘‘The Commission has wide 

discretion in its choice of a remedy deemed 

adequate to cope with the unlawful practices in this 

area of trade and commerce.’’). 

147 See supra notes 123-26. 

148 See, e.g., NAAG at 10 (‘‘The risk of not 

receiving payment provides the strongest possible 

incentive for mortgage consultants to promptly and 

adequately provide all promised services. Plus, if 

the consultant provides good services and the 

consumer obtains an affordable loan modification, 

the consumer should be in a better position 

financially to pay the consultant.’’); id. at 11 (‘‘The 

incentives created for fraudulent companies to enter 

into this industry by allowing payment of advance 

fees cannot be mitigated through disclosures. The 

only way to ensure that companies are actually 

working for consumers is to require them to 

produce results before the consumers make 

payment.’’); NCLC at 5, 8 (‘‘Requiring these 

companies to obtain the promised loan 

modification as a condition of being paid will 

substantially reduce their incentive for making false 

or inflated promises of foreclosure assistance.’’); MN 

AG at 4 (‘‘A prohibition on up-front fees also 

provides the strongest incentive for loan 

modification and foreclosure rescue companies to 

provide adequate services....’’). 

149 Although the proposed Rule prohibits 

deceptive representations and mandates certain 

disclosures, there is no assurance that these 

remedies would be effective in every case, or that 

all providers will abide by them. An advance fee 

ban thus also may be needed to prevent deception. 

The Commission in the TSR prohibited the 

collection of advance fees from credit repair 

services, money recovery services, and guaranteed 

loans or other extensions of credit even though the 

Rule also banned deceptive claims and required 

disclosures in marketing those products and 

services. See TSR, 16 CFR 310.1, et seq.; TSR 

Statement of Basis and Purpose, 68 FR 4580. 

of mortgage assistance services are never 

able to recover the amount of the 

advance payment they made to a MARS 

provider who neither performed 

promised services nor delivered 

promised results.140

Having paid in advance and not 

received a refund, the only remaining 

recourse consumers would have for a 

nonperforming MARS provider is to file 

a lawsuit for breach of contract, hardly 

a viable option for financially-distressed 

consumers who might be facing 

imminent foreclosure.141 Many 

consumers who are in financial distress 

are not sophisticated in legal matters 

and may not be aware that filing an 

action against the MARS provider for 

breach of contract is available as an 

alternative. More significantly, the cost 

of litigating makes it impossible or 

impractical for many consumers to seek 

legal recourse. Thus, the possibility of 

taking legal action does not sufficiently 

mitigate the harm to consumers from 

paying an advance fee. 

Based on the forgoing analysis, the 

Commission believes that charging an 

advance fee for mortgage assistance 

relief services is an unfair practice. The 

Commission reached the same 

conclusion in its TSR with respect to 

the charging of an advance fee for credit 

repair services, money recovery 

services, and guaranteed loans or other 

extensions of credit.142 As is true in this 

proceeding, the Commission found in 

the TSR proceeding that companies 

selling those products or services 

routinely misrepresented the services 

they would perform or the results they 

would achieve, and that consumers 

paying advance fees would incur all of 

the risk of nonperformance. The TSR 

therefore prohibits telemarketers of such 

products or services from charging an 

advance fee.143

d. Public Policy Concerning Advance 

Fees 

Section 5(n) of the FTC Act permits 

the Commission to consider established 

public policies in determining whether 

an act or practice is unfair, although 

those policies cannot be the primary 

basis for that determination. There are 

strong public policies against charging 

advance fees for MARS as shown by the 

20 or more state laws that prohibit this 

practice because of its adverse effect on 

consumers.144 Consistent with these 

statutes and their law enforcement 

experience, 46 states filed comments 

strongly advocating that the 

Commission issue a rule that prohibit 

the charging of advance fees for 

MARS.145 The Commission believes that 

these state laws provide further support 

for its finding that this practice is unfair. 

2. The Advance Fee Ban to Help Prevent 

Deception 

As a second basis for imposing an 

advance fee ban, the Commission 

believes that such a ban is reasonably 

related to the goal of protecting 

consumers from widespread deception 

in the offering of MARS. The 

Commission has authority not only to 

prohibit conduct that is itself unlawful, 

but also may impose additional relief 

that is reasonably related to restraining 

unlawful conduct.146

As detailed in Section II of this 

document, MARS providers commonly 

make claims as to the services they will 

provide or the results they will obtain. 

These claims induce consumers to pay 

up-front fees of hundreds or thousands 

of dollars for services and results the 

providers typically do not deliver. 

Because the likelihood of consumers 

pursuing judicial remedies against 

nonperformance is small, MARS 

providers have little incentive to 

perform, and in fact many do not.147

The advance fee ban proposed in § 322.5 

realigns the incentives of the MARS 

provider to deliver on its promises 

because it will not be paid until it does 

so.148 Thus, the ban would help to 

prevent the deceptive performance 

claims providers frequently make.149

3. The Ban on Advance Payments in the 

Proposed Rule 

Section 322.5(a) of the proposed Rule 

provides that: 

It is a violation of this rule for any 

mortgage assistance relief service 

provider to request or receive 

payment of any fee or other 

consideration until the provider has: 

(1) [a]chieved all of the results that: (i) 

[t]he provider represented, expressly 

or by implication, to the consumer 

that the service would achieve, and 

(ii) [a]re consistent with consumers’ 

reasonable expectations about the 

service and (2) [p]rovided the 

consumer with documentation of 

such achieved results. . . . 

The Commission intends for this 

provision to prevent a MARS provider 

from requesting or receiving any fees or 

any other form of compensation, 

including an equity stake in consumers’ 

property, until it achieves the results 

that its claims cause consumers to 

expect or that consumers reasonably 

expect given the type of service sold. 

Thus, the performance that MARS 

providers must complete before 

collecting fees is those results that are 

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150 See Kraft, Inc., 114 F.T.C. 40, 120 (1991), aff’d, 

970 F.2d 311 (7th Cir. 1992). 

151 See Fedders Corp. v. FTC, 529 F.2d 1398, 

1402-03 (2d Cir.). 

152 See Cliffdale Assocs., 103 F.T.C. at 179 & n.32 

(Deception Policy Statement). 

153 Id. at 180-81 (‘‘Written disclosures or fine 

print may be insufficient to correct a misleading 

representation. . . . Oral statements, label disclosures 

or point-of-sale material will not necessarily correct 

a deceptive representation or omission. Thus, when 

the first contact between a seller and a buyer occurs 

through a deceptive practice, the law may be 

violated even if the truth is subsequently made 

known to the purchaser. Pro forma statements or 

disclaimers may not cure otherwise deceptive 

messages or practices.’’). To be effective, disclosures 

must be clear and conspicuous. See, e.g., Thompson 

Med. Co. v. FTC, 104 F.T.C. 648 (1984), aff’d, 791 

F.2d 189 (D.C. Cir. 1986); United States v. Bayer 

Corp., No. CV-00-132 (D.N.J. Jan. 11, 2000) (consent 

decree). 

154 FTC v. Chrysler Corp., 561 F.2d 357 (D.C. Cir. 

1977); Feil v. FTC, 285 F.2d 879, 885-87 & n.19 (9th 

Cir. 1960); In re J.B. Williams, 68 F.T.C. 481, 542- 

43 (1965). 

155 For example, in a legitimate short sale, the 

property is sold for a price that is less than the debt 

owed on the mortgage, but the lender agrees to take 

this lesser amount as full satisfaction of the debt. 

A short sale is intended to result in less damage to 

a consumer’s credit rating than a foreclosure. Some 

purported ‘‘short sales’’ are detrimental to 

consumers, however. See, e.g., NCLC at 17-18 

(expressing concern about ‘‘short sale’’ scams). Some 

MARS providers that purportedly help the 

consumer to sell the property ‘‘short’’ conceal the 

actual sale price amount from the lender, leaving 

the consumer liable for the difference and owing 

taxes on a larger forgiven balance than necessary. 

This would not be considered a beneficial result for 

the consumer, and thus the MARS provider could 

not collect a fee for it. 

156 An efficacy claim conveys to consumers that 

the result or benefit will be meaningful and not de 

minimis. See P. Lorillard Co. v. FTC, 186 F.2d 52, 

57 (4th Cir. 1950) (challenging advertising that 

claimed that the cigarette was lowest in nicotine, tar 

and resins in part because the difference was, in 

fact, insignificant); Sun Co., 115 F.T.C. 560 (1992) 

(challenging advertising for octane gasoline that 

represented gas would provide superior power that 

would be significant to consumers); Guides 

Concerning the Use of Endorsements and 

Testimonials in Advertising, 16 CFR 255.2 (2009) 

(‘‘An advertisement containing an endorsement 

relating the experience of one or more consumers 

on a central or key attribute of the product or 

service also will likely be interpreted as 

representing that the endorser’s experience is 

representative of what consumers will generally 

achieve with the advertised product or service in 

actual, albeit variable, conditions of use.’’); Guides 

for the Use of Environmental Marketing Claims,16 

CFR 260.6(c) (1998) (‘‘Marketers should avoid 

implications of significant environmental benefits if 

the benefit is in fact negligible.’’); FTC Enforcement 

Policy Statement on Food Advertising, 59 FR 28388, 

28395 & n.96 (June 1, 1994), available at (http:// 

www.ftc.gov/bcp/policystmt/ad-food.shtm) (‘‘The 

Commission shares FDA’s view that health claims 

should not be asserted for foods that do not 

significantly contribute to the claimed benefit. A 

claim about the benefit of a product carries with it 

the implication that the benefit is significant.’’). 

157 See, e.g., In re International Harvester Co., 104 

F.T.C. 949, 1058-59 (1984) (implied representations 

may arise from ‘‘ordinary consumer expectations as 

to the irreducible minimum performance standards 

of a particular class of good,’’ i.e., ‘‘by the very act 

of offering goods for sale the seller impliedly 

represents that they are reasonably fit for their 

intended uses.’’) 

158 Id. 

159 See, e.g., FTC v. Loss Mitigation Servs., Inc., 

No. SACV09-800 DOC (ANX), Mem. In Supp. of Ex 

Parte TRO, Ex. 10 (C.D. Cal. filed July 13, 2009); 

FTC v. Fed. Loan Modification Law Ctr., LLP, No. 

SACV09-401 CJC (MLGx) (C.D. Cal. filed Apr. 3, 

2009), Reply to Resp. Order to Show Cause at 7 

(C.D. Cal. filed Apr. 22, 2009). 

160 Without such a prohibition, MARS providers 

might attempt to charge consumers for discrete 

tasks that fall short of the full service or result 

promised, such as collecting a fee once they 

conduct an initial consultation with the consumer; 

review or audit the consumer’s mortgage loan 

documents; gather financial or other information 

from the borrower; send an application or other 

request to the lender or borrower; facilitate 

communications between the borrower or servicer; 

represented, expressly or by 

implication, to prospective consumers 

and that are consistent with the purpose 

for which the service is sold. 

Section 322.5(1)(i) prohibits a MARS 

provider from collecting a fee until it 

has achieved each result ‘‘represented, 

expressly or by implication, to the 

consumer that the service would 

achieve.’’ In determining what 

representations consumers take away 

from providers’ communications, the 

Commission will employ its traditional 

tools of claims construction. Thus, an 

advertisement or other communication 

will be deemed to convey a claim if 

consumers, acting reasonably under the 

circumstances, would interpret the 

communication to convey that 

message.150 The message may be 

conveyed by innuendo as well as by 

express statements.151 The Commission 

looks to the overall, net impression 

created by the communication, rather 

than focusing on the individual 

elements in isolation.152 Information 

intended to qualify a claim must be 

presented in a clear and prominent 

manner; fine print disclosures in 

advertisements or contracts generally 

are ineffective to change the meaning of 

statements that appear in the body of a 

communication.153

In addition, under § 322.5(a)(1)(ii), 

before a MARS provider can collect any 

payment, it also must achieve all those 

results that ‘‘are consistent with the 

consumers’ reasonable expectations 

about the service.’’ Using traditional 

principles of claim interpretation, the 

Commission believes that even general 

efficacy claims (e.g., ‘‘our service will 

help you with your mortgage’’) are likely 

to convey that consumers can expect to 

achieve a result consistent with the 

purpose of the product or service,154

that the result will be beneficial to 

them,155 and that the benefit will be 

substantial.156 Even in the absence of 

claims that a specific result will be 

achieved, reasonable consumers thus 

are likely to interpret an advertisement 

as promising results consistent with the 

purpose of the product or service.157

The act of offering the MARS for sale 

obligates the provider to achieve at a 

minimum results that are consistent 

with the results consumers reasonably 

expect to receive from such a service.158

The proposed Rule mandates that 

providers achieve a defined result if 

they promise consumers a loan 

modification. Specifically, the 

Commission believes that a MARS 

provider’s representation that it will 

negotiate, arrange, or obtain a loan 

modification (which may include 

modifying the interest rate, principal 

amount, or the term of the loan) implies 

to reasonable consumers that they will 

receive a reduction in their mortgage 

obligation, that the result will be 

permanent, and that the benefits will 

include a substantial decrease in the 

amount of their monthly payments for a 

meaningful period of time. Accordingly, 

§ 322.5 provides that if a MARS 

provider makes an express or implied 

representation that it will ‘‘negotiate, 

obtain, or arrange a modification of any 

dwelling loan,’’ it must obtain a 

‘‘mortgage loan modification’’ for the 

consumer before it can collect any fee or 

other consideration. 

Under proposed § 322.5, the required 

‘‘mortgage loan modification’’ that must 

be provided prior to payment is a 

permanent contractual change to the 

mortgage that substantially reduces the 

borrower’s scheduled periodic 

payments. The reduction must be 

permanent for a period of at least five 

years or a reduction that will become 

permanent once the consumer 

successfully completes a trial period. 

Many MARS providers attempt to 

persuade consumers to accept 

repayment plans or forbearance 

agreements as a substitute for a 

promised loan modification.159 Such 

plans and agreements do not result in a 

permanent decrease in monthly 

payments, but tend to increase the 

amount that consumers owe each month 

on their mortgages, either immediately 

or in the near future when the 

forbearance period ends. Under the 

proposed Rule, a loan modification 

must reduce the consumer’s scheduled 

periodic payments, and that reduction 

must be substantial, i.e., a meaningful 

reduction that makes the loan affordable 

for that consumer. 

The proposed ban on advance fees 

prohibits MARS providers from 

requesting or collecting advance fees for 

any represented service until all of the 

results promised, expressly or by 

implication, are delivered. This 

prevents MARS providers from charging 

for their services piecemeal.160 If, for 

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or respond to particular requests from the lender or 

borrower on behalf of the consumer. See, e.g., 

NAAG at 5 (‘‘We are now seeing consultants offering 

these services piecemeal. For example, some 

companies represent they will help consumers 

gather their financial documents and prepare the 

information to submit to their mortgage servicer for 

a fee. Then, for another fee, the companies 

represent that they will facilitate communication 

between the consumers and their mortgage 

servicer.’’). 

161 The MARS provider cannot evade this 

prohibition by refraining from making any explicit 

claim about the result it will achieve (such as a loan 

modification) and instead offering to provide 

specific mortgage relief-related services, such as a 

review of consumers’ loan documents. Such offers 

are likely to convey to reasonable consumers that 

they will receive the ultimate result that is the 

purpose for which they are entering into the 

transaction. Thus, proposed § 322.5(b) requires 

MARS providers to obtain the loan modification or 

other remedy before requesting or collecting any 

fee. 

162 For example, Maine’s statute regarding MARS 

providers limits them to a $75 up-front fee. See ME. 

REV. STAT. ANN. tit. 32, § 6174-A. 

163 See, e.g., NAAG at 10 (‘‘By fees, we mean any 

transfer of money whatsoever from consumers to 

consultants. This includes monies placed in 

escrow, holds placed on credit cards, and checks 

that are post-dated.’’); NCLC at 4 (‘‘Companies 

should not be permitted to evade an advance fee 

ban by taking the money ‘in trust’ until the 

‘services’ are performed.’’). 

164 See, e.g., FTC v. US Foreclosure Relief Corp., 

No. SACV09-768 JVS (MGX), Decl. Thomas Layton 

(C.D. Cal. filed July 16, 2009) (stating that attorney 

improperly transferred 90% of funds from client 

trust accounts associated with loan modification 

services to other non-attorney business partners). 

165 See, e.g., NAAG at 9; MN AG at 3-4; NCLC 

at 12; CRC at 4-5. 

166 See supra note 76. 

167 See MARS ANPR, 74 FR at 26134-35. 

168 The Commission has previously issued 

regulations providing for a rescission period in 

circumstances in which the context of the 

transaction made it difficult for consumers to make 

well-informed purchasing decisions. See Door-toDoor Sales Rule, 16 CFR 429.1, et seq.; Trade 

Regulation Rules: Mail or Telephone Order 

Merchandise (Mail Order Rule), 16 CFR 435.1(c) 

(1993); see also Door-to-Door Sales Rule Statement 

of Basis and Purpose, 37 FR 22943, 22937. 

169 See, e.g., FTC v. Kirkland Young, LLC, No. 09- 

23507, Mem. Supp. of Emer. Mot. for TRO at 9 (S.D. 

Fla. filed Nov. 24, 2009). 

example, consumers reasonably expect 

that at the end of the process they will 

receive a particular outcome, such as a 

short sale or deed-in-lieu of foreclosure 

transaction, the MARS provider cannot 

require the consumer to pay a fee for an 

initial consultation or subsequent fees 

on a periodic basis as it purportedly 

performs various steps to achieve that 

outcome. The provider cannot collect 

any fee until after the favorable result 

marketed ultimately has been achieved 

for the consumer.161

Under proposed § 322.5, MARS 

providers must provide the consumer 

with documentary proof of completed 

services and achieved results before 

requesting or collecting payment. The 

Commission intends for the required 

documentation to be the most 

comprehensive written instrument 

memorializing the loan holder’s 

agreement to offer the represented 

concession to the consumer. In the case 

of promised loan modifications, the 

proposed Rule specifies that 

documentation must be a ‘‘written offer 

from the dwelling loan holder or 

servicer to the consumer.’’ Likewise, the 

MARS provider must provide 

documentation in the form of a written 

offer from the lender or servicer setting 

forth other concessions, such as a 

forbearance agreement, short sale or 

deed-in-lieu of foreclosure transaction; 

waiver of an acceleration clause; 

opportunity to cure default or reinstate 

a loan; or repayment plan. 

4. Alternatives to an Advance Fee Ban 

In proposing an advance fee ban, the 

Commission has considered and, at this 

stage, decided against imposing 

alternative restrictions on MARS 

providers. However, it seeks comment 

on these alternatives – in particular, on 

whether the Commission should: (1) 

limit or cap advance fees instead of 

banning them outright; (2) allow MARS 

providers to use independent thirdparty escrow accounts to hold fees until 

they achieve the results; and (3) include 

a right of rescission. 

First, the Commission seeks comment 

on whether, instead of banning fees 

outright, the proposed Rule should 

permit MARS providers to charge a 

small up-front fee or to collect fees as 

they perform services preliminary to 

obtaining the result that are 

commensurate with those services.162

As detailed above, the FTC believes that 

charging hundreds or thousands of 

dollars in advance for MARS is 

unjustified based on the current record. 

However, the Commission seeks 

comment on whether there are MARS 

providers currently operating that 

charge a small up-front fee (such as $50 

- $100) or collect fees as they perform 

preliminary services, and then 

successfully deliver results to their 

customers. Based on the current record, 

the FTC is not aware of such entities. 

Second, the Commission seeks 

comment on whether, in the event the 

Rule bans advance fees, MARS 

providers should be allowed to request 

or require that consumers place any 

such fees in an escrow account. Under 

this approach, an escrow agent could 

administer the account to ensure that 

MARS providers receive payment if and 

only if they successfully provide the 

ultimate results. Based on the 

Commission’s law enforcement 

experience, as well as the views of state 

law enforcement officials and consumer 

groups,163 however, the Commission is 

concerned that MARS providers might 

improperly obtain access to MARS 

funds in escrow accounts.164 The 

Commission seeks comment on whether 

escrow accounts protect consumers 

adequately in other types of financial 

transactions, whether such escrows 

could be used in the context of mortgage 

assistance relief services and, if so, what 

restrictions or limitations should be 

placed on their use. 

Third, the Commission seeks 

comment on whether the proposed Rule 

should include a right of rescission. A 

right of rescission, often called a 

‘‘cooling-off period,’’ would allow 

consumers to cancel their agreements 

with a MARS provider for a certain 

period after entering into the agreement. 

Several commenters recommended that 

the Commission include such a 

provision in the proposed Rule.165

Additionally, most state MARS statutes 

provide a right of cancellation.166 In 

light of the acute financial and 

emotional distress faced by consumers 

of MARS,167 consumers often may not 

have or take the time needed, or obtain 

the information necessary, to consider 

carefully their options before deciding 

to purchase these services.168 A right of 

rescission would serve to provide 

consumers with additional time to make 

decisions. 

At this time, the Commission believes 

that a right of rescission is not needed 

to protect consumers if MARS providers 

are banned from collecting advance fees. 

The Commission seeks comment on 

whether a right of rescission would be 

adequate to protect consumers in lieu of 

an advance fee ban or, alternatively, 

whether it would be beneficial to 

consumers as a complement to an 

advance fee ban. It also seeks comment 

on, to the extent such a provision were 

included in the Rule, the appropriate 

period of time after consumers enter 

into the agreement that they should be 

able to rescind their agreements with 

MARS providers. 

F. Section 322.6: Assisting and 

Facilitating 

1. Background 

Many MARS providers engaged in 

deceptive or unfair practices rely on, or 

work in conjunction with, other entities 

to advertise and operate their 

businesses. These entities may provide 

a wide variety of critical support and 

assistance, including advertising 

services, telemarketing and other 

marketing support,169 payment 

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170 See, e.g., FTC v. Loss Mitigation Servs., Inc., 

No. SACV09-800 DOC (ANX), Pls. Opp. Mot. Decl. 

Relief at 5 (C.D. Cal. filed Nov. 20, 2009) (alleging 

that payment processor for defendant loan 

modification company had ‘‘actual knowledge that 

the credit card charges [it] processed for [the 

defendant] were for advance fees in violation of 

relevant consumer protection laws’’). In other 

industries, the FTC has sued payment processors 

for charging consumers for products or services 

despite indications that those products or services 

were illusory. See, e.g., FTC v. InterBill, Ltd., No. 

06-cv-01644-JCM-PAL (D. Nev. Jan. 8, 2007); FTC v. 

Your Money Access, LLC, No. 07-5174 (E.D. Pa. 

filed Dec. 11, 2007). 171 See, e.g., FTC v. Fed. Loan Modification Law 

Ctr., LLP, No. SACV09-401 CJC (MLGx), Reply to 

Resp. Order To Show Cause at 9 (C.D. Cal. filed 

April 22, 2009) (alleging that defendants contracted 

with another entity to process backlog of consumer 

files and negotiate with lenders on behalf of those 

consumers). 172 See supra notes 170-71. 173 Additionally, advertising affiliate network 

companies may serve as intermediaries between 

individual advertisers and lead generator websites. 174 See, e.g., FTC v. Kirkland Young, LLC, No. 09- 

23507, Mem. Supp. of Emer. Mot. for TRO at 9 (S.D. 

Fla. filed Nov. 24, 2009) (alleging that defendant 

employed lead generators to leave messages with 

consumers via outbound telemarketing calls); FTC 

v. Truman Foreclosure Assistance, LLC, No. 09- 

23543 (S.D. Fla. filed Nov. 23, 2009); FTC v. Hope 

Now Modifications, LLC, No. 1:09-cv-01204-JBS-JS 

(D.N.J. filed Mar. 17, 2009). 175 See United States v. Ryan, No. 09-00173-CJC 

(C.D. Cal. filed July 14, 2009) (criminal complaint 

against lead generator named as defendant in FTC 

action); FTC v. Thomas Ryan, No. 1:09-00535 

(HHK) (D.D.C. filed Mar. 25, 2009); FTC v. Sean 

Cantkier, No. 1:09-cv-00894 (D.D.C. amended 

complaint filed July 10, 2009). The Commission 

also has alleged the involvement of lead generators 

in deception and abusive practices in other 

contexts, including deceptive or abusive 

telemarketing and payday lending practices. See, 

e.g., We Give Loans, Inc., Docket No. C-4232, FTC 

File No. 072 3205 (FTC Sept. 5, 2008) (complaint) 

(payday loans); United States v. Voice-Mail Broad. 

Corp., No. CV-08 MMM (JTLx) (C.D. Cal. filed Jan. 

29, 2008) (telemarketing). 

176 In law enforcement actions, the Commission 

has alleged that entities that offered substantial 

assistance to another engaged in unlawful acts were 

themselves engaged in unfair practices in violation 

of Section 5 of the FTC Act. See, e.g., FTC v. 

InterBill, Ltd., No. 06-cv-01644-JCM-PAL (D. Nev. 

filed Jan. 8, 2007); FTC v. Your Money Access, LLC, 

No. 07-5174 (E.D. Pa. filed Dec. 11, 2007). Federal 

court decisions have held that such conduct is 

unfair in violation of Section 5. See, e.g., FTC v. 

Neovi, Inc., 598 F. Supp. 2d 1104 (S.D. Cal. 2008) 

(holding that defendants engaged in unfair acts by 

creating checks they knew were often requested by 

unauthorized parties); FTC v. Accusearch, Inc., No. 

06-CV-105-D, 2007 WL 4356786 (D. Wyo. Sept. 28, 

2007) (holding that defendants engaged in unfair 

practices by selling phone records obtained by other 

parties through deception); FTC v. Windward Mktg., 

No. Civ.A. 1:96-CV-615F, 1997 WL 33642380 (N.D. 

Ga. Sept. 30, 1997) (holding that defendants 

engaged in unfair acts by depositing unauthorized 

bank drafts obtained by a deceptive telemarketing 

operation). 

177 See 16 CFR 310.3(b). The Telemarketing Sales 

Act gave the Commission the express authority to 

prohibit assisting and facilitating another in 

violating the TSR. Although the Omnibus 

Appropriation Act, as clarified by the Credit CARD 

processing,170 and the back-end 

handling of consumer files.171 In 

providing this support and assistance, 

such entities often know, or consciously 

avoid knowing, that the MARS 

providers whom they assist are engaging 

in deceptive or unfair conduct.172

MARS providers, for example, often 

purchase the contact information of 

potential customers from so-called ‘‘lead 

generators.’’ These lead generators, in 

turn, often rely on a network of Internet 

advertisers to drive traffic to their 

websites so that they can obtain 

consumers’ information.173 Lead 

generators have provided contact 

information of potential customers to 

many of the MARS providers that the 

Commission has challenged in its law 

enforcement actions.174 Additionally, 

some lead generators themselves 

disseminate claims to consumers, and 

the Commission has challenged some of 

these claims as deceptive in violation of 

Section 5 of the FTC Act.175

To address the conduct of those who 

provide key support to MARS providers 

engaged in unlawful conduct, the 

proposed Rule prohibits any person 

from providing substantial assistance or 

support to a MARS provider if that 

person knows or consciously avoids 

knowing that the provider is violating 

any provision of the proposed Rule. 

Proposed § 322.6 thus would allow FTC 

and state law enforcement officials to 

obtain monetary and injunctive relief 

against those who knowingly help 

MARS providers engaged in conduct 

that harms consumers. The Commission 

believes that (1) it is an unfair act or 

practice to knowingly or with conscious 

avoidance provide substantial assistance 

or support to those engaged in unlawful 

conduct; and (2) prohibiting such 

assistance is reasonably related to the 

goal of preventing the deceptive or 

unfair practices of MARS providers. 

2. Substantial Assistance or Support as 

an Unfair Practice 

Applying the three-prong test under 

Section 5(n) of the FTC Act, the 

Commission tentatively concludes that 

it is unfair to knowingly (or with 

conscious avoidance) provide 

substantial assistance or support to a 

MARS provider engaged in violations of 

the proposed Rule. A person engaged in 

such conduct causes substantial injury 

to consumers that is not offset by 

benefits to consumers or competition, 

and consumers cannot reasonably avoid 

the injury.176

Persons who knowingly provide 

substantial assistance or support to a 

MARS provider engaged in unlawful 

practices significantly enhance the 

provider’s ability to engage in the 

conduct and greatly increase the scope 

of the injury the practices cause. For 

example, a lead generation company 

may possess the contact information of 

thousands of consumers that otherwise 

might be unavailable to a small MARS 

provider. The MARS provider could use 

that information to target in a costeffective manner many more consumers 

with deceptive marketing 

advertisements or pitches than it could 

in the absence of such information. 

Thus, entities such as lead generators 

often play a key role in enabling MARS 

providers to promote their services 

widely, leading to substantial injury to 

consumers if those providers collect 

advance fees but fail to deliver on their 

promises. 

The Commission is not aware of any 

benefits to consumers or competition 

from knowingly assisting or supporting 

providers in violating the proposed 

Rule. The Commission seeks comment 

on whether there are benefits to 

consumers or competition from this 

conduct and, if so, whether those 

benefits outweigh the harms they cause 

to consumers. 

Finally, the substantial injury caused 

by knowingly providing substantial 

assistance or support in this context is 

not reasonably avoidable by consumers. 

Consumers do not know that the MARS 

providers with whom they contract are 

engaged in unlawful conduct, much less 

those who assist or facilitate the 

providers. 

3. Prohibiting Substantial Assistance or 

Support to Prevent Deception 

The Commission believes that 

proposed § 322.6 is warranted for the 

purposes of preventing deceptive and 

unfair conduct by MARS providers. As 

noted above, MARS providers 

frequently rely upon the assistance and 

support of other entities for essential 

tasks such as identifying potential 

customers, marketing, back-room 

operations, and payment processing. 

These support entities make it possible 

for deceptive MARS providers to 

efficiently target, enroll, and process 

consumers on a wide scale. Prohibiting 

the knowing substantial assistance or 

support of MARS providers engaged in 

illegal acts is reasonably related to 

preventing deceptive or unfair practices 

by MARS providers. 

4. The Proposed Provision 

Section 322.6 of the proposed Rule 

prohibits any person from providing 

‘‘substantial assistance or support’’ to 

any MARS provider if the person 

‘‘knows or consciously avoids knowing 

that the provider is engaged in any act 

or practice that violates the Rule.’’ This 

provision is modeled on a similar 

provision in the TSR.177

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Act, did not provide comparable authority, the 

Commission believes, as discussed earlier, that 

assisting and facilitating another in violating the 

MARS Rule is itself an unfair act or practice, and 

in addition that prohibiting this conduct is 

reasonably related to the goal of preventing unfair 

and deceptive conduct. 178 See TSR Statement of Basis and Purpose, 60 

FR 43842, 43852 (‘‘The Commission further believes 

that the ordinary understanding of the qualifying 

word ‘substantial’ encompasses the notion that the 

requisite assistance must consist of more than mere 

casual or incidental dealing with a seller or 

telemarketer that is unrelated to a violation of the 

Rule.’’). 

179 See, e.g., FTC v. Patten, No. 08-5560 (N.D. Ill. 

filed Sept. 29, 2008). 

180 See id. 

181 See, e.g., FTC v. Your Money Access, LLC, No. 

07-5174 (E.D. Pa. filed Dec. 11, 2007). 

182 TSR Statement of Basis and Purpose, 60 FR 

at 43852. 

183 See supra notes 46-48, 66-68. In fact, the State 

Bar of California recently reported a ‘‘crisis’’ of 

attorney misconduct, noting that it ‘‘has 

experienced a 58 percent increase in active 

investigations over 2008 due in large part to the 

huge increase in complaints against attorneys 

offering loan modification services.’’ See Press 

Release, State Bar of California, State Bar Takes 

Action to Aid Homeowners in Foreclosure Crisis 

(Sept. 18, 2009), available at (http:// 

www.calbar.ca.gov/state/calbar/ 

calbar_generic.jsp?cid=10144&n=96395); see also 

CRC at 6. 

184 IL AG at 1. 

185 See, e.g., NCLC at 14 (noting that attorneys 

could ‘‘fil[e] a bankruptcy petition or. . . suit 

challenging a predatory loan or a defense to 

foreclosure’’ and provide other non-litigation legal 

services including ‘‘negotiating a settlement with a 

lender’’); OH AG at 5 (‘‘The knowledge an attorney 

has of his or her state’s foreclosure law can properly 

help borrowers navigate the foreclosure process.’’); 

MA AG at 7 (noting that ‘‘a competent and ethical 

attorney can be a valuable asset to a homeowner 

trying to avoid foreclosure’’). 

186 See NCLC at 14 (noting that ‘‘an attorney’s 

more beneficial and traditional role of analyzing a 

client’s paperwork and advising the client of 

potential claims and options may also fit within the 

definition of mortgage assistance relief’’). 

187 See, e.g., MODEL RULES OF PROF’L 

CONDUCT R. 1.15 (2009). 

188 Note that the Commission did not receive any 

comments in response to its ANPR from attorneys 

or organizations representing attorneys addressing 

the role of attorneys in connection with providing 

loan modification services. To have a complete and 

accurate understanding of the role of attorneys in 

connection with loan modification services, the 

Commission seeks comment from attorneys and 

other interested parties on this issue. 

189 See supra notes 46-47; see also, e.g., NAAG 

at 13 (‘‘We have received many complaints 

regarding attorneys who are offering loan 

modification business. These attorneys generally 

provide no legal services for consumers and present 

the same problems as mortgage consultants in 

general.’’); Drexel Testimony, 111th Cong. 1st Sess. 

at 6 (‘‘[A] certain number of attorneys are willing 

to engage in these fraudulent activities on their 

own.’’). 

190 See IL AG at 2 (‘‘Attorneys are using the 

exemption to market and sell the same mortgage 

consulting services provided by non-attorneys.’’); 

CSBS at 2 (noting ‘‘attorneys who lend their name 

to a loan modification company, but play, little, if 

Continued 

Proposed § 322.6 is limited to persons 

providing substantial – i.e., more than 

casual or incidental – assistance or 

support to MARS providers.178

Activities that might constitute 

substantial assistance or support 

include the provision of consumer 

leads,179 contact lists, advertisements, 

or promotional materials.180 Such 

activities also might include the support 

provided by payment processors181 and 

other entities providing essential 

backroom operations. 

In addition, proposed § 322.6 is 

limited to persons who know or 

consciously avoid knowing that the 

MARS provider is violating the Rule. As 

the Commission concluded in the 

context of the TSR, ‘‘[t]he ‘conscious 

avoidance’ standard is intended to 

capture the situation where actual 

knowledge cannot be proven, but there 

are facts and evidence that support an 

inference of deliberate ignorance on the 

part of a person that the seller or 

telemarketer is engaged in an act or 

practice that violates [the Rule].’’182

Proposed § 322.6 similarly excludes 

entities that provide basic support and 

services to MARS providers, but have 

no reasonable way of knowing that the 

providers are engaged in conduct in 

violation of the Rule. 

G. Section 322.7: Exemptions 

Section 322.7 of the proposed Rule 

addresses the applicability of the Rule’s 

provisions to attorneys who are MARS 

providers. There is no general 

exemption for attorneys from the 

requirements of the proposed Rule. The 

Commission, however, proposes a 

limited exemption for licensed 

attorneys’ conduct in connection with a 

bankruptcy case or other court 

proceeding to prevent foreclosure, 

where that conduct complies with state 

law, including rules regulating the 

practice of law. Attorneys who meet 

these criteria would be exempt from the 

proposed Rule’s prohibitions against 

requesting or collecting advance fees. 

Additionally, attorneys would be 

exempt from the Rule’s prohibition 

against advising consumers to cease 

contact with their lenders or servicers. 

Note, however, that all attorneys would 

continue to be subject to the proposed 

Rule’s prohibition against 

misrepresentations, disclosure 

requirements, prohibition against 

knowing substantial assistance or 

support, and recordkeeping 

requirements. 

1. Background 

As discussed in Section II, an 

increasing number of attorneys have 

engaged in deception and unfairness in 

connection with mortgage assistance 

relief services.183 For example, in its 

written comment, the Illinois Attorney 

General reported that ‘‘33 percent of the 

[MARS] companies we have dealt with 

are owned by attorneys, while 38 

percent have some link to the legal 

profession.’’184 Including attorneys 

within the proposed Rule is necessary to 

ensure that the rule is effective in 

preventing such conduct. 

The Commission, however, recognizes 

that legal counsel may be valuable to 

some consumers who are trying to save 

their homes. Frequently, consumers will 

turn to attorneys for legal assistance 

with bankruptcy or other legal 

proceedings regarding their mortgage.185

Consumers also may seek legal advice 

that may not necessarily be connected to 

a legal proceeding. For example, 

attorneys may conduct a review of 

mortgage contracts to determine legal 

options and obligations, which may aid 

the attorney in negotiating with a 

servicer on behalf of a consumer.186

Under the proposed Rule, in the absence 

of an exemption, attorneys would be 

prohibited from using certain methods 

of collecting fees when they provide 

MARS to consumers. For example, 

attorneys representing clients in 

bankruptcy and other court proceedings 

often collect advance fees in the form of 

retainers, which usually must be placed 

in escrow.187 Section 322.5 of the 

proposed Rule would prohibit the 

collection of such fees. In addition, 

attorneys performing bona fide legal 

services routinely advise clients to cease 

any direct communication with outside 

parties, such as lenders and servicers, 

and to refer all communications from 

these outside parties to the attorneys. 

Section 322.3(a) of the proposed Rule 

bars giving this instruction to 

consumers. 

In the Commission’s view, the present 

record188 does not support a broad 

exemption for attorneys. Some attorneys 

have engaged in various forms of 

deceptive and unfair conduct in 

conducting activities covered by the 

proposed Rule. First, some attorneys 

have engaged in the same deceptive 

practices as non-attorney MARS 

providers, i.e., failing to provide 

promised services, falsely touting high 

likelihoods of success, misrepresenting 

their refund policies, and falsely 

claiming an affiliation with the 

government or other entities.189 Second, 

some MARS providers have begun 

employing or associating with attorneys 

to (1) support the MARS providers’ 

(often false) claims that they provide 

legal services and (2) try to avail 

themselves of attorney exemptions 

under various state laws governing 

MARS.190 In such attorney-MARS 

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10724 Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 

any direct role, in helping consumers obtain actual 

loan modifications’’); MN AG at 5 (‘‘The Office is 

aware of several loan modification and foreclosure 

rescue companies that have affiliated with licensed 

attorneys in other states in an effort to circumvent 

state law.’’); CRC at 2 (‘‘An increasing number of 

attorneys are involving themselves in these 

unethical practices without providing any legal (or 

other) services, sometimes engaging in fee-splitting 

or even simply acting as fronts for loan 

modification companies who are seeking to avoid 

state laws that prohibit some of the practices 

described above but exempt attorneys.’’); California 

State Bar Ethics Alert at 2 (‘‘There is evidence that 

some foreclosure consultants may be attempting to 

avoid the statutory prohibition on collecting a fee 

before any services have been rendered by having 

a lawyer work with them in foreclosure 

consultations.’’); FTC v. Loss Mitigation Servs., Inc., 

No. SACV09-800 DOC (ANX), Mem. Supp. Pls. Ex 

Parte App. at 3 (C.D. Cal. Aug. 3, 2009) (alleging 

that ‘‘Walker Law Group’’ was ‘‘a sham legal 

operation designed to evade state law restrictions 

on the collection of up-front fees for loan 

modification and foreclosure relief’’). 

191 See, e.g., IL AG at 2 (‘‘While attorney mortgage 

consultants charge a premium for their services and 

aggressively market their status as legal 

professionals, they generally exclude – either 

expressly or in practice – actual legal representation 

or legal work from the scope of provided services.’’). 

Some MARS providers advertise the provision of 

legal services to consumers but then later disclaim, 

in fine print contracts, that they will actually 

provide such services. See id. at 2-4, 7. 

192 See, e.g., Chase at 5 (‘‘Many MARS providers 

claim to be affiliated with attorneys, but typically 

the people performing the services are not 

attorneys, and the connection with the attorney is 

very tenuous. Calls to the MARS provider do not 

go to the attorney’s office and addresses used by the 

providers are not the same as the attorney’s.’’); OH 

AG at 5 (‘‘[A]t most the lawyer [advertised to 

consumers by foreclosure rescue companies] will 

file a brief template response on behalf of the 

consumers.’’); see also Drexel Testimony at 6 (‘‘In 

exchange for the use of the attorney’s name and his 

or her ability to charge and receive advance fees, 

the foreclosure consultant typically offers to 

perform most or all of the loan modification 

services....’’); Press Release, State Bar of California, 

State Bar Takes Action to Aid Homeowners in 

Foreclosure Crisis (Nov. 25, 2009) (‘‘[T]he attorneys 

work with untrained non-attorney staff engaging in 

the unlawful practice of law by offering legal advice 

to prospective clients. [The Office of Trial Counsel] 

also is investigating the non-attorney staff for 

possible referral to law enforcement.’’), available at 

(http://www.calbar.ca.gov/state/calbar/ 

calbar_generic.jsp?cid=10144&n=96395); FTC v. 

LucasLawCenter ‘‘Inc.,’’ No. SACV-09-770 DOC 

(ANX) (C.D. Cal. filed July 7, 2009). 

193 See, e.g., supra note 46; see also CMC at 10 

(‘‘[The attorneys’] communications [with the 

consumer] are generally ‘boilerplate’ that does not 

appear to reflect any considered review by an 

attorney.’’); OH AG at 5 (‘‘[O]ur office sees 

foreclosure rescue companies advertise that they 

will provide a lawyer or legal help to that 

consumer. The lawyer’s client, however, is actually 

the company, not the consumer, and at most the 

lawyer will file a brief template response on behalf 

of the consumers’’); IL AG at 2. 194 See, e.g., COLO. REV. STAT. § 6-1- 

1103(4)(b)(I); 765 IL. COMP. STAT. ANN. 940/5; 

Mo. Rev. Stat. § 407.935(2)(b)a; see also, e.g., NAAG 

at 13 (‘‘Currently, most states exempt attorneys from 

their mortgage rescue consultant laws.’’); CMC at 9- 

10. 

195 See generally, e.g., Cincinnati Bar Assoc. v. 

Mullaney, 119 Ohio St. 3d 412 (2008) (sanctioning 

attorneys engaged in mortgage assistance relief 

service for, inter alia, engaging in the unauthorized 

practice of law, fee sharing with nonlawyers, and 

failing to provide adequate legal services); CRC at 

2 (‘‘An increasing number of attorneys are involved 

themselves in these unethical practices without 

providing any legal (or other) services, sometimes 

engaging in fee-splitting or even simply acting as a 

front for loan modification companies who are 

seeking to avoid state laws that prohibit some of the 

practices described above but exempt attorneys.’’). 

196 See, e.g., CMC at 9-10 (‘‘These attorneys are 

often not licensed to practice in either the 

borrower’s or servicer’s state....’’); CSBS at 2 (‘‘This 

[increase of involvement by attorneys] includes outof-state attorneys, many of whom are not licensed 

to practice law in the state where the homeowner 

lives....’’); see also MODEL RULES OF PROF’L 

CONDUCT R. 5.5 (2009). 

197 See, e.g., CSBS at 2; Chase at 5; CMC at 9- 

10; OH AG at 5. 

198 CSBS at 2; California State Bar Ethics Alert 

at 2 (‘‘Many of the proposed relationships between 

these foreclosure consultants and lawyers violate 

the Rules of Professional Conduct and other ethical 

rules and, therefore, could result in lawyer 

discipline.’’); see also, e.g., California Rules of 

Professional Conduct R. 1-310 (prohibiting 

partnerships with non-attorneys); id. R. 1-310 

(prohibiting fee sharing with non-attorneys); id. R. 

1-300(A) (prohibiting aiding in unauthorized 

practice of law.). 

199 See, e.g., Press Release, State Bar of California, 

State Bar Continues Pursuit of Attorney 

Modification Fraud (Aug. 12, 2009), available at 

(http://www.calbar.ca.gov/state/calbar/ 

calbar_generic.jsp?cid=10144&n=96096); Florida 

Bar, Ethics Alert: Providing Legal Services to 

Distressed Homeowners, available at (http:// 

www.floridabar.org/TFB/TFBResources.nsf/ 

Attachments/ 

872C2A9D7B71F05785257569005795DE/$FILE/ 

loanModification20092.pdf?); see also, e.g., 

Cincinnati Bar Assoc. v. Mullaney, 119 Ohio St. 3d 

412 (2008) (disciplining attorneys involved in 

mortgage assistance relief services). 

200 See, e.g., IL AG at 1 (‘‘We believe that any rulemaking should not include a categorical attorney 

exemption....’’). 

201 NAAG at 13. One commenter also argued 

against an exemption for attorneys because it ‘‘is 

likely to create an environment where more 

companies organize themselves as exempted 

classes,’’ whereas ‘‘[a]n effective rule will not create 

loopholes that will only be readily exploited, nor 

will it create unfair competition by creating lessaccountable classes of loan modification or 

foreclosure rescue companies.’’ NCRC at 5. 

202 To the extent that commenters supported any 

exemption for attorneys, they largely supported a 

very limited exemption along the lines of the one 

in the proposed Rule. See, e.g., IL AG at 9 (‘‘We 

continue to support a limited exemption for 

attorneys who render legal services on behalf of 

consumers in the course of serving as the attorney 

of record in bankruptcy or foreclosure 

proceedings.’’) (emphasis in original); Shriver at 3 

(recommending that ‘‘attorneys engaged in judicial 

foreclosure proceedings should remain exempt at 

the federal level since they are already regulated [by 

state law] and supervised [by state bar 

associations]’’); NYC DCA at 4 (recommending that 

the Commission prohibit collection of advance fees 

by attorneys ‘‘not directly involved with legal 

services in connection with either the preparation 

and filing of a bankruptcy petition or court 

proceedings to avoid a foreclosure.’’); MA AG at 9 

(recommending that the Commission adopt a 

provision similar to Massachusetts state law, 

described infra note 206). 

provider arrangements, the attorneys 

often do little or no legal work on behalf 

of consumers,191 with non-attorneys 

handling most functions, including 

communications with the lender or 

servicer.192 The Commission’s law 

enforcement experience, as well as that 

of state attorneys general, indicates that 

MARS providers often induce 

consumers to believe that they will 

receive specialized legal assistance from 

attorneys, even though the attorneys 

have done little more than lend their 

names and credentials to the 

operation.193

Many state MARS statutes contain 

relatively broad exemptions for 

attorneys. For example, some states 

exempt attorneys so long as they are 

licensed in the same state as the 

borrower or have an attorney-client 

relationship with the borrower.194

Attorneys offering MARS often have 

flouted various state bar rules, 

however.195 In many cases, these 

attorneys have not been licensed to 

practice law in the states where 

consumers who purchase the MARS 

reside.196 In addition, given that 

attorneys purporting to provide MARS 

often play little or no role in counseling 

or negotiating on behalf of borrowers, 

they may violate state bar requirements 

that they provide bona fide legal 

services to their clients.197 Attorneys 

also allegedly have engaged in 

prohibited affiliation arrangements with 

non-attorneys such as fee-splitting, 

providing or taking referral fees, and 

assisting or supporting others in the 

unauthorized practice of law.198 In 

response, state bars have initiated 

numerous investigations of attorneys 

engaged in MARS and, in some cases, 

have brought misconduct cases against 

them.199

Most of the public comments filed in 

response to the ANPR that addressed 

this issue recommended that the 

Commission not grant a broad 

exemption for attorneys because of 

concerns that they may continue to 

engage in deceptive and unfair practices 

related to mortgage assistance relief 

services.200 NAAG, for example, urged 

the Commission to provide no 

exemption for attorneys engaged in 

MARS.201

2. Proposed Exemption 

Most comments advocated a narrow 

exemption limited to certain types of 

practice or conduct by attorneys.202

With regard to the prohibition on 

collecting advance fees, the Commission 

proposes to exempt only those attorneys 

who are in compliance with state law, 

including state bar rules, and only for 

the provision of specific, limited legal 

services. Such a narrowly-tailored 

exemption seeks to strike a balance that 

would protect consumers from unfair or 

deceptive conduct by attorneys who are 

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203 In one recent lawsuit by the Commission, the 

defendants represented to consumers that ‘‘they 

[were] a law firm with attorneys in several states 

offering loan modification, Chapter 13 bankruptcy, 

and Chapter 7 bankruptcy.’’ FTC v. Washington 

Data Res., Inc., No. 8:09-cv-02309-SDM-TBM (M.D. 

Fla. filed Nov. 12, 2009). Despite any such 

marketing claims, if the attorney associated with a 

provider fails to work with the borrower to prepare 

a bankruptcy petition, or instead only seeks a loan 

modification for the borrower outside of any 

bankruptcy or other court proceedings, he or she 

would still be prohibited from requesting or 

receiving an advance fee under the proposed Rule. 

204 See, e.g., OH AG at 5 (recommending that the 

exception only apply where the attorney has a 

legitimate attorney-client relationship with the 

consumer, which would require the attorney to 

provide legal services to the consumer and to be 

properly licensed in the state where he or she 

would be providing legal services); MA AG at 7-8; 

NCLC at 15; Chase at 5; CMC at 10; NCLC at 15. 

205 See supra note 196. 

206 Proposed § 322.7 resembles a similar 

provision in the Massachusetts state mortgage 

assistance relief rules. The Massachusetts provision 

provides, in relevant part, ‘‘It is an unfair or 

deceptive act. . . to solicit, arrange, or accept an 

advance fee in connection with offering, arranging 

or providing Foreclosure-related Services; provided, 

however, that [this provision] shall not prohibit a 

licensed attorney from soliciting, arranging or 

accepting an advance fee or retainer for legal 

services in connection with the preparation and 

filing of a bankruptcy petition, or court 

proceedings, to avoid a foreclosure. Provided 

further, however, that a licensed attorney accepting 

an advance fee or legal retainer must comply with 

all applicable laws and regulations pertaining to 

such fees, including the Massachusetts Rules of 

Professional Conduct....’’ 940 MASS. CODE REGS. 

§ 25.02. 

207 See, e.g., MODEL RULES OF PROF’L 

CONDUCT R. 1.15 (2009). 

208 The Commission also seeks comment and data 

bearing on whether other professionals, such as 

financial planners, advise consumers on obtaining 

loan concessions from their lenders or servicers, 

and whether the proposed Rule would interfere 

with their provision of MARS. The Commission 

further requests comment on whether the proposed 

Rule should contain a limited exemption for these 

professionals. 209 See supra note 76. 210 The proposed recordkeeping requirements are 

modeled after those set forth in the TSR Statement 

of Basis and Purpose, 60 FR at 43841. As explained 

below, the required documents include records of 

transactions with consumers, scripts, 

advertisements, and related promotional materials. 

The Telemarketing Sales Act expressly authorized 

the Commission to impose recordkeeping 

requirements. Although the Omnibus 

Appropriation Act, as clarified by the Credit CARD 

Act, did not give comparable authority to the 

Commission, the Commission believes that the 

proposed recordkeeping requirements are 

reasonably related to the goal of preventing unfair 

and deceptive conduct. 

211 Proposed § 322.9(c). See 16 CFR 310.5(b) 

(‘‘Failure to keep all records required. .. shall be a 

violation of [the TSR].’’); TSR Statement of Basis 

and Purpose, 60 FR at 43857 (‘‘[I]f a deceptive 

telemarketer or seller were to destroy records, law 

enforcement agencies still would be able to charge 

them with violating § 310.5(b), which makes the 

failure to maintain all the required records a 

violation of the Rule.’’). 

engaged or otherwise involved in the 

practice of selling MARS, while at the 

same time preserve the ability of 

attorneys to provide bona fide legal 

services to homeowners. 

The Commission’s limited exemption 

for attorneys in proposed § 322.7 applies 

only if the attorney is ‘‘providing legal 

counsel in connection with preparing or 

filing (i) a bankruptcy petition or any 

other document that must be filed in a 

bankruptcy proceeding; or (ii) any 

document that must be filed in 

connection with a court or 

administrative proceeding.’’ The 

preparation and filing of bankruptcy 

petitions and other documents for court 

proceedings is part of the bona fide 

practice of law. In addition, limiting the 

attorney exemption in the Rule to these 

concrete and specific legal services 

makes it easier for federal and state law 

enforcement officials to determine 

whether an attorney in fact qualifies for 

the exemption. For example, the 

exemption clearly does not cover 

attorneys who primarily offer to obtain 

loan modifications for consumers 

outside of a formal legal proceeding. 

Further, the Commission intends for 

this exemption to cover only attorneys 

who actually provide the specified legal 

services for a borrower; it would 

exclude attorneys that merely market 

the possibility of doing so.203

Moreover, the limited exemption for 

attorneys from the advance fee ban 

applies only if the attorney ‘‘complies 

with all applicable state laws, including 

licensing regulations.’’ If an attorney is 

not licensed to practice in the state, 

there is no reason the proposed Rule 

should not apply to the attorney’s 

activities to the same extent as any other 

MARS provider. If an attorney is 

licensed to practice in a state, the 

attorney would be exempt under the 

proposed Rule only if he or she 

complies with state law, including state 

bar rules. Several commenters 

advocated the inclusion of such a 

requirement to protect consumers from 

unfair and deceptive conduct of 

attorneys that would violate state ethics 

and other rules governing attorneys.204

For example, a frequent characteristic of 

MARS attorneys engaged in deception is 

that they offer services to borrowers 

outside of the state in which they are 

licensed.205 Under the proposed Rule, 

such an attorney would not be exempt 

from the rule. 

Finally, proposed § 322.7 only 

exempts attorneys from those parts of 

the proposed Rule that interfere with 

the attorneys’ provision of traditional, 

bona fide legal services to homeowners. 

Attorneys would be exempt from the 

advance fee ban in proposed § 322.7.206

Attorneys performing the services 

within the scope of the exemption often 

collect advance fees in the form of 

retainers, which usually must be placed 

in escrow.207 There is no indication that 

this practice generally has caused 

problems for consumers. 

The Commission recognizes that this 

narrow exemption would not apply to 

attorneys providing MARS to consumers 

outside of the bankruptcy or litigation 

context, and therefore might deter some 

attorneys from providing legitimate 

assistance to consumers, for example, by 

calling lenders or servicers on their 

behalf. There is nothing in the record, 

however, indicating how many 

attorneys provide these types of services 

and whether an advance fee ban would 

deter them from helping consumers. In 

addition to providing a limited 

exemption from the prohibition on 

advance fees, proposed § 322.7 exempts 

lawyers from the proposed Rule’s 

prohibition against instructing 

consumers to cease communications 

with their lenders or servicers, so long 

as the lawyer is licensed to practice law 

in the state where the consumers 

resides. The Commission is concerned 

that the narrowness of the exemption 

could interfere with the ability of 

attorneys to offer counsel and advice to 

their clients. Therefore, it seeks 

comment on whether this exemption is 

justified and whether it would be 

possible to tailor it differently to curb 

unfair or deceptive acts or practices 

engaged in by attorneys providing 

MARS, without preventing or deterring 

the provision of legitimate legal 

services.208

H. Section 322.8: Waiver 

Section 322.8 of the proposed Rule 

provides that ‘‘[a]ny attempt by any 

person to obtain a waiver from any 

consumer of any protection provided by 

or any right of the consumer under this 

rule constitutes a violation of the rule.’’ 

The Commission believes that this 

provision is necessary to prevent MARS 

providers from attempting to 

circumvent the proposed Rule. Several 

states include similar provisions in their 

statutes restricting MARS.209

I. Section 322.9: Recordkeeping and 

Compliance Requirements 

Section 322.9(a) of the proposed Rule 

sets forth specific categories of records 

MARS providers must retain.210 A 

failure to keep such records is an 

independent violation of the Rule.211

Specifically, for a period of 24 months 

from the date the record is produced, 

MARS providers must keep the 

following records: 

(1) All contracts or other agreements 

between the provider and any consumer 

for any mortgage assistance relief 

service; 

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212 NCLC notes that HUD’s criteria for approving 

housing counselors under the HUD Housing 

Counseling Program include strong recordkeeping 

provisions. NCLC at 7. These recordkeeping 

provisions include the retention of client files. See 

Mortgage and Loan Insurance Programs Under the 

National Housing Act and Other Authorities, 24 

CFR 214.315(b) (2007). As HUD explained in its 

regulation: ‘‘The system must permit HUD to easily 

access all information needed for a performance 

review.’’ Id. at 214.315(a). The recordkeeping 

requirements proposed by the Commission – 

focusing largely on documents pertaining to 

transactions between the provider and client – are 

similar and will enable the Commission efficiently 

to obtain evidence of compliance with the proposed 

Rule. See TSR Statement of Basis and Purpose, 60 

FR at 43875 (‘‘A record retention requirement is 

necessary to enable law enforcement agencies to 

ascertain whether sellers and telemarketers are 

complying with the requirements of the Final Rule, 

to identify persons who are involved in any 

challenged practices, and to identify customers who 

may have been injured.’’); cf. Franchise Rule, 16 

CFR 436.6(h) (‘‘Franchisors shall retain, and make 

available to the Commission upon request, a sample 

copy of each materially different version of their 

disclosure documents for three years after the close 

of the fiscal year when it was last used.’’); id. 

at 436.6(i) (‘‘For each completed franchise sale, 

franchisors shall retain a copy of the signed receipt 

for at least three years.’’); Funeral Industry Practices 

(Funeral Rule), 16 CFR 453.6 (1994) (requiring 

funeral providers to retain copies of price lists and 

statements of funeral goods and services for at least 

one year). 213 Cf. TSR Statement of Basis and Purpose, 60 

FR at 43857 (‘‘The [TSR] Final Rule requires 

retaining records that most businesses already 

maintain during the ordinary course of business.’’). 214 Cf. id. 215 Cf. id. at 43858 (recognizing the burden 

imposed by requiring the retention of each and 

every script, advertisement, and promotional piece, 

‘‘much of which may be worthless or redundant 

from a law enforcement standpoint’’). 216 Cf. 16 CFR 310.5(a) (setting forth a 24-month 

record retention requirement). 

217 The Commission notes that this requirement 

does not mean that MARS providers must tape 

every sales call; rather, implementing a taping 

program that is reasonably designed to record calls 

on a random basis without knowledge that the calls 

are being recorded would suffice. 

218 16 CFR 314.1, et seq. (2002) (imposes various 

affirmative obligations on covered entities in 

connection with implementing mandated security 

program to protect and secure customer 

information); see also Children’s Online Privacy 

Protection Rule, 16 CFR 312.1, et seq. (2005) 

(requiring, among other things, parental approval to 

collect personal information from children). 

219 16 CFR 310.1, et seq. 

220 16 CFR 308.1, et seq. 

221 16 CFR 314.4; see also 900 Rule, 16 CFR 

308.3(h). 

(2) Copies of all written 

communications between the provider 

and any consumer occurring prior to the 

date on which the consumer enters into 

a contract or other agreement with the 

provider of any mortgage assistance 

relief service; 

(3) Copies of all documents or 

telephone recordings created in 

connection with compliance with 

paragraph (b) of the section, which sets 

forth requirements to monitor 

employees’ and independent 

contractors’ compliance with the 

proposed Rule; 

(4) All consumer files containing the 

names, phone numbers, dollar amounts 

paid, quantity of items or services 

purchased, and descriptions of items or 

services purchased, to the extent such 

information is obtained in the ordinary 

course of business; 

(5) Copies of all materially different 

sales scripts, training materials, 

commercial communications, or other 

marketing materials, including websites 

and weblogs; and 

(6) Copies of the documentation 

provided to the consumer as specified 

in § 322.5 of this rule. 

The Commission believes the record 

establishes the need to propose these 

recordkeeping requirements. As 

discussed throughout this document, 

the MARS industry appears to be 

permeated with deception and unfair 

practices, targeting financially 

vulnerable consumers. Accordingly, 

strong recordkeeping provisions seem 

essential to ensure effective and 

efficient enforcement of the Rule and to 

identify injured consumers.212

At the same time, the Commission is 

mindful that recordkeeping provisions 

impose compliance costs. To reduce the 

compliance burden, the proposed 

provisions require that MARS providers 

generate and keep documents they 

likely already retain in the ordinary 

course of their business.213 In addition, 

proposed § 322.9(c) states that providers 

may keep the records in any form and 

in the same manner, format, or place as 

they keep records in the ordinary course 

of business.214 This flexibility as to the 

form and manner in which records must 

be kept likewise would decrease the 

cost of recordkeeping. 

The proposed Rule further attempts to 

limit the retention requirements to the 

minimum amount of information 

necessary. For example, providers must 

maintain records relating to actual 

transactions with customers; they are 

not required to keep records where 

consumers do not sign contracts or do 

not agree to offers of mortgage assistance 

relief services. In addition, providers 

must retain only materially different 

versions of advertising and related 

materials.215 The proposed Rule calls 

for a 24-month record retention 

period.216 The Commission believes that 

two years is the minimum amount of 

time necessary for consumers to report 

violations of the Rule and for the 

Commission to complete investigations 

and to identify victims. Accordingly, the 

FTC believes that the proposed 

recordkeeping provisions strike an 

appropriate balance between ensuring 

efficient and effective law enforcement 

and avoiding the imposition of 

unnecessary compliance costs. 

Section 322.9(b) of the proposed Rule 

also contains four compliance 

requirements reasonably calculated to 

prevent unfair or deceptive practices by 

MARS providers. Proposed § 322.9(b)(1) 

requires providers to monitor the Rule 

compliance of their employees and 

independent contractors. Such steps 

include monitoring sales presentations 

with customers and potential customers. 

Providers specifically must: 

∑ Conduct random, blind tape 

recording of the oral representations 

made by persons in sales or other 

customer service functions;217

∑ Establish a procedure for receiving 

and responding to consumer 

complaints; and 

∑ Ascertain the number and nature of 

consumer complaints regarding 

transactions with the employee or 

independent contractor. 

Proposed § 322.9(b)(2) also requires 

that MARS providers investigate 

promptly and fully any consumer 

complaint received. To comply with 

this provision, MARS providers should 

establish a procedure for receiving, 

investigating, and responding to all 

consumer complaints. Proposed 

§ 322.9(b)(3), in addition, mandates that 

MARS providers must take corrective 

action with respect to any salesperson 

whom the provider determines is not 

complying with the Rule. These 

corrective actions include the adoption 

and implementation of a reasonable 

program to train, discipline and 

terminate employees who do not 

comply with the Rule. Finally, proposed 

§ 322.9(b)(4) requires documentation of 

compliance with the above 

requirements. Such documentation 

must include copies of the random, 

blind tape recordings of employees’ 

communications with consumers and 

records of any disciplinary actions 

against employees for non-compliance 

with the Rule. 

The compliance requirements in the 

proposed Rule are comparable to 

provisions in other FTC rules, including 

the Standards for Safeguarding 

Customer Information (‘‘Safeguards 

Rule’’),218 TSR,219 and the 900 Number 

Rule.220 In the TSR and 900 Number 

Rules, the Commission imposed 

monitoring and compliance 

requirements parallel to those set forth 

in proposed § 322.9(b). As is the case 

with the Safeguards Rule, proposed 

§ 322.9(b)(3) of the proposed Rule 

requires that covered entities take 

appropriate corrective actions to ensure 

employee and contractor compliance 

with the Rule.221 In addition, proposed 

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222 See 16 CFR 310.4(a)(6)(i)(C) (requiring 

telemarketers to make and maintain an audio 

recording of telemarketing transactions involving 

pre-acquired account information). 

223 See 16 CFR 308.7. Specifically, the 900 Rule 

requires billers of pay-per-call services to respond 

to consumer notices of billing errors, including: (1) 

sending a written acknowledgment to the consumer 

of receipt of the billing error notice; (2) correcting 

the billing error and crediting the consumer’s 

account for any disputed amount; and (3) if 

appropriate, explaining to the customer, after 

reasonable investigation, the reasons why no billing 

error occurred. 

224 Credit CARD Act § 511(b). 

225 See 16 CFR 310.9. 

§ 322.9(b)(1)’s specification that 

monitoring must include, at a 

minimum, random, blind taping 

recording and monitoring of the oral 

representations made by sales 

representatives has a parallel in the 

TSR.222 The requirement in proposed 

§ 322.9(b) that MARS providers receive, 

respond to, and investigate consumer 

complaints is comparable to the billing 

and collection provisions in the 900 

Rule that require consumer dispute 

resolution procedures, including 

responding to customer allegations of 

billing errors.223

J. Section 322.10: Actions by States 

The Omnibus Appropriations Act, as 

clarified by the Credit CARD Act, 

permits states to enforce the Rules 

issued in connection with the MARS 

rulemaking.224 States may enforce the 

Rules, subject to the notice requirements 

of the Omnibus Appropriations Act, by 

bringing civil actions in federal district 

court or another court of competent 

jurisdiction. Proposed § 322.10 sets 

forth that states have the authority to 

file actions against those who violate the 

Rule. 

K. Section 322.11: Severability 

Proposed § 322.11 states that the 

provisions of the Rule are separate and 

severable from one another. This 

provision, which is modeled after a 

similar provision in the TSR,225 also 

states that if a court stays or invalidates 

any provisions in the proposed Rule, the 

Commission intends the remaining 

provisions to continue in effect. 

IV. Request for Comment 

The Commission seeks comment on 

various aspects of the proposed Rule. 

Without limiting the scope of issues on 

which it seeks comments, the 

Commission is particularly interested in 

receiving comments on the questions 

that follow. In responding to these 

questions, please include detailed 

factual supporting information 

whenever possible. 

A. General Questions for Comment 

Please provide comment on each 

aspect of the proposed Rule, including 

answers to the following questions. 

(1) How would the proposed Rule 

affect the provision of different types of 

mortgage assistance relief services? 

Useful information would include 

information about the services provided 

by particular entities or the types of 

entities, how these different entities 

perform their services, and the effect of 

the proposed Rule on them. 

(a) In particular, what types of 

mortgage and foreclosure relief are being 

offered to consumers? Do the forms of 

relief differ in the benefits they provide 

to consumers and, if so, how do they 

differ? Do the costs of mortgage 

assistance relief services vary based on 

the type of relief offered and, if so, how? 

For each form of relief, what is the 

likelihood consumers will receive it? 

What factors affect whether a particular 

consumer will receive a form of relief? 

(b) Do entities differ in how they 

currently charge fees for their services? 

For example, what payments are made 

before work begins, what payments are 

made while work is being performed, 

and what payments are made after all 

work is completed? Which types of 

providers require consumers to make 

some payment before services are 

completed, and which do not? How 

much of the total fee do providers 

typically collect prior to completing 

their work? Are consumers required to 

make payments that are contingent on 

the provider achieving a beneficial 

result and, if so, how much of the total 

amount paid is contingent on such a 

result? Which types of providers require 

consumers to pay only if the providers 

achieve a beneficial result? How is it 

determined that the provider has 

achieved such a beneficial result? 

(2) What would be the effect of the 

proposed Rule (including any benefits 

and costs) on consumers? Would the 

costs and benefits to consumers differ 

depending on the service offered or the 

type of provider offering it and, if so, 

how? Would the costs and benefits 

differ depending on the form of relief 

and, if so, how? 

(3) What evidence is there that 

consumers are misled in the promotion 

and sale of MARS? Are consumers 

misled by particular types of entities 

and, if so, which ones? What evidence 

is there that consumers are misled about 

the status of MARS providers or their 

affiliation with the government, 

government programs, lenders, or 

servicers? What evidence is there that 

consumers are misled about the 

likelihood that they will receive specific 

results and, if so, which results? What 

evidence is there that consumers are 

misled about the total cost of MARS? 

About what other attributes of MARS do 

providers mislead consumers? 

(4) What would be the effect of the 

proposed Rule (including any benefits 

and costs) on MARS providers? 

(5) Would the proposed Rule 

encourage or discourage financial 

advisors, financial planners, and other 

providers of financial services from 

becoming MARS providers or adding 

MARS to their existing lines of 

business? Does the proposed Rule 

restrict business practices, for example, 

the terms of payment, that create 

barriers for financial service providers 

from becoming MARS providers? If so, 

what are these business practices and 

how does the proposed Rule affect 

them? 

(6) What changes, if any, should be 

made to the proposed Rule to increase 

benefits to consumers and competition? 

(7) What changes, if any, should be 

made to the proposed Rule to decrease 

costs to industry or consumers? 

(8) How would the proposed Rule 

affect small business entities with 

respect to costs, profitability, 

competitiveness, and employment? 

B. Specific Questions on Proposed 

Provisions 

1. Section 322.2: Definitions 

(1) Does the definition of ‘‘mortgage 

assistance relief service’’ in proposed 

§ 322.2(h) adequately describe the scope 

of the proposed Rule’s coverage? If not, 

how should it be modified? Are there 

additional services or forms of relief that 

should be included in the definition? 

Alternatively, are there services or forms 

of relief that should not be included in 

the definition? Should additional terms 

be defined and, if so, how? What would 

be the costs and benefits of each 

suggested definition? 

(a) In particular, should the proposed 

Rule cover services to assist consumers 

negotiate with their lenders to obtain 

new loans or refinancing? What types of 

entities offer these kind of services? 

What factors affect whether a particular 

consumer receives this form of relief? 

Do entities offer these services to 

consumers who may be delinquent on 

their mortgages, owe more on their 

mortgages than their homes are worth, 

or who are struggling to make their 

mortgage payments? What is the 

likelihood that consumers in these 

situations receive refinancing or new 

loans? What evidence, if any, is there 

that consumers in these situations are 

being misled about these services? Are 

other laws or regulations sufficient to 

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10728 Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 

protect consumers from these practices? 

What would be the costs and benefits of 

including these types of services in the 

proposed Rule? 

(b) The Commission intends the 

proposed Rule to apply to sale-leaseback 

and similar transactions only to the 

extent that such transactions are 

marketed as a means to avoid 

foreclosure. What are the costs and 

benefits of this approach? Should these 

services generally be exempted from 

coverage? Alternatively, should these 

services be subject to additional 

restrictions and limitations in the 

proposed Rule? What is the experience 

of the states in regulating these types of 

transactions? Does the proposed Rule 

conflict with state laws regulating saleleaseback and similar transactions and, 

if so, how should the conflict be 

resolved? 

(c) Are there reasons to broaden the 

definition of MARS to include the word 

‘‘product?’’ Would the addition of 

‘‘products’’ allow the proposed Rule to 

address deceptive and unfair practices 

not already covered? Are there reasons 

to include ‘‘products’’ in anticipation of 

likely changes in the marketplace? Why 

or why not? 

(2) Should any entities covered by the 

definition of ‘‘mortgage assistance relief 

service provider’’ in proposed § 322.2(i) 

be excluded or exempted from this 

definition? If so, which entities? Why or 

why not? 

(a) In particular, should MARS 

provider be defined for the purposes of 

the proposed Rule to exclude persons 

who provide incidental or de minimis 

advice or assistance? If so, how should 

incidental or de minimis advice or 

assistance be measured? Should this 

modified definition depend on whether 

the person attempts to obtain the 

mortgage relief on behalf of the 

consumer, or advises or assists the 

consumer to obtain the relief on his or 

her own? 

(3) Proposed §§ 322.2(i)(1) and (2) 

generally exempt loan holders and 

servicers, as well as their agents, from 

the definition of ‘‘mortgage assistance 

relief service providers.’’ Is this 

exemption appropriate? Why or why 

not? Do these entities promote or sell 

MARS to consumers? If so, what types 

of services are offered to consumers and 

how are fees collected for these 

services? Are there concerns that loan 

holders and servicers engage in 

deceptive or unfair conduct addressed 

by the proposed Rule? If so, please 

provide a detailed explanation. 

(4) Proposed § 322.2(i)(3) generally 

exempts from the definition of 

‘‘mortgage assistance relief service 

providers’’ any nonprofit excluded from 

the FTC’s jurisdiction. What types of 

such nonprofit entities offer MARS? 

What types of MARS do these entities 

offer to consumers and, if applicable, 

how are fees collected for these 

services? What are the costs and benefits 

for consumers if MARS are provided by 

a nonprofit rather than a for-profit 

entity? Does the proposed Rule create an 

incentive for for-profit entities to 

become nonprofits? If providers become 

nonprofits, what would be the 

advantages and disadvantages for 

consumers? 

(5) Are the disclosure standards set 

forth in the definition of ‘‘clear and 

prominent’’ appropriate for MARS? 

What are the costs and benefits of these 

standards? For example, is it 

appropriate for the visual disclosure to 

be at least 4 percent of the vertical 

picture or screen height and be shown 

for at least the duration of the oral 

disclosure? Should these disclosures be 

larger or longer? Do consumers notice 

and comprehend disclosures that appear 

on a separate landing page immediately 

prior to the page on which the consumer 

takes action to incur any financial 

obligation? Are there alternative 

standards that would be more effective? 

Are there data bearing on whether the 

proposed disclosure standards would be 

effective? 

2. Section 322.3: Prohibited 

Representation 

(1) Proposed § 322.3(a) bans providers 

from advising consumers not to contact 

or communicate with their lenders or 

servicers. What are the costs and 

benefits of banning these types of 

statements? Should additional 

statements relating to MARS be 

prohibited? Are there alternative 

approaches to banning such advice that 

would allow such advice to be given but 

would still protect consumers from the 

risk arising from not communicating 

with servicers or lenders? 

(2) Proposed § 322.3(b) prohibits 

misrepresentations of any material 

aspect of any MARS, and provides 

specific examples of such prohibited 

misrepresentations. How widespread is 

each specified misrepresentation? Are 

there other prohibited 

misrepresentations that should be 

specified in the proposed Rule? If so, 

why? Should any of the described 

misrepresentations be broadened or 

narrowed to better address the deceptive 

conduct they are intended to prevent? If 

so, what should those modifications be? 

3. Section 322.4: Required Disclosures 

(1) Are the disclosures required by 

proposed § 322.4 appropriate to address 

current and prospective harms to 

consumers in connection with the sale 

of MARS? Why or why not? How could 

the disclosures be modified to better 

address these harms? Is the proposed 

language of each disclosure readily 

understandable by consumers? If not, is 

there alternative language that would be 

more effective? If so, provide the 

suggested disclosure language and 

discuss why it would be more effective. 

(2) The disclosure required under 

§ 322.4(b)(3) only must be made in cases 

where MARS are represented to perform 

services and achieve results that are set 

forth in § 322.2(h)(1) and §§ 322.2(h)(3)- 

(6). Are there other situations in which 

the disclosure requirements should be 

tailored to apply only to entities 

purporting to provide certain services or 

results, or should each of the disclosure 

requirements be applicable to all MARS 

providers? Why or why not? If so, which 

entities should be covered for each 

required disclosure? 

(3) What are the costs and benefits of 

the disclosure requirements in the 

proposed Rule? How would MARS 

providers comply with the 

requirements? What burdens do the 

requirements impose on providers? Are 

there changes that could be made to 

lessen the burdens without reducing the 

benefits to consumers? 

(a) In particular, would having the 

proposed Rule mandate a specific 

format for disclosures or set forth a 

disclosure requirement that would be a 

safe harbor lessen the burdens on MARS 

providers without reducing the benefits 

to consumers? 

(b) Should the proposed Rule 

mandate that the required disclosures be 

made in writing? If so, how should such 

disclosures be made, for example, in a 

contract or a stand-alone notice? If there 

is a written notice, what types of 

information should be included in the 

notice? For example, should the written 

notice disclose the total fee for the 

MARS and/or any formula used to 

calculate the amount of the fee charged 

for the service? When should the 

written disclosures be made to 

consumers? What would be the added 

benefits to consumers of such a 

disclosure requirement? What would be 

the added costs to MARS providers? 

(4) Are there additional types of 

information that should be disclosed to 

prevent harm to consumers? If so, please 

identify the types of information, and, if 

possible, provide suggested language 

that could be used to convey that 

information to consumers. Also, please 

discuss the relative costs and benefits to 

consumers and industry of such 

disclosures? For example, would it be 

beneficial for MARS providers to 

disclose to consumers the consequences 

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of not paying their mortgages (such as 

the loss of their home and damage to 

their credit ratings)? Why or why not? 

If the proposed ban on advance fees is 

enacted, would it be beneficial for 

MARS providers to disclose to 

consumers that fees are not owed unless 

promised results are delivered? Why or 

why not? Should MARS providers be 

required to disclose the minimum 

specific benefit the consumer will 

receive, e.g., the minimum reduction in 

the monthly payment amount, for the 

amount of fees to be paid? Would such 

a disclosure be beneficial to consumers 

or competition? Why or why not? 

(5) Should the FTC require MARS 

providers to disclose their historical 

performance? If so, how should 

historical performance be measured and 

disclosed? Could historical performance 

information mislead some consumers 

about the likelihood that they will 

achieve the promised results? How do 

the potential benefits of such a 

disclosure compare to the potential 

costs? If the FTC requires this 

disclosure, what if any disclosure 

should be required of new entrants? 

4. Section 322.5: Prohibition on 

Collection of Advance Payments 

(1) Proposed § 322.5 specifically 

prohibits the collection of any fee or 

other consideration for MARS until after 

the provider has achieved all of the 

results the provider represented, 

expressly or by implication, to the 

consumer that the service would 

achieve, and that is consistent with 

consumers’ reasonable expectations 

about the service. Should MARS 

providers be required to achieve these 

results to receive payment? Why or why 

not? Would an alternative standard for 

receiving payment be more appropriate? 

If so, describe the alternative standard 

and discuss its relative costs and 

benefits. 

(a) In particular, the Notice of 

Proposed Rulemaking to amend the 

Telemarketing Sales Rule to address the 

sale of debt relief services, 74 FR 41988 

(Aug. 19, 2009) prohibits: 

Requesting or receiving payment of 

any fee or consideration from a person 

for any debt relief service until the 

seller has provided the customer with 

documentation in the form of a 

settlement agreement, debt 

management plan, or other such valid 

contractual agreement, that the 

particular debt has, in fact, been 

renegotiated, settled, reduced, or 

otherwise altered. 

Should the standard be the same as or 

different than the standard articulated 

for debt relief services in the proposed 

amendments to the TSR? 

(b) Would it be appropriate for the 

Commission to consider allowing 

providers to collect a limited initial fee 

or set-up fee at the beginning of MARS 

being provided? Would this provide 

sufficient protection for consumers? 

Why or why not? Do providers currently 

use this payment model in the MARS 

industry and, if so, how much do they 

collect upfront from consumers and in 

total? For what purposes do providers 

use such fees? What has been the 

experience of states that have limited 

the amount of the initial fee or set-up 

fee providers may charge consumers? If 

providers were permitted to collect an 

initial or set-up fee, what fees should be 

limited and what amount should be 

permitted? 

(c) Should MARS providers who 

promise that consumers will obtain a 

specific end result (e.g., a successful 

loan modification) be allowed to charge 

partial or piecemeal fees for 

intermediate results (e.g., helping the 

consumer fill out required forms to 

apply for the loan modification)? Why 

or why not? Would allowing providers 

to charge fees for intermediate services 

provide an opportunity for fraudulent 

providers to charge consumers without 

ever obtaining the result consumers 

expect, such as a loan modification, and 

thus evade the advance fee ban? 

(d) Should MARS providers be 

allowed to charge fees for individual 

services (e.g., helping consumers fill out 

required forms) so long as they do not 

promise that consumers will obtain a 

specific end result (e.g., a successful 

loan modification)? Why or why not? If 

MARS providers are allowed to collect 

such fees in this situation, should they 

be required to disclose that they are not 

promising to deliver a specific, or any, 

end result? Would such a disclosure be 

sufficient to avoid consumer deception? 

(e) What are the costs and benefits of 

providers charging fees based on the 

level of the benefit provided? For 

example, what is the effect if MARS 

providers charge fees that are 

proportional to the size of the loan 

modification ultimately obtained for the 

consumer? If MARS providers charge 

such fees for loan modifications, should 

a minimum level of benefit be required? 

If a minimum level of benefit is 

required, should the minimum level be 

a substantial and permanent reduction 

in the amount of the scheduled 

mortgage payments, or something else? 

Should providers be required to charge 

fees based on the level of the benefit 

provided? Why or why not? 

(2) In certain cases, proposed § 322.5 

specifies that a MARS provider cannot 

request or receive payment until after it 

delivers a ‘‘mortgage loan modification’’ 

to the consumer. Mortgage loan 

modification is defined as a ‘‘the 

contractual change to one or more terms 

of an existing dwelling loan between the 

consumer and the owner of such debt 

that substantially reduces the 

consumer’s scheduled periodic 

payments.’’ Under the proposed Rule, 

such change must be ‘‘permanent for a 

period of five years or more;’’ or ‘‘will 

become permanent for a period of five 

years or more once the consumer 

successfully completes a trial period of 

three months or less.’’ Is this the 

appropriate standard to ensure that 

providers confer on consumers the 

benefit they expect? Why or why not? 

Are there alternative standards that 

should be applied? If so, describe the 

suggested standard and explain the 

relative costs and benefits of the 

standard. 

(a) Does the definition of ‘‘mortgage 

loan modification’’ define the conditions 

for payment clearly enough? Why or 

why not? In particular, does the term 

‘‘substantially’’ need to be defined and, 

if so, what would constitute a 

substantial reduction for the consumer? 

Similarly, should the term ‘‘permanent’’ 

be modified to ensure that consumers 

receive a benefit consistent with 

reasonable expectations? If so, describe 

the suggested modifications and discuss 

the relative costs and benefits of each 

modification. 

(3) What benefits do consumers 

paying fees in advance of performance 

provide to consumers or competition? 

What evidence is there that consumers 

who purchase MARS fail to pay the fees 

if fees are not collected in advance? 

What evidence is there that without 

collecting fees in advance providers 

could not fund their operations? Will it 

no longer be economically feasible for 

covered entities to provide particular 

types of services if this fee restriction is 

imposed? Which services will it be no 

longer economically feasible to provide 

and why? 

(4) Would it be appropriate to allow 

providers to use escrow accounts to 

collect their fees upfront? What are the 

costs and benefits of using escrow 

accounts? 

(a) To what extent do providers of 

MARS currently use escrow accounts? If 

so, how are these escrows structured, for 

example, what conditions must be met 

before providers are entitled to 

withdraw money from the escrows? 

Have providers abused escrow accounts, 

for example, by making unauthorized 

withdrawals or refusing to return money 

to consumers when services are not 

performed? What has been the 

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experience in states that allow escrows 

for MARS? What has been the 

experience of the states with respect to 

these escrows, for example, have the 

states observed abuses and, if so, what? 

Are there types of escrows used for 

other services that providers of MARS 

could use that would provide sufficient 

protection for consumers? Why or why 

not? 

(b) If escrows are allowed in 

connection with consumers paying fees 

to MARS providers, how should the 

escrows be structured? What restrictions 

and limitations are needed to protect 

consumers, for example, should any 

funds held in escrow be returned 

automatically to consumers if services 

are not completed within a certain time 

period? What type of accounting and 

reporting should be required for escrow 

accounts, if any? Are there entities that 

could provide escrow services in 

connection with MARS and, if so, 

which types of entities? Is there a way 

to determine whether a provider of 

escrow services is more likely to 

perform its duties adequately, for 

example, are there applicable licensing 

requirements? 

(5) To what extent does the proposed 

Rule’s advance fee ban (§ 322.5) prevent 

harm to consumers that would not be 

eliminated by its prohibition against 

misrepresentations (§ 322.3) and the 

disclosure requirements (§ 322.4)? If you 

believe that proposed § 322.5 does not 

provide any additional protection, 

please explain why. 

(6) Should any type or portion of fees 

charged by entities offering MARS be 

exempted from proposed § 322.5? If so, 

which fees, either by type of entity 

providing the service or by type of fee, 

should be exempted, and why? 

(7) Should consumers have the right 

to rescind any agreement to purchase 

MARS within a certain time period? 

Should a right of rescission be a 

substitute for, or complement to, the 

advance fee ban? Why or why not? If the 

proposed Rule contained a right of 

rescission, how long should consumers 

have to rescind their contracts? What 

are the relative costs and benefits of 

giving consumers the right to rescind 

the contract? 

(8) Proposed § 322.5 prohibits the 

collection of any fee or other 

consideration until after the MARS 

provider provides the consumer with 

documentation of achieved results. 

What type of documentation should be 

required, for example, should the 

provider be required to produce a copy 

of a written contract between the lender 

or servicer and the consumer setting 

forth the specific concession? In the 

case of ‘‘mortgage loan modifications,’’ 

proposed § 322.5 requires that the 

provider produce a ‘‘contractual 

agreement between the dwelling loan 

holder or servicer and the consumer.’’ 

For a mortgage loan modification, is this 

the appropriate form of documentary 

proof, or are there alternatives? Describe 

each suggested alternative and discuss 

its relative costs and benefits. 

5. Section 322.6: Assisting and 

Facilitating 

(1) Is proposed § 322.6 the appropriate 

standard to address assisting and 

facilitating in connection with the sale 

of MARS? Why or why not? What types 

of entities provide substantial assistance 

or support to MARS providers? What 

evidence is there that these entities 

know or consciously avoid knowing that 

MARS providers are violating the 

proposed Rule? What would be the costs 

to these entities of determining whether 

MARS providers are in compliance with 

the proposed Rule? What effect would 

these costs have on those who assist the 

operation of MARS providers? 

6. Section 322.7: Exemptions 

(1) Proposed § 322.7 exempts 

attorneys from proposed § 322.3(a)’s ban 

on instructing consumers not to 

communicate with their lenders or 

servicers, so long as the attorneys are 

licensed to practice in the state where 

the consumer resides. Is this exemption 

appropriate? Why or why not? What are 

the costs and benefits of allowing 

attorneys to make these types of 

statements? Are there other types of 

entities that should be exempted from 

this provision? If so, identify which 

entities and explain why. 

(2) Proposed § 322.7 exempts an 

attorney from the advance fee ban if the 

attorney: (a) provides MARS in 

connection with a bankruptcy petition 

or other court proceeding; (b) is licensed 

to practice in the state where the 

consumer resides; and (c) is in 

compliance with applicable state laws, 

including licensing regulations. Is this 

exemption appropriate? Why or why 

not? Should the exemption be broader 

to cover other legal services attorneys 

provide? If so, describe other services 

and discuss the costs and benefits of 

exempting them from the advance fee 

ban. What is the experience of states 

with laws governing MARS that exempt 

attorneys? 

(3) What types of MARS services apart 

from representation in litigation (e.g, 

calling lenders or servicers on 

consumers’ behalf) do attorneys perform 

that would not qualify for the 

exemption in proposed § 322.7? How 

prevalent is the provision of these nonlitigation legal services, and how do 

they provide consumers with legitimate 

mortgage relief? If such services are 

provided, what types and amounts of 

fees do these providers charge, and how 

are these fees collected? Are trust or 

escrow accounts used to hold these fees 

while services are being performed? 

Does the proposed advance fee ban 

unduly restrict the provision of these 

non-litigation legal services? If so, are 

there any alternatives to the proposed 

advance fee ban, such as escrows 

accounts, that will adequately protect 

consumers from unfair and deceptive 

practices, while allowing attorneys to 

continue to provide such bona fide legal 

services to consumers? 

(4) Are there entities other than 

attorneys that should be exempt from 

the advance fee ban and, if so, which 

entities? What types of MARS services 

do these entities perform? For example, 

do financial planners or advisors 

provide MARS services and, if so, what 

types of services do they perform? How 

prevalent is the provision of MARS 

services by any such non-attorney 

entities? What types and amount of fees 

do these non-attorney entities charge? 

How would the advance fee ban affect 

the provision of these types of services 

to consumers? If an exemption is 

appropriate, please describe in detail 

the entities and services that should be 

covered by the exemption and how the 

exemption should be structured? 

7. Section 322.9: Recordkeeping and 

Compliance Requirements 

(1) Proposed § 322.9 requires a 24- 

month document retention period. Is 

this period of time adequate for effective 

and efficient law enforcement? Does it 

impose unnecessary costs on MARS 

providers? Should the Commission 

consider an alternative document 

retention period, for example, a time 

period commensurate with the five-year 

statute of limitations for an FTC action 

for civil penalties? If so, explain what 

you believe to be the appropriate time 

period, and why? 

(2) Proposed § 322.9(b)(1) sets forth 

steps MARS providers must take to 

monitor and ensure that all their 

employees and independent contractors 

comply with the proposed Rule. For 

example, the proposed Rule requires 

MARS providers to perform random, 

blind, taping and testing of telemarketer 

presentations, to establish a procedure 

for receiving and responding to 

consumer complaints, and to determine 

the number and nature of consumer 

complaints regarding employees and 

independent contractors. Are these 

monitoring requirements sufficient to 

ensure compliance with the Rule? 

Should the Commission consider 

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Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 10731 

226 The comment must be accompanied by an 

explicit request for confidential treatment, 

including the factual and legal basis for the request, 

and must identify the specific portions of the 

comment to be withheld from the public record. 

The request will be granted or denied by the 

Commission’s General Counsel, consistent with 

applicable law and the public interest. See 16 CFR 

4.9(c). 

227 See 16 CFR 1.26(b)(5). 228 5 U.S.C. 601-612. 229 5 U.S.C. 603-605. Covered entities under the 

proposed Rule will be classified as small businesses 

if they satisfy the Small Business Administrator’s 

relevant size standards, as determined by the Small 

Business Size Standards component of the North 

American Industry Classification System (NAICS). 

Because a wide range of individuals and companies 

may provide mortgage assistance relief services to 

homeowners, no one classification is applicable to 

this rulemaking. The closest NAICS size standards 

relevant to this rulemaking is $7-8.5 million 

maximum in annual receipts. That is the range in 

size standard for comparable professional and 

support services, such as those for lawyers ($7 

million), tax preparation services ($7 million), 

certified public accountants ($8.5 million), human 

resources consulting services ($7 million), and 

marketing consulting services ($7 million). 

alternative monitoring provisions? What 

would be the costs and benefits of such 

alternatives? 

(3) Proposed § 322.9(b)(4) mandates 

that MARS providers maintain 

documentation of their compliance with 

§§ 322.9(b)(1)-(3) of the Rule. Should the 

retention period for these documents be 

a 24-month period or an alternative 

period of time? For example, would a 

time period commensurate with the 

five-year statute of limitations for an 

FTC action for civil penalties be more 

appropriate? For each suggested time 

period, discuss why you believe it 

would be appropriate. 

(4) Proposed § 322.9(c) permits MARS 

providers to retain documents in any 

form and in the same manner, format, or 

place as they keep such records in the 

ordinary course of business. Is this 

flexibility warranted in the context of 

MARS? Should the Commission specify 

how documents should be retained? If 

so, explain what you believe to be the 

appropriate standard for retaining 

documents. 

Interested parties are invited to 

submit written comments electronically 

or in paper form. Comments should 

refer to ‘‘Mortgage Assistance Relief 

Services Rulemaking, Rule No. 

R911003’’ to facilitate the organization 

of comments. Please note that your 

comment – including your name and 

your state – will be placed on the public 

record of this proceeding, including on 

the publicly accessible FTC website, at 

(http://www.ftc.gov/os/ 

publiccomments.shtm). 

Because comments will be made 

public, they should not include any 

sensitive personal information, such as 

any individual’s Social Security 

number; date of birth; driver’s license 

number or other state identification 

number, or foreign country equivalent; 

passport number; financial account 

number; or credit or debit card number. 

Comments also should not include any 

sensitive health information, such as 

medical records or other individually 

identifiable health information. In 

addition, comments should not include 

any ‘‘[t]rade secret or any commercial or 

financial information which is obtained 

from any person and which is privileged 

or confidential. . . . ,’’ as provided in 

Section 6(f) of the FTC Act, 15 

U.S.C. 46(f), and Commission Rule 

4.10(a)(2), 16 CFR 4.10(a)(2). Comments 

containing material for which 

confidential treatment is requested must 

be filed in paper form, must be clearly 

labeled ‘‘Confidential,’’ and must 

comply with FTC Rule 4.9(c), 16 CFR 

4.9(c).226

Because paper mail addressed to the 

FTC is subject to delay due to 

heightened security screening, please 

consider submitting your comments in 

electronic form. Comments filed in 

electronic form should be submitted at 

(http://public.commentworks.com/ftc/ 

MARS-NPRM) and following the 

instructions on the web-based form. To 

ensure that the Commission considers 

an electronic comment, you must file it 

on the web-based form at (http:// 

public.commentworks.com/ftc/MARSNPRM). If this Notice appears at (http:// 

www.regulations.gov/search/Regs/ 

home.html#home), you may also file an 

electronic comment through that 

website. The Commission will consider 

all comments forwarded to it by 

regulations.gov. You may also visit the 

FTC website at (www.ftc.gov) to read the 

Notice and the news release describing 

it. 

A comment filed in paper form 

should include the reference ‘‘Mortgage 

Assistance Relief Services Rulemaking, 

Rule No. R911003’’ both in the text of 

the comment and on the envelope, and 

should be mailed or delivered to the 

following address: Federal Trade 

Commission, Office of the Secretary, 

Room H-135 (Annex W), 600 

Pennsylvania Avenue, NW, Washington, 

DC 20580. The FTC is requesting that 

any comment filed in paper form be sent 

by courier or overnight service, if 

possible, because U.S. postal mail in the 

Washington, DC area and at the 

Commission is subject to delay due to 

heightened security precautions. 

Comments on any proposed filing, 

recordkeeping, or disclosure 

requirements that are subject to the 

paperwork burden review under the 

Paperwork Reduction Act should 

additionally be submitted to: Office of 

Information and Regulatory Affairs, 

Office of Management and Budget 

(OMB), Attention: Desk Officer for 

Federal Trade Commission. Comments 

should be submitted via facsimile to 

(202) 395-5167 because U.S. postal mail 

at the OMB is subject to delay due to 

heightened security precautions. 

The FTC Act and other laws the 

Commission administers permit the 

collection of public comments to 

consider and use in this proceeding as 

appropriate. The Commission will 

consider all timely and responsive 

public comments it receives, whether 

filed in paper or electronic form. 

Comments received will be available to 

the public on the FTC website, to the 

extent practicable, at (http:// 

www.ftc.gov/os/publiccomments.htm). 

As a matter of discretion, the 

Commission makes every effort to 

remove home contact information for 

individuals from the public comments it 

receives before placing those comments 

on the FTC website. More information, 

including routine uses permitted by the 

Privacy Act, may be found in the FTC’s 

privacy policy, at (http://www.ftc.gov/ 

ftc/privacy.shtm). 

V. Communications by Outside Parties 

to the Commissioners or Their Advisors 

Written communications and 

summaries or transcripts of oral 

communications respecting the merits 

of this proceeding from any outside 

party to any Commissioner or 

Commissioner’s advisor will be placed 

on the public record.227

VI. Regulatory Flexibility Act 

The Regulatory Flexibility Act of 1980 

(RFA)228 requires the Commission to 

provide an Initial Regulatory Flexibility 

Analysis (IRFA) with a proposed Rule, 

and a Final Regulatory Flexibility 

Analysis (FRFA) with a final rule, 

unless the Commission certifies that the 

rule will have no significant economic 

impact on a substantial number of small 

entities.229

The Commission anticipates that the 

proposed MARS Rule will have no 

significant economic impact on a 

substantial number of small entities. As 

noted above, the proposed Rule will 

prevent unfair and deceptive conduct by 

MARS providers through a combination 

of conduct prohibitions, disclosures, 

affirmative compliance obligations, and 

recordkeeping provisions. As discussed 

in detail in the ANPR, the proposed 

Rule’s reach is limited. First, the 

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230 See, e.g., MA AG at 1-2; NAAG at 3-4; OH AG 

at 1. 

231 For example, NAAG explained that it is 

difficult to obtain empirical data on providers ‘‘due 

to the prominence of internet-based companies and 

their ephemeral nature. The difficulty of gathering 

information is increased due to the fact many of 

these companies operate primarily over the internet 

and do not maintain a physical presence in the 

states in which they do business.’’ NAAG at 3. 

232 NAAG at 4. 

233 See supra § VI.C. 

234 See infra § VII. 

proposed Rule will cover entities that 

are within the FTC’s jurisdiction under 

the FTC Act. The FTC Act specifically 

excludes banks, thrifts, and federal 

credit unions from the agency’s 

jurisdiction. Further, the proposed 

definition of ‘‘mortgage assistance relief 

service provider’’ is limited to third 

parties offering for-fee services and does 

not extend to free services provided by 

lenders or mortgage servicers and their 

agents. In addition, the proposed Rule 

would provide attorneys with a limited 

exemption from the advance fee ban, as 

well as with a broad exemption from its 

prohibition against directing consumers 

not to contact their lender or servicer. 

As detailed below, the Commission 

believes that the proposed Rule is likely 

to cover several hundred MARS 

providers. Although the Commission 

does not know the precise number of 

such providers, its conservative estimate 

is that the Rule will cover 

approximately 500 providers. It is not 

known, however, how many of those 

500 providers, if any, are small entities. 

The Commission nonetheless believes 

that the number of providers that are 

small entities is not likely to be 

substantial and, therefore, the proposed 

Rule is not likely to have a significant 

economic impact on a substantial 

number of small entities. Accordingly, 

this document serves as notice to the 

Small Business Administration of the 

Commission’s certification of no 

economic impact. Nonetheless, the FTC 

has determined to prepare the following 

analysis: 

A. Description of the Reasons That 

Action by the Agency is Being 

Considered 

The Commission proposes, and seeks 

comment on, a rule to implement 

Section 626 of the Omnibus 

Appropriations Act, as amended by the 

Credit CARD Act, which mandates that 

the Commission initiate a rulemaking 

with respect to mortgage loans. Section 

511 of the Credit CARD Act clarified 

that the Commission’s rulemaking 

should relate to unfair or deceptive acts 

or practices, and stated that the FTC’s 

implementing rules should address 

‘‘loan modification and foreclosure 

rescue services.’’ In addition, the 

proposed Rule will cover those entities 

over which the FTC has jurisdiction 

under the FTC Act – entities other than 

banks, thrifts, federal credit unions, and 

nonprofits that engage in the conduct 

the rule would cover. Through this 

document, the Commission proposes, 

and seeks comment on, prohibitions, 

disclosures, affirmative compliance 

requirements, and recordkeeping 

provisions aimed at for-profit MARS 

providers to prevent deceptive and 

unfair practices that harm borrowers, 

consistent with the goals of the Act. 

B. Statement of the Objectives of, and 

Legal Basis for, the Proposed Rule 

The proposed Rule is intended to 

implement Section 626 of the Omnibus 

Appropriations Act, as amended by the 

Credit CARD Act, which directs the 

Commission to initiate a rulemaking 

with respect to mortgage loans. As noted 

above, the Omnibus Act, as amended, 

directs the Commission to initiate a 

rulemaking related to unfair or 

deceptive acts or practices with respect 

to mortgage loans. Through the 

rulemaking, the Commission seeks to 

prevent deceptive and unfair acts and 

practices in the mortgage assistance 

relief services industry, which has been 

the subject of numerous individual law 

enforcement actions under Section 5 of 

the FTC Act. 

C. Small Entities to Which the Proposed 

Rule Will Apply 

The proposed Rule will apply to 

mortgage assistance relief service 

providers. Based upon its knowledge of 

the industry, the Commission believes 

that a variety of individuals and 

companies provide or purport to 

provide such services, including 

telemarketers, mortgage brokers, lead 

generators, payment processors, 

contractors that provide back-room 

services, and attorneys. 

Comments in response to the ANPR 

suggest that the number of MARS 

providers purporting to assist distressed 

homeowners is growing in response to 

the crisis in the home mortgage 

industry,230 but do not offer empirical 

data on the number of such entities.231

The available data suggest that there are 

a few hundred such providers. For 

example, FTC staff sent warning letters 

to 71 MARS providers in the course of 

its investigation of the industry. In its 

comment, the National Community 

Reinvestment Coalition reported testing 

of 100 MARS providers. NAAG stated 

that its members have investigated 450 

companies and brought suits against 130 

under state law.232 Accordingly, 

Commission staff has taken a 

conservative approach and estimates 

that there are approximately 500 

mortgage assistance relief service 

providers. Nonetheless, staff cannot 

readily estimate the number of such 

providers, if any, that are small entities. 

Accordingly, the Commission 

specifically requests additional 

comment on: (1) the number of 

individuals or entities that provide 

mortgage assistance relief services; and 

(2) the number of such providers, if any, 

that are small entities. 

D. Projected Reporting, Recordkeeping, 

and Other Compliance Requirements 

The proposed Rule sets forth specific 

recordkeeping requirements to ensure 

efficient and effective law enforcement, 

to identify individual wrongdoers, and 

to identify potential injured consumers. 

In large measure, the recordkeeping 

provisions require MARS providers to 

retain documents – consumer files and 

documentation of consumer 

transactions – that are kept in the 

ordinary course of business. Other 

proposed recordkeeping requirements 

would ensure covered entities can 

demonstrate compliance with specific 

proposed Rule provisions, which are 

discussed below. 

The proposed Rule has three other 

kinds of compliance requirements: (1) 

prohibited acts and practices that are 

deceptive or unfair; (2) disclosures to 

ensure that consumers receive the 

truthful and accurate information they 

need to make an informed decision 

whether to purchase MARS; and (3) 

compliance obligations to monitor sales 

promotions and consumer complaints. 

As discussed above, these requirements 

are necessary to prevent unfair or 

deceptive acts and practices, to ensure 

compliance with the Rule, and to 

achieve effective law enforcement. 

The classes of small entities, if any, 

covered by the rule have been discussed 

in the preceding section of this 

analysis.233 The professional or other 

skills necessary for compliance with the 

proposed Rule are discussed in the 

Paperwork Reduction Act analysis 

elsewhere in this document.234

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

The Commission has not identified 

any other federal statutes, rules, or 

policies that would duplicate, overlap, 

or conflict with the proposed Rule. The 

Commission invites comment on this 

issue. 

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Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 10733 

235 See ABA at 8; AFSA at 1, 3; Chase at 1; CMC 

at 1; MBA at 3-4 (urging the Commission not to 

cover mortgage servicers or third parties retained by 

mortgage servicers to assist homeowners on a notfor-profit basis). 

236 See TSR Statement of Basis and Purpose, 60 

FR at 43858 (recognizing the burden imposed by 

requiring the retention of each and every script, 

advertisement, and promotional piece, ‘‘much of 

which may be worthless or redundant from a law 

enforcement standpoint.’’). 

237 See 44 U.S.C. 3502(3)(A). 

238 Proposed § 322.4 sets forth the format and 

content of the notice, which varies depending upon 

the medium used. 

239 See 5 CFR 1320.3(b)(2). 

240 According to OMB, the public disclosure of 

information originally supplied by the Federal 

government to a recipient for the purpose of 

disclosure to the public is excluded from the 

definition of a ‘‘collection of information.’’ See 5 

CFR 1320.3(c)(2). 

F. Significant Alternatives to the 

Proposed Rule Amendments 

As previously noted, the proposed 

Rule is intended to prevent deceptive 

and unfair acts and practices in the 

mortgage assistance relief services 

industry, as mandated by the Act. The 

proposed Rule is intended to achieve 

that goal without creating unnecessary 

compliance costs. To achieve that goal, 

the Commission proposes a definition of 

‘‘mortgage assistance relief service 

provider’’ that focuses on for-fee thirdparty providers. The term does not 

include the mortgage loan holder or 

servicer of a mortgage, or any agent of 

either, provided that the agent does not 

receive any money or other valuable 

consideration from the borrower for the 

agent’s own benefit.235 Further, as 

discussed in Section III.I above, 

providers generally must keep only 

consumer files and consumer 

transactional records that are retained in 

the ordinary course of business. In 

addition, proposed § 322.9(c) states that 

providers may keep the records in any 

form and in the same manner, format, or 

place as they keep records in the 

ordinary course of business. 

The proposed Rule also limits the 

type of information that must be 

retained to a minimum. For example, 

providers must maintain records 

relating to actual transactions with 

customers; they are not required to keep 

records if consumers do not sign 

contracts or otherwise agree to an offer 

of mortgage assistance relief services. In 

addition, providers must retain only 

materially different versions of 

advertising and related materials.236

Finally, the proposed Rule calls for a 24- 

month record retention period. The 

Commission believes this is the 

minimum amount of time necessary for 

consumers to report violations of the 

Rule and for the Commission to 

complete investigations of 

noncompliance and to identify victims. 

Furthermore, the recordkeeping and 

disclosure requirements are formatneutral; they would not preclude the 

use of electronic methods that might 

reduce compliance burdens. In addition, 

the Commission is not aware of any 

feasible or appropriate exemptions for 

small entities because the proposed 

Rule attempts to minimize compliance 

burdens for all entities. 

Nonetheless, the Commission seeks 

additional comment regarding: (1) the 

existence of small entities for which the 

proposed Rule would have a significant 

economic impact and (2) suggested 

alternatives, including potential 

exemptions for small entities, that 

would reduce the economic impact of 

the proposed Rule on such small 

entities. If the comments filed in 

response to this document identify any 

small entities that would be 

significantly affected by the proposed 

Rule, as well as alternatives that would 

reduce compliance costs on such 

entities, the Commission will consider 

the feasibility of such alternatives and 

determine whether they should be 

incorporated into any final Rule. 

VII. Paperwork Reduction Act 

The Commission is submitting this 

proposed Rule and a Supporting 

Statement to the Office of Management 

and Budget for review under the 

Paperwork Reduction Act (PRA), 44 

U.S.C. 3501-21. The disclosure and 

recordkeeping requirements of the 

proposed Rule constitute ‘‘collection[s] 

of information’’ for purposes of the 

PRA.237 The associated PRA burden 

analysis follows. 

A. Disclosure Requirements 

As discussed in the preamble, the 

proposed Rule requires several 

disclosures that MARS providers must 

place in commercial communications 

for MARS and must state to specific 

consumers who seek such services. In 

commercial communications, providers 

must include the following statement: 

‘‘IMPORTANT NOTICE: (Name of 

company) is a for-profit business not 

associated with the government. This 

offer has not been approved by the 

government or your lender.’’ 

In addition, providers must disclose 

to consumers, in any advertisement or 

other commercial communication 

directed to a specific consumer, the cost 

of those services and the following 

statements: (1) that ‘‘(Name of company) 

is a for-profit business not associated 

with the government;’’ (2) that the ‘‘offer 

has not been approved by the 

government or your lender’’; and, in 

some instances; (3) ‘‘Even if you buy our 

service, your lender may not agree to 

change your loan.’’238

B. Recordkeeping Requirements 

The proposed Rule also imposes 

several recordkeeping requirements. 

Several record retention requirements, 

however, pertain to records that are 

customarily kept in the ordinary course 

of business, such as copies of contracts 

and consumer files containing the name 

and address of the borrower, and 

materially different versions of sales 

scripts and related promotional 

materials. As such, the retention of 

these documents does not constitute a 

‘‘collection of information,’’ as defined 

by OMB’s regulations that implement 

the PRA.239

In other instances, the proposed Rule 

requires MARS providers to create as 

well as retain documents demonstrating 

their compliance with specific Rule 

requirements. These include the 

requirement that providers document 

the following activities: (1) the 

performance of promised services and 

delivery of promised services before 

seeking payment from a borrower; (2) 

monitoring of sales presentations by 

tape recording and testing of oral 

representations; (3) establishing a 

procedure for receiving and responding 

to consumer complaints; (4) 

ascertaining, in some instances, the 

number and nature of consumer 

complaints; and (5) taking corrective 

action if sales persons fail to comply 

with the proposed Rule, including 

training and disciplining sales persons. 

C. Estimated Hours Burden and 

Associated Labor Costs 

Commission staff believes that the 

above noted disclosure and 

recordkeeping requirements will impact 

approximately 500 MARS providers. 

The related PRA burden assumptions 

and calculations follow. 

(1) Disclosure Requirements 

The proposed Rule calls for the 

disclosure of specific items of 

information to consumers. Largely, the 

content of the disclosures is prescribed. 

Thus, the PRA burden on providers is 

greatly reduced.240 Staff conservatively 

estimates, however, that the incremental 

burden to prepare these documents will 

be approximately 2 hours. Staff assumes 

that management personnel will 

implement the disclosure requirements, 

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10734 Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 

241 This estimate is based on an averaging of the 

mean hourly wages for sales and financial managers 

provided by the Bureau of Labor Statistics. BUR. OF 

LABOR STATISTICS, NATIONAL 

COMPENSATION SURVEY: OCCUPATIONAL 

EARNINGS IN THE UNITED STATES, 2008, tbl. 3, 

at 3-1 (2009), (http://www.bls.gov/ncs/ 

ncswage2008.pdf) (‘‘Occupational Earnings 

Survey’’). 

242 Id. 

243 This estimate is based on mean hourly wages 

for office file clerks found at OCCUPATIONAL 

EARNINGS SURVEY, tbl. 3, at 3-22. 

244 Associated costs would be reduced if the 

disclosures are made electronically. 

at an hourly rate of $45.22.241 Based 

upon these estimates and assumptions, 

total labor cost for 500 MARS providers 

to prepare the required documents is 

$45,220 (500 providers x 2 hours each 

x $45.22 per hour). 

(2) Recordkeeping Requirements 

As noted above, the proposed Rule 

contemplates that MARS providers will 

create and retain records demonstrating 

their compliance with several 

obligations set forth in the Rule. Staff 

estimates that each of the estimated 500 

providers will spend approximately 25 

hours to institute procedures to monitor 

sales presentations. Although 

Commission staff cannot estimate with 

precision the time required to document 

compliance with the proposed Rule 

provisions, it is reasonable to assume 

that providers will each spend 

approximately 100 hours to do this. 

This includes preparing records 

demonstrating steps taken to seek 

payment for services performed, 

handling consumer complaints, and 

conducting training. Additionally, staff 

estimates that retention and filing of 

these records will require approximately 

3 hours per year per provider. 

Commission staff assumes that 

management personnel will prepare the 

required disclosures at an hourly rate of 

$45.22.242 Based upon the above 

estimates and assumptions, the total 

labor cost to prepare the required 

documents to demonstrate compliance 

is $2,826,250 (500 providers x 125 hours 

each x $45.22 per hour). 

Commission staff further assumes that 

office support file clerks will handle the 

proposed Rule’s record retention 

requirements at an hourly rate of 

$13.24.243 Based upon the above 

estimates and assumptions, the total 

labor cost to retain and file documents 

is $19,860 (500 providers x 3 hours each 

x $13.24 per hour). 

D. Estimated Capital/Other Non-Labor 

Cost Burden 

The proposed Rule should impose no 

more than minimal non-labor costs. 

Staff assumes that each of the estimated 

500 MARS providers will make required 

disclosures in writing to approximately 

1,000 consumers annually.244 Under 

these assumptions, non-labor costs will 

be limited mostly to printing and 

distribution costs. At an estimated $1 

per disclosure, total non-labor costs 

would be $1,000 per provider or, 

cumulatively for all providers, 

$500,000. 

The Commission invites comments 

that will enable it to: (1) evaluate 

whether the proposed collections of 

information are necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information will have practical utility; 

(2) evaluate the accuracy of the 

Commission’s estimate of the burden of 

the proposed collections of information, 

including the validity of the 

methodology and assumptions used; (3) 

enhance the quality, utility, and clarity 

of the information to be collected; and 

(4) minimize the burden of the 

collections of information on those who 

must comply, including through the use 

of appropriate automated, electronic, 

mechanical, or other technological 

techniques or other forms of information 

technology. 

APPENDIX A – LIST OF COMMENTERS AND SHORT-NAMES/ACRONYMS

MARS Proposed Rule 

Short-name/Acronym Commenter 

ABA American Bankers Association 

AFSA American Financial Services Association 

ALMSC American Loss Mitigation Solutions Corp. 

CRC California Reinvestment Coalition, et al. 

CMC Consumer Mortgage Coalition 

CSBS Conference of State Bank Supervisors 

CUNA Credit Union National Association 

Chase Chase Home Finance, LLC 

Gutner John Gutner 

HPC Housing Policy Counsel 

IL AG Illinois Office of the Attorney General 

MA AG Massachusetts Office of the Attorney General 

MBA Mortgage Bankers Association 

MN AG Office of the Minnesota Attorney General 

NAAG National Association of Attorneys General 

NAR National Association of Relators 

NCRC National Community Reinvestment Coalition 

NCLC National Consumer Law Center, et al. 

NCLR National Council of La Raza 

NYC DCA New York City Department of Consumer Affairs 

OTS Office of Thrift Supervision 

OH AG Ohio Attorney General 

Shriver Sargent Shriver National Center on Poverty Law 

TNLMA The National Loss Mitigation Association 

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Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 10735 

245 Pub. L. No. 111-8, § 626, 123 Stat. 524, as 

amended by Pub. L. No. 111-24, § 511, 123 Stat. 

1734. 

Appendix B – List of FTC MARS Law 

Enforcement Actions 

MARS Proposed Rule 

∑ FTC v. First Universal Lending, LLC, 

No. 09-CV-82322 (S.D. Fla. filed Nov. 

24, 2009) 

∑ FTC v. Truman Foreclosure 

Assistance, LLC, No. 09-23543 (S.D. Fla. 

filed Nov. 23, 2009) 

∑ FTC v. Debt Advocacy Ctr, LLC, No. 

1:09CV2712 (N.D. Ohio filed Nov. 19, 

2009) 

∑ FTC v. Kirkland Young, LLC, No. 09- 

23507 (S.D. Fla. filed Nov. 18, 2009) 

∑ FTC v. 1st Guar. Mortgage Corp., 

No. 09-DV-61846 (S.D. Fla. filed Nov. 

17, 2009) 

∑ FTC v. Washington Data Res., Inc., 

No. 8:09-cv-02309-SDM-TBM (M.D. Fla. 

filed Nov. 12, 2009) 

∑ FTC v. Fed. Housing Modification 

Dep’t, No. 09-CV-01753 (D.D.C. filed 

Sept. 15, 2009) 

∑ FTC v. Infinity Group Servs., No. 

SACV09-00977 DOC (MLGx) (C.D. Cal. 

filed Aug. 26, 2009) 

∑ FTC v. Loan Modification Shop, 

Inc., No. 3:09-cv-00798 (JAP) (D.N.J., 

amended complaint filed Aug. 4, 2009) 

∑ FTC v. Apply2Save, Inc., No. 2:09- 

cv-00345-EJL-CWD (D. Idaho filed July 

14, 2009) 

∑ FTC v. Loss Mitigation Servs., Inc., 

No. SACV09-800 DOC (ANX) (C.D. Cal. 

filed July 13, 2009) 

∑ FTC v. Sean Cantkier, No. 1:09-cv00894 (D.D.C., amended complaint filed 

July 10, 2009) 

∑ FTC v. LucasLawCenter ‘‘Inc.,’’ No. 

SACV-09-770 DOC (ANX) (C.D. Cal. 

filed July 7, 2009) 

∑ FTC v. US Foreclosure Relief Corp., 

No. SACVF09-768 JVS (MGX) (C.D. Cal. 

filed July 7, 2009) 

∑ FTC v. Freedom Foreclosure 

Prevention Specialists, LLC, No. 2:09-cv01167-FJM (D. Ariz. filed June 1, 2009) 

∑ FTC v. Data Med. Capital, Inc., No. 

SA-CV-99-1266 AHS (Eex) (C.D. Cal., 

contempt application filed May 27, 

2009) 

∑ FTC v. Dinamica Financiera LLC, 

No. 09-CV-03554 CAS PJWx (C.D. Cal. 

filed May 19, 2009) 

∑ FTC v. Fed. Loan Modification Law 

Ctr., LLP, No. SACV09-401 CJC (MLGx) 

(C.D. Cal. filed Apr. 3, 2009) 

∑ FTC v. Thomas Ryan, No. 1:09- 

00535 (HHK) (D.D.C. filed Mar. 25, 

2009) 

∑ FTC v. Home Assure, LLC, No. 8:09- 

CV-00547-T-23T-Sm (M.D. Fla. filed 

Mar. 24, 2009) 

∑ FTC v. New Hope Prop. LLC, No. 

1:09-cv-01203-JBS-JS (D.N.J. filed Mar. 

17, 2009) 

∑ FTC v. Hope Now Modifications, 

LLC, No. 1:09-cv-01204-JBS-JS (D.N.J. 

filed Mar. 17, 2009) 

∑ FTC v. National Foreclosure Relief, 

Inc., No. SACV09-117 DOC (MLGx) 

(C.D. Cal. filed Feb. 2, 2009) 

∑ FTC v. United Home Savers, LLP, 

No. 8:08-cv-01735-VMC-TBM (M.D. Fla. 

filed Sept. 3, 2008) 

∑ FTC v. Foreclosure Solutions, LLC, 

No. 1:08-cv-01075 (N.D. Ohio filed Apr. 

28, 2008) 

∑ FTC v. Mortgage Foreclosure 

Solutions, Inc., No. 8:08-cv-388-T-23EAJ 

(M.D. Fla. filed Feb. 26, 2008) 

∑ FTC v. Nat’l Hometeam Solutions, 

Inc., No. 4:08-cv-067 (E.D. Tex. filed 

Feb. 26, 2008) 

∑ FTC v. Safe Harbour Foundation of 

Florida, Inc., No. 08-C-1185 (N.D. Ill. 

filed Feb. 27, 2008). 

VIII. Proposed Rule 

List of Subjects in 16 CFR Part 322 

Consumer Protection, Trade Practices, 

Telemarketing. 

Pursuant to the Omnibus 

Appropriations Act, as amended by the 

Credit CARD Act,245 for the reasons set 

forth in the preamble, the Federal Trade 

Commission is proposing to amend title 

16, Code of Federal Regulations, by 

adding a new part 322, to read as 

follows: 

PART 322 – MORTGAGE ASSISTANCE 

RELIEF SERVICES RULE 

Section Contents 

§ 322.1 Scope of regulations of this part. 

§ 322.2 Definitions. 

§ 322.3 Prohibited representations. 

§ 322.4 Required disclosures. 

§ 322.5 Prohibition on collection of advance 

payments. 

§ 322.6 Assisting and facilitating. 

§ 322.7 Exemptions. 

§ 322.8 Waiver not permitted. 

§ 322.9 Recordkeeping and compliance 

requirements. 

§ 322.10 Actions by states. 

§ 322.11 Severability. 

Authority: Pub. L. 111-8, § 626, 123 Stat. 

524, as amended by Pub. L. No. 111-24, 

§ 511, 123 Stat. 1734. 

§ 322.1 Scope of regulations in this part. 

This part implements the 2009 

Omnibus Appropriations Act, Pub. L. 

111-8, § 626, 123 Stat. 524 (Mar. 11, 

2009), as amended by the Credit Card 

Accountability Responsibility and 

Disclosure Act of 2009, Pub. L. 111-24, 

§ 511, 123 Stat. 1734 (May 22, 2009). 

§ 322.2 Definitions. 

(a) ‘‘Commercial communication’’ 

means any written or verbal statement, 

illustration, or depiction, whether in 

English or any other language, that is 

designed to effect a sale or create 

interest in the purchasing of goods or 

services, whether it appears on or in a 

label, package, package insert, radio, 

television, cable television, brochure, 

newspaper, magazine, pamphlet, leaflet, 

circular, mailer, book insert, free 

standing insert, letter, catalogue, poster, 

chart, billboard, public transit card, 

point of purchase display, film, slide, 

audio program transmitted over a 

telephone system, telemarketing script, 

onhold script, upsell script, training 

materials provided to telemarketing 

firms, program-length commercial 

(‘‘infomercial’’), the Internet, cellular 

network, or any other medium. 

Promotional materials and items and 

Web pages are included in the term 

‘‘commercial communication.’’ 

(b) ‘‘Consumer’’ means any natural 

person who owes on any loan secured 

by a dwelling. 

(c) ‘‘Clear and prominent’’ means: 

(1) In textual communications, the 

required disclosures shall be in a font 

easily read by a reasonable consumer, of 

a color or shade that readily contrasts 

with the background of the commercial 

communication, in the same language as 

each that is substantially used in the 

commercial communication, parallel to 

the base of the commercial 

communication, and, except as 

otherwise provided in this rule, each 

letter of the disclosure shall be, at a 

minimum, the larger of 12-point type or 

one-half the size of the largest letter or 

numeral used in the name of the 

advertised website or telephone number 

to which consumers are referred to 

receive information relating to any 

mortgage assistance relief service. 

Textual communications include any 

communications in a written or printed 

form such as print publications or 

words displayed on the screen of a 

computer; 

(2) In communications disseminated 

orally or through audible means, such as 

radio or streaming audio, the required 

disclosures shall be delivered in a slow 

and deliberate manner and in a volume 

and cadence sufficient for an ordinary 

consumer to hear and comprehend 

them; 

(3) In communications disseminated 

through video means, such as television 

or streaming video, the required 

disclosures shall appear simultaneously 

in the audio and visual parts of the 

commercial communication and be 

delivered in a manner consistent with 

paragraphs (c)(1) and (c)(2) of this 

section. The visual disclosure shall be at 

least four percent of the vertical picture 

or screen height and appear for the 

duration of the oral disclosure; 

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(4) In communications made through 

interactive media, such as the Internet, 

online services, and software, the 

required disclosures shall be: 

(i) Consistent with paragraphs (c)(1), 

(c)(2), and (c)(3) of this section, 

(ii) Made on a separate landing page 

immediately prior to the page on which 

the consumer takes any action to incur 

any financial obligation, 

(iii) Unavoidable, e.g., visible to 

consumers without requiring them to 

scroll down a webpage, and 

(iv) Appear in type at least twice the 

size as any hyperlink to the company’s 

website or display of the Uniform 

Resource Locator of the company’s 

website; 

(5) In all instances, the required 

disclosures shall be presented in an 

understandable language and syntax, 

and with nothing contrary to, 

inconsistent with, or in mitigation of the 

disclosures used in any communication 

of them; and 

(6) For program-length television, 

radio, or Internet-based multi-media 

commercial communications, the 

required disclosures shall be made at 

the beginning, near the middle, and at 

the end of the commercial 

communication. 

(d) ‘‘Dwelling’’ means a residential 

structure containing four or fewer units, 

whether or not that structure is attached 

to real property, that is primarily for 

personal, family, or household 

purposes. The term includes any of the 

following if used as a residence: an 

individual condominium unit, 

cooperative unit, mobile home, or 

trailer. 

(e) ‘‘Dwelling loan’’ means any loan 

secured by a dwelling, and any 

associated deed of trust or mortgage. 

(f) ‘‘Dwelling Loan Holder’’ means the 

person who holds a loan secured by a 

dwelling. 

(g) ‘‘Material’’ means likely to affect a 

person’s choice of, or conduct regarding, 

any mortgage assistance relief service. 

(h) ‘‘Mortgage Assistance Relief 

Service’’ means any service, plan, or 

program, offered or provided in 

exchange for consideration on behalf of 

the consumer, that is represented, 

expressly or by implication, to assist or 

attempt to assist the consumer with any 

of the following: 

(1) Negotiating, obtaining, or 

arranging a modification of any term of 

a dwelling loan, including a reduction 

in the amount of interest, principal 

balance, monthly payments, or fees; 

(2) Stopping, preventing, or 

postponing any mortgage or deed of 

trust foreclosure sale for a dwelling or 

any repossession of the consumer’s 

dwelling, or otherwise saving the 

consumer’s dwelling from foreclosure or 

repossession; 

(3) Obtaining any forbearance or 

modification in the timing of payments 

from any dwelling loan holder or 

servicer on any dwelling loan; 

(4) Negotiating, obtaining, or 

arranging any extension of the period of 

time within which the consumer may: 

(i) Cure his or her default on a 

dwelling loan, 

(ii) Reinstate his or her dwelling loan, 

(iii) Redeem a dwelling, or 

(iv) Exercise any right to reinstate a 

dwelling loan or redeem a dwelling; 

(5) Obtaining any waiver of an 

acceleration clause or balloon payment 

contained in any promissory note or 

contract secured by any dwelling; or 

(6) Negotiating, obtaining, or 

arranging: 

(i) A short sale of a dwelling, 

(ii) A deed-in-lieu of foreclosure, or 

(iii) Any other disposition of a 

dwelling other than a sale to a third 

party that is not the dwelling loan 

holder. 

(i) ‘‘Mortgage Assistance Relief Service 

Provider’’ means any person that 

provides, offers to provide, or arranges 

for others to provide, any mortgage 

assistance relief service. This term does 

not include: 

(1) The dwelling loan holder, or any 

agent of such person, provided that any 

such agent does not claim, demand, 

charge, collect, or receive any money or 

other valuable consideration from the 

consumer for the agent’s benefit; 

(2) The servicer of a dwelling loan, or 

any agent of such person, provided that 

any such agent does not claim, demand, 

charge, collect, or receive any money or 

other valuable consideration from the 

consumer for the agent’s benefit; and 

(3) Any nonprofit, bank, thrift, federal 

credit union, or other person 

specifically excluded from the Federal 

Trade Commission’s jurisdiction 

pursuant to 15 U.S.C. 44 and 45(a)(2). 

(j) ‘‘Person’’ means any individual, 

group, unincorporated association, 

limited or general partnership, 

corporation, or other business entity. 

(k) ‘‘Servicer’’ means the person 

responsible for receiving any scheduled 

periodic payments from a consumer 

pursuant to the terms of any dwelling 

loan, including amounts for escrow 

accounts under section 10 of the Real 

Estate Settlement Procedures Act (12 

U.S.C. 2609), and making the payments 

of principal and interest and such other 

payments with respect to the amounts 

received from the consumer as may be 

required pursuant to the terms of the 

mortgage servicing loan documents or 

servicing contract. 

§ 322.3 Prohibited representations. 

It is a violation of this rule for any 

mortgage assistance relief service 

provider to engage in the following 

conduct: 

(a) Representing, expressly or by 

implication, in connection with the 

advertising, marketing, promotion, 

offering for sale, or sale of any mortgage 

assistance relief service that a consumer 

cannot or should not contact or 

communicate with his or her lender or 

servicer. 

(b) Misrepresenting, expressly or by 

implication, any material aspect of any 

mortgage assistance relief service, 

including but not limited to: 

(1) The likelihood of negotiating, 

obtaining, or arranging any represented 

service or result, such as those set forth 

in § 322.2(h); 

(2) The amount of time it will take the 

mortgage assistance relief service 

provider to accomplish any represented 

service or result, such as those set forth 

in § 322.2(h); 

(3) That a mortgage assistance relief 

service is affiliated with, endorsed or 

approved by, or otherwise associated 

with: 

(i) The United States Government, 

(ii) Any governmental homeowner 

assistance plan, 

(iii) Any Federal, state, or local 

government agency, unit, or department, 

(iv) Any nonprofit housing counselor 

agency or program, 

(v) The maker, holder or servicer of 

the consumer’s dwelling loan, or 

(vi) Any other person or program; 

(4) The consumer’s obligation to make 

scheduled periodic payments or any 

other payments pursuant to the terms of 

the consumer’s existing dwelling loan; 

(5) The terms or conditions of the 

consumer’s dwelling loan, including but 

not limited to the amount of debt owed; 

(6) The terms or conditions of any 

refund, cancellation, exchange, or 

repurchase policy for a mortgage 

assistance relief service, including but 

not limited to the likelihood of 

obtaining a full or partial refund, or the 

circumstances in which a full or partial 

refund will be granted, for a mortgage 

assistance relief service; or 

(7) That the mortgage assistance relief 

service provider has completed the 

represented services, as specified in 

§ 322.5, or otherwise has a right to 

claim, demand, charge, collect, or 

receive payment or other consideration. 

§ 322.4 Required disclosures. 

It is a violation of this rule for any 

mortgage assistance relief service 

provider to engage in the following 

conduct: 

(a)(1) Failing to place the following 

statement, in a clear and prominent 

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manner, in every commercial 

communication for any mortgage 

assistance relief service: 

‘‘(Name of company) is a for-profit 

business not associated with the 

government. This offer has not been 

approved by the government or your 

lender.’’ 

(2) In textual communications except 

for communications not covered by 

paragraph (b) of this section, the 

required disclosure also must be 

preceded by the statement 

‘‘IMPORTANT NOTICE’’ in bold-face 

type. 

(b) Failing to disclose, in a clear and 

prominent manner, in every 

communication directed at a specific 

consumer that promotes the sale of any 

mortgage assistance relief service and 

occurs prior to the consumer entering 

into any agreement for the purchase of 

such service, the following information: 

(1) ‘‘You will have to pay (insert 

amount) for this service.’’ For the 

purposes of this paragraph, the amount 

‘‘you will have to pay’’ shall consist of 

the total amount the consumer must pay 

to purchase, receive, and use all of the 

mortgage assistance relief services that 

are the subject of the sales offer, 

including, but not limited to, all fees, 

charges, or penalties; 

(2) ‘‘(Name of company) is a for-profit 

business not associated with the 

government. This offer has not been 

approved by the government or your 

lender;’’ and 

(3) In cases where the provider 

advertises any represented service or 

result set forth in § 322.2(h) other than 

paragraph (h)(2), ‘‘Even if you buy our 

service, your lender may not agree to 

change your loan.’’ 

(c) For the disclosures required by 

paragraph (b) of this section, in textual 

communications the disclosures also 

must appear together under the 

following heading,‘‘IMPORTANT 

NOTICE: Carefully consider this 

information before buying this service.’’ 

The heading must be in bold face font 

that is two point-type larger than the 

font size of the required disclosures. In 

communications disseminated orally or 

through audible means, wholly or in 

part, the audio component of the 

required disclosures must be preceded 

by the statement ‘‘Please consider 

carefully the following information 

before buying this service.’’ In telephone 

communications, the required 

disclosures must be made at the 

beginning of the call. 

§ 322.5 Prohibition on collection of 

advance payments. 

(a) It is a violation of this rule for any 

mortgage assistance relief service 

provider to request or receive payment 

of any fee or other consideration until 

the provider has: 

(1) Achieved all of the results that: 

(i) The provider represented, 

expressly or by implication, to the 

consumer that the service would 

achieve, and 

(ii) Are consistent with consumers’ 

reasonable expectations about the 

service; and 

(2) Provided the consumer with 

documentation of such achieved results. 

(b) In cases where the provider has 

represented, expressly or by 

implication, that it will negotiate, 

obtain, or arrange a modification of any 

term of any dwelling loan, the provider 

shall not request or receive any payment 

or other consideration until it has: 

(1) Obtained a mortgage loan 

modification for the consumer; and 

(2) Provided the consumer 

documentation of the mortgage loan 

modification in the form of a written 

offer from the dwelling loan holder or 

servicer to the consumer. 

(c) For the purposes of paragraph (b) 

of this section, ‘‘mortgage loan 

modification’’ means the contractual 

change to one or more terms of an 

existing dwelling loan between the 

consumer and the owner of such debt 

that substantially reduces the 

consumer’s scheduled periodic 

payments, where the change is: 

(1) Permanent for a period of five 

years or more; or 

(2) Will become permanent for a 

period of five years or more once the 

consumer successfully completes a trial 

period of three months or less. 

§ 322.6 Assisting and facilitating. 

It is a violation of this rule for a 

person to provide substantial assistance 

or support to any mortgage assistance 

relief service provider when that person 

knows or consciously avoids knowing 

that the provider is engaged in any act 

or practice that violates this rule. 

§ 322.7 Exemptions. 

(a) A person licensed to practice law 

in the state in which the consumer 

resides is exempt from § 322.3(a) of this 

rule. 

(b) A person licensed to practice law 

in the state in which the consumer 

resides is not prohibited under § 322.5 

from requesting or receiving 

compensation if such person complies 

with all applicable state laws, including 

licensing regulations, in connection 

with preparing or filing: 

(1) A bankruptcy petition or any other 

document that must be filed in a 

bankruptcy proceeding; or 

(2) Any document that must be filed 

in connection with a court or 

administrative proceeding. 

§ 322.8 Waiver not permitted. 

Any attempt by any person to obtain 

a waiver from any consumer of any 

protection provided by or any right of 

the consumer under this rule constitutes 

a violation of the rule. 

§ 322.9 Recordkeeping and compliance 

requirements. 

(a) Any mortgage assistance relief 

provider must keep, for a period of 

twenty-four (24) months from the date 

the record is produced, the following 

records: 

(1) All contracts or other agreements 

between the provider and any consumer 

for any mortgage assistance relief 

service; 

(2) Copies of all written 

communications between the provider 

and any consumer occurring prior to the 

date on which the consumer enters into 

a contract or other agreement with the 

provider for any mortgage assistance 

relief service; 

(3) Copies of all documents or 

telephone recordings created in 

connection with compliance with 

paragraph (b) of this section. 

(4) All consumer files containing the 

names, phone numbers, dollar amounts 

paid, quantity of items or services 

purchased, and descriptions of items or 

services purchased, to the extent such 

information is obtained in the ordinary 

course of business; 

(5) Copies of all materially different 

sales scripts, training materials, 

commercial communications, or other 

marketing materials, including websites 

and weblogs; and 

(6) Copies of the documentation 

provided to the consumer as specified 

in § 322.5 of this part. 

(b) A mortgage assistance relief 

service provider must: 

(1) Take reasonable steps sufficient to 

monitor and ensure that all employees 

and independent contractors comply 

with this rule. Such steps shall include 

the monitoring of sales presentations 

with customers, and shall also include, 

at a minimum, the following: 

(i) Performing random, blind tape 

recording and testing of the oral 

representations made by persons 

engaged in sales or other customer 

service functions; 

(ii) Establishing a procedure for 

receiving and responding to consumer 

complaints; and 

(iii) Ascertaining the number and 

nature of consumer complaints 

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10738 Federal Register / Vol. 75, No. 45 / Tuesday, March 9, 2010 / Proposed Rules 

regarding transactions in which all 

employees and independent contractors 

are involved; 

(2) Investigate promptly and fully any 

consumer complaint received; 

(3) Take corrective action with respect 

to any employee or independent 

contractor whom the mortgage 

assistance relief service provider 

determines is not complying with this 

rule, which may include training, 

disciplining, or terminating such 

person; and 

(4) Maintain documentation of its 

compliance with paragraphs (b)(1)-(3) of 

this section. 

(c) A mortgage assistance relief 

provider may keep the records required 

by § 322.9 (a) and (b) in any form, and 

in the same manner, format, or place as 

they keep such records in the ordinary 

course of business. Failure to keep all 

records required under § 322.9 (a) and 

(b) shall be a violation of this Part. 

§ 322.10 Actions by states. 

Any attorney general or other officer 

of a state authorized by the state to bring 

an action under this part may do so 

pursuant to section 626(b) of the 2009 

Omnibus Appropriations Act, Pub. L. 

111-8, § 626, 123 Stat. 524 (Mar. 11, 

2009), as amended by Pub. L. 111-24, 

§ 511, 123 Stat. 1734 (May 22, 2009). 

§ 322.11 Severability. 

The provisions of this rule are 

separate and severable from one 

another. If any provision is stayed or 

determined to be invalid, it is the 

Commission’s intention that the 

remaining provisions shall continue in 

effect. 

By direction of the Commission. 

Donald S. Clark, 

Secretary. 

[FR Doc. 2010–4651 Filed 3–8–10; 8:45 am] 

BILLING CODE 6750–01–S 

DEPARTMENT OF LABOR 

Occupational Safety and Health 

Administration 

29 CFR Part 1904 

[Docket No. OSHA–2009–0044] 

RIN 1218–AC45 

Occupational Injury and Illness 

Recording and Reporting 

Requirements 

AGENCY: Occupational Safety and Health 

Administration (OSHA), Labor. 

ACTION: Extension of comment period. 

SUMMARY: OSHA is extending the 

comment period on the proposed rule 

on Occupational Injury and Illness 

Recording and Reporting Requirements 

to March 30, 2010. The proposal would 

restore a column to the OSHA 300 Log 

that employers would use to record 

work-related musculoskeletal disorders 

(MSDs). 

DATES: The comment period for the 

proposed rule published January 29, 

2010, at 75 FR 4728, is extended. 

Comments must be submitted 

(postmarked, sent or received) by March 

30, 2010. 

ADDRESSES: You may submit comments, 

identified by Docket No. OSHA–2009– 

0044, by any one of the following 

methods: 

Electronically: You may submit 

comments and attachments 

electronically at http:// 

www.regulations.gov, the Federal 

eRulemaking Portal. Follow the 

instructions on-line for making 

electronic submissions. 

Fax: If your comments, including 

attachments, do not exceed 10 pages, 

you may fax them to the OSHA Docket 

Office at (202) 693–1648. 

Mail, hand delivery, express mail, 

messenger or courier service: You must 

submit three copies of your comments 

and attachments to the OSHA Docket 

Office, Docket No. OSHA–2009–0044, 

U.S. Department of Labor, Room N– 

2625, 200 Constitution Avenue, NW., 

Washington, DC 20210; telephone (202) 

693–2350 (OSHA’s TTY number is (877) 

889–5627). Deliveries (hand, express 

mail, messenger and courier service) are 

accepted during the Department of 

Labor’s and Docket Office’s normal 

business hours, 8:15 a.m.–4:45 p.m., e.t. 

Instructions: All submissions must 

include the docket number (Docket No. 

OSHA–2009–0044) or RIN number (RIN 

1218–AC45) for this rulemaking. 

Because of security-related procedures, 

submission by regular mail may result 

in significant delay. Please contact the 

OSHA Docket Office about security 

procedures for hand delivery, express 

delivery, messenger or courier. 

All comments, including any personal 

information you provide, are placed in 

the public docket without change and 

may be made available on http:// 

www.regulations.gov. Therefore, OSHA 

cautions you about submitting personal 

information such as social security 

numbers and birthdates. 

Docket: To read or download 

submissions in response to the proposed 

rule, go to Docket No. OSHA–2009– 

0044 at http://www.regulations.gov. All 

submissions are listed in the http:// 

www.regulations.gov index, however, 

some information (e.g., copyrighted 

material) is not publicly available to 

read or download through that Web 

page. All submissions, including 

copyrighted material, are available for 

inspections and copying at the OSHA 

Docket Office. 

Electronic copies of this Federal 

Register document are available at 

http://www.regulations.gov. This 

document, as well as news releases and 

other relevant information, also are 

available at OSHA’s Web page at http:// 

www.osha.gov. 

FOR FURTHER INFORMATION CONTACT: 

Press inquiries: Jennifer Ashley, 

Director, OSHA, Office of 

Communications, Room N–3647, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Washington, DC 20210; 

telephone (202) 693–1999. 

For general and technical 

information: Jim Maddux, Acting 

Deputy Director, OSHA, Directorate of 

Standards and Guidance, Room N–3718, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Washington, 

DC 20210; telephone (202) 693–1950. 

SUPPLEMENTARY INFORMATION: On 

January 29, 2010, OSHA published a 

proposed rule to revise its regulation on 

Occupational Injury and Illness 

Recording and Reporting 

(Recordkeeping) (75 FR 4728). The 

proposal would restore a column to the 

OSHA 300 Log that employers would 

use to record work-related 

musculoskeletal disorders (MSDs). The 

proposal set a March 16, 2010 deadline 

for submitting written comments. 

OSHA has received requests from 

several entities, including the Chamber 

of Commerce, National Association of 

Manufacturers, National Association of 

Home Builders, Associated Builders and 

Contractors, and IPC (Association 

Connecting Electronics Industries) to 

extend the comment period between 15 

to 45 additional days. Their reasons for 

requesting an extension include the 

severe February snowstorms, which 

stakeholders said shut down or severely 

hampered access to their workplaces for 

more than a week, leaving them unable 

to access their offices or meet with their 

members. The requests also noted that 

while the proposed rule said OSHA was 

providing 60 days for public comment 

(75 FR 4739), the deadline in the DATES

section only provided 45 days. 

OSHA has decided to extend the 

deadline for submitting comments to 

March 30, 2010, which provides 

stakeholders an additional 15 days, as 

IPC requested. The extension ensures 

that stakeholders will have had a full 60 

days to submit comments, which OSHA 

believes is adequate for this limited 

rulemaking. The extension also ensures 

that stakeholders attending the public 

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