60352 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

electronic form, as FHFA shall deem 

appropriate. 

(d) No waiver of privilege. The release 

of information under this section does 

not constitute a waiver by FHFA of any 

privilege, or its right to control, 

supervise, or impose limitations on, the 

subsequent use and disclosure of any 

information concerning a Bank. To the 

extent that any reports of examination 

or other materials provided to a Bank or 

the Office of Finance pursuant to this 

section otherwise qualify as 

Unpublished Information under § 911.1 

of this title or any successor provision, 

those materials shall continue to qualify 

as such and shall continue to be subject 

to the restrictions on disclosure set forth 

in part 911 of this title, or any successor 

provisions. 

(e) Transition provision. Following 

the effective date of this section, FHFA 

will distribute promptly to each Bank 

and the Office of Finance a copy of the 

most recent report of examination of all 

other Banks. Each Bank shall have ten 

(10) business days following the 

effective date of this section within 

which to submit a written request to 

withhold information as described in 

paragraph (b)(1) of this section. Upon 

the expiration of the time period 

described in the preceding sentence, the 

distribution of the initial reports of 

examination shall proceed in 

accordance with paragraphs (b)(2) and 

(c) of this section. 

Dated: September 24, 2010. 

Edward J. DeMarco, 

Acting Director, Federal Housing Finance 

Agency. 

[FR Doc. 2010–24578 Filed 9–29–10; 8:45 am] 

BILLING CODE 8070–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 71 

Proposed Modification of the Seattle, 

WA, Class B Airspace Area; Public 

Meetings 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of meetings. 

SUMMARY: This notice announces three 

fact-finding informal airspace meetings 

to solicit information from airspace 

users and others concerning a proposal 

to revise the Class B airspace area at 

Seattle, WA. The purpose of these 

meetings is to provide interested parties 

an opportunity to present views, 

recommendations, and comments on the 

proposal. All comments received during 

these meetings will be considered prior 

to any revision or issuance of a notice 

of proposed rulemaking. 

DATES: The informal airspace meetings 

will be held on Thursday, December 9, 

2010, from 6:30 p.m.–9 p.m.; Tuesday, 

December 14, 2010, from 6:30 p.m.– 

9 p.m.; and Thursday, December 16, 

2010, from 6:30 p.m.–9 p.m. Comments 

must be received on or before January 

31, 2011. 

ADDRESSES: (1) The meeting on 

Thursday, December 9, 2010, will be 

held at Snohomish County Auditorium, 

2320 California Street, Everett, WA 

98201. (2) The meeting on Tuesday, 

December 14, 2010, will be held at the 

Highline Performing Arts Center, 401 

South 152nd Street, Burien, WA 98148. 

(3) The meeting on Thursday, December 

16, 2010, will be held at The Theater at 

Auburn Mountainview, 28900 124 

Avenue South East, Auburn, WA, 

98092. 

Comments: Send comments on the 

proposal, in triplicate, to: Clark Desing, 

Manager, Operations Support Group, 

AJV–W2, Western Service Center, Air 

Traffic Organization, Federal Aviation 

Administration, 1601 Lind Avenue, 

SW., Renton WA 98057. 

FOR FURTHER INFORMATION CONTACT: To 

obtain details including a graphic 

depiction regarding this proposal, 

please contact Everett Paul Delay, FAA 

Support Manager Seattle TRACON, SeaTac International Airport, 825 South 

160th Street, Burien, WA 98148, (206) 

214–4620. 

SUPPLEMENTARY INFORMATION: 

Meeting Procedures 

(a) Doors open 30 minutes prior to the 

beginning of each meeting. The 

meetings will be informal in nature and 

will be conducted by one or more 

representatives of the FAA. A 

representative from the FAA will 

present a briefing on the planned 

modification to the Class B airspace at 

Seattle, WA. Each participant will be 

given an opportunity to deliver 

comments or make a presentation, 

although a time limit may be imposed. 

Only comments concerning the plan to 

modify the Class B airspace area at 

Seattle WA, will be accepted. 

(b) The meetings will be open to all 

persons on a space-available basis. 

There will be no admission fee or other 

charge to attend and participate. 

(c) Any person wishing to make a 

presentation to the FAA panel will be 

asked to sign in and estimate the 

amount of time needed for such 

presentation. This will permit the panel 

to allocate an appropriate amount of 

time for each presenter. These meetings 

will not be adjourned until everyone on 

the list has had an opportunity to 

address the panel. 

(d) Position papers or other handout 

material relating to the substance of 

these meetings will be accepted. 

Participants wishing to submit handout 

material should present an original and 

two copies (3 copies total) to the 

presiding officer. There should be 

additional copies of each handout 

available for other attendees. 

(e) These meetings will not be 

formally recorded. However, a summary 

of comments made at the meeting will 

be filed in the docket. 

Agenda for the Meetings 

—Sign-in. 

—Presentation of meeting procedures. 

—FAA explanation of the planned Class 

B airspace area modifications. 

—Solicitation of public comments. 

—Closing comments. 

Issued in Washington, DC, on September 

21, 2010. 

Paul Gallant, 

Acting Manager, Airspace and Rules Group. 

[FR Doc. 2010–24543 Filed 9–29–10; 8:45 am] 

BILLING CODE P 

FEDERAL TRADE COMMISSION 

16 CFR Part 321 

[RIN 3084-AB18] 

Notice of Proposed Rulemaking: 

Mortgage Acts and Practices – 

Advertising Rule 

AGENCY: Federal Trade Commission 

(FTC or Commission). 

ACTION: Notice of proposed rulemaking; 

request for comment. 

SUMMARY: Pursuant to the 2009 

Omnibus Appropriations Act (Omnibus 

Appropriations Act), as clarified by the 

Credit Card Accountability, 

Responsibility and Disclosure Act of 

2009 (Credit CARD Act), the 

Commission issues a Notice of Proposed 

Rulemaking (NPRM) relating to unfair or 

deceptive acts and practices that may 

occur with regard to mortgage 

advertising, the Mortgage Acts and 

Practices (MAP) – Advertising Rule 

(proposed rule). The proposed rule 

published for comment, among other 

things, would prohibit any 

misrepresentation in any commercial 

communication regarding any term of 

any mortgage credit product; and 

impose recordkeeping requirements. 

DATES: Comments must be received by 

November 15, 2010. 

ADDRESSES: Interested parties are 

invited to submit written comments 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60353 

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

8, 123 Stat. 524 (2009). 

2 Section 626(a), Pub. L. 111-8, 123 Stat. 524, 678 

(2009) (codified at 15 U.S.C. 1638 note). 

3 5 U.S.C. 553. 

4 15 U.S.C. 57a. 

5 Pub. L. 111-24, 123 Stat. 1734 (2009) (codified 

in scattered sections of 15 U.S.C.). 

6 Pub. L. 111-24, 123 Stat. 1734, 1763-64 (2009) 

(codified at 15 U.S.C. 1638 note). 

7 Section 511(a)(1)(B), Pub. L. 111-24, 123 Stat. 

1734, 1763 (2009) (codified at 15 U.S.C. 1638 note). 

The Commission is conducting a separate 

rulemaking with respect to mortgage assistance 

relief services. See infra note 19. 

8 Section 511(a)(1)(B), Pub. L. 111-24, 123 Stat. 

1734, 1763 (2009) (codified at 15 U.S.C. 1638 note). 

9 Federal Trade Commission Policy Statement on 

Deception, appended to In re Cliffdale Assocs., Inc., 

103 F.T.C. 110, 174-84 (1984) (Deception Policy 

Statement). 

10 15 U.S.C. 45(n). Section 5(n) of the FTC Act 

also provides that ‘‘[i]n determining whether an act 

or practice is unfair, the Commission may consider 

established public policies as evidence to be 

considered with all other evidence. Such public 

policy considerations may not serve as a primary 

basis for such determination.’’ 

11 Credit CARD Act § 511(a)(1)(C). 

12 See 15 U.S.C. 44, 45(a)(2). 

13 The FTC Act defines ‘‘banks’’ by reference to 

a listing of certain distinct types of depository 

institutions. See 15 U.S.C. 44, 57a(f)(2). That list 

includes: national banks, federal branches of foreign 

banks, member banks of the Federal Reserve 

System, branches and agencies of foreign banks, 

commercial lending companies owned or controlled 

by foreign banks, banks insured by the Federal 

Deposit Insurance Corporation (FDIC), and insured 

state branches of foreign banks. The Commission 

has jurisdiction over entities that are affiliated with 

banks, such as parent or subsidiary companies, that 

are not themselves banks. This jurisdiction is held 

concurrently with the federal bank regulatory 

agencies (the Board of Governors of the Federal 

Reserve System (Federal Reserve Board or Board), 

the Office of the Comptroller of the Currency (OCC), 

the FDIC, and the Office of Thrift Supervision 

(OTS)) and the National Credit Union 

Administration (NCUA) as to their respective 

institutions. See Section 133(a) of the GrammLeach-Bliley Act, Pub. L. 106-102, 113 Stat. 1383 

(1999) (codified at 15 U.S.C. 41 note (a)); Minnesota 

v. Fleet Mortg. Corp., 181 F. Supp. 2d 995 (D. Minn. 

2001). The FTC also has jurisdiction over non-bank 

entities that provide services to or on behalf of a 

bank, such as credit card marketing. See, e.g., FTC 

v. CompuCredit Corp., No. 08-1976, at 6-15 (N.D. 

Ga. Oct. 8, 2008) (magistrate judge’s non-final report 

and recommendation) (finding that the FTC has 

jurisdiction under FTC Act against entity that 

contracted to provide services to a bank); FTC v. 

Am. Std. Credit Sys., 874 F. Supp. 1080, 1086 (C.D. 

Cal. 1994) (dismissing argument that entity that 

contracted to perform credit card marketing and 

other services for a bank is not subject to FTC Act). 

14 The exclusion is limited to federal credit 

unions; thus, the FTC has jurisdiction over statechartered credit unions, among others. See infra 

notes 116-118 and accompanying text. 

15 Section 4 of the FTC Act, 15 U.S.C. 44, 

specifies that the Commission’s jurisdiction over 

‘‘corporations’’ is limited to entities that are 

organized to carry on business for their own profit 

or that of their members. Thus, the non-profit 

exemption does not apply to ostensible non-profits 

that operate for the profit of their ‘‘members,’’ a term 

that courts have interpreted to include affiliates and 

corporate officials. See, e.g., FTC v. AmeriDebt, Inc., 

343 F. Supp. 2d 451 (D. Md. 2004); Am. Med. Ass’n 

v. FTC, 638 F.2d 443 (2d Cir. 1980), aff’d by an 

equally divided court, 455 U.S. 676 (1982). 

16 Omnibus Appropriations Act § 626; Credit 

CARD Act § 511(a)(1)(C) and (a)(2). 

electronically or in paper form by 

following the instructions in the 

Requests for Comments part of the 

SUPPLEMENTARY INFORMATION section 

below. Comments in electronic form 

should be submitted at (https:// 

ftcpublic.commentworks.com/ftc/ 

mapadrulenprm) (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 Part IV of the 

SUPPLEMENTARY INFORMATION section 

below. 

FOR FURTHER INFORMATION CONTACT: 

Laura Johnson or Carole Reynolds, 

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 the notice and comment 

rulemaking procedures specified by 

Section 553 of the Administrative 

Procedure Act,3 in this proceeding, 

rather than the rulemaking procedures 

set forth in Section 18 of the Federal 

Trade Commission Act (FTC Act).4

On May 22, 2009, President Obama 

signed the Credit Card Accountability 

Responsibility and Disclosure Act of 

2009 (Credit CARD Act).5 Section 511 of 

the Credit CARD Act clarified the 

conduct and types of entities for which 

the Commission may promulgate rules 

to implement the Omnibus 

Appropriations Act.6

1. Covered Acts and Practices 

Section 511 of the CARD Act 

specified that the FTC 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.’’7 The Omnibus Appropriations 

Act, as clarified by the Credit CARD 

Act, does not otherwise specify what the 

Commission should include in, or 

exclude from, a rule, but rather directs 

the FTC to issue mortgage rules that 

‘‘relate to’’ unfairness or deception.8

Section 5 of the FTC Act broadly 

proscribes unfair or deceptive acts or 

practices in or affecting commerce. An 

act or practice is deceptive if there is a 

representation, omission of information, 

or practice that is likely to mislead 

consumers who are acting reasonably 

under the circumstances, and the 

representation, omission, or practice is 

one that is material, i.e., likely to affect 

consumers’ decisions to purchase or use 

the product or service at issue.9 Section 

5(n) of the FTC Act sets forth a threepart test to determine whether an act or 

practice is unfair. First, the practice 

must be one that causes or is likely to 

cause substantial injury to consumers. 

Second, the injury must not be 

outweighed by countervailing benefits 

to consumers or to competition. Third, 

the injury must be one that consumers 

could not reasonably have avoided.10

The express statutory language of the 

Credit CARD Act allows the FTC to 

promulgate rules that ‘‘relate to’’ 

unfairness or deception. The 

Commission interprets this language to 

allow it to issue rules that prohibit or 

restrict unfair or deceptive conduct or 

that are reasonably related to the goal of 

preventing unfair or deceptive practices. 

The FTC, however, also notes that all of 

the conduct prohibited by the proposed 

rule is itself deceptive. 

2. Covered Entities 

Section 511 of the Credit CARD Act 

also clarified that the Commission’s 

rulemaking authority is limited to 

entities over which the FTC has 

jurisdiction under the FTC Act.11 Under 

the FTC Act, the Commission has 

jurisdiction over any person, 

partnership, or corporation that engages 

in unfair or deceptive acts or practices 

in or affecting commerce, except, among 

others:12 banks,13 savings and loan 

institutions, federal credit unions,14

non-profits,15 and common carriers. The 

proposed rule does not cover the 

practices of entities that are excluded 

from the FTC’s jurisdiction. 

3. Enforcement 

The Omnibus Appropriations Act, as 

clarified by the Credit CARD Act, also 

permits both the Commission and the 

states to enforce the rules the FTC 

issues.16 The Commission can use its 

powers under the FTC Act to conduct 

investigations and bring law 

enforcement actions against those who 

violate FTC rules. In such actions, the 

Commission may seek injunctive relief, 

as well as civil penalties if the 

defendant committed the violations 


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60354 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

17 See 15 U.S.C. 45(m)(1)(A). The Commission 

must refer any action for civil penalties to the 

Department of Justice, which may file the case or 

return it to the Commission for filing. See 15 U.S.C. 

56. 

18 The Omnibus Appropriations Act and the 

Credit CARD Act use the term ‘‘loan’’ in referring 

to mortgage credit generally and do not limit that 

term in any way. Accordingly, this NPRM and the 

proposed rule use the term ‘‘loan’’ to refer to any 

form of mortgage credit. 

19 Mortgage Acts and Practices, ANPR, 74 FR 

26118 (June 1, 2009). On the same date, the 

Commission issued another ANPR, the Mortgage 

Assistance Relief Services Rulemaking, 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 

loans or to avoid foreclosure on their loans. 

Mortgage Assistance Relief Services (MARS), 

ANPR, 74 FR 26130 (June 1, 2009). The 

Commission has issued an NPRM on the MARS 

Rule. 75 FR 10707 (Mar. 9, 2010). 

20 The other nine comments are duplicates, 

replacements, blank, or ‘‘test’’ submissions. Public 

comments associated with the MAP ANPR are 

available at (http://www.ftc.gov/os/comments/map/ 

index.shtm). In addition, a list of commenters cited 

in this NPRM, along with their short citation names 

or acronyms used throughout the NPRM, is attached 

to this document. See Table A - List of Commenters 

and Short-names/Acronyms, infra. 

21 See, e.g., MICA at 9; NAR at 2; AG Mass. at 

1; NCLC at 1; NCRC at 1; CRL at 1. 22 See, e.g., MBA at 1; ABA at 6. 23 See infra Parts III and IV. 24 See CMC/AFSA at 7; HPC at 3; ABA at 5; MBA 

at 5; MICA at 3; CUNA at 2. 

25 See BECU at 3; NASCUS at 2; GCUA at 2. 

26 See, e.g., HPC at 3; MICA at 3; CMC/AFSA at 

7; ABA at 6. 

27 12 CFR 226. The Federal Reserve Board issued 

Regulation Z, which implements TILA, 15 U.S.C. 

1601-1666j. The Home Ownership and Equity 

Protection Act (HOEPA), 15 U.S.C. 1639, is part of 

TILA. 

28 See, e.g., ABA at 6 (certain aspects of 

advertising rules for nonbank entities); CRL at 19. 

The Commission has authority to obtain civil 

penalties for violations of rules that the Board 

promulgates under Section 129(l)(2) of TILA (part 

of HOEPA), 15 U.S.C. 1639(l)(2). See Omnibus 

Appropriations Act § 626(c). As discussed further 

below, see infra note 56, the Board issued mortgagerelated rules in July 2008, some of which were 

promulgated under Section 129(l)(2) of TILA. See 

generally 73 FR 44522 (July 30, 2008). 

In contrast, the Commission does not have 

specific authority to obtain civil penalties for 

violations of rules that the Board promulgates under 

Section 105 of TILA. 15 U.S.C. 1604. See generally 

Omnibus Appropriations Act § 626(c). Some 

provisions of the Board’s July 2008 mortgage rules 

were promulgated under Section 105. See 73 FR 

44522-23. Incorporating the Board’s Section 105 

rules into the proposed MAP – Advertising Rule 

would give the Commission authority to seek civil 

penalties for violations of the Section 105 rules. The 

advantages and disadvantages of incorporating the 

Section 105 rules, which include technical and 

complex advertising requirements, are discussed 

below. See infra Parts III.C.2 and IV.C.2. 

29 See, e.g., CMC/AFSA at 3; ABA at 4-5. For a 

discussion of the FTC’s jurisdiction, see supra Part 

I.A.2. 

30 See generally CUNA; NASCUS; BECU; Zager; 

GCUA. Among other things, various comments note 

that the Commission lacks jurisdiction to issue 

rules for federally-chartered credit unions. Some 

comments assert that credit union advertising is 

already regulated. 

31 Traditional mortgages are considered ‘‘closedend credit,’’ generally consisting of installment 

financing where the amount borrowed and 

repayment schedule are set at the transaction’s 

outset. TILA and Regulation Z set various 

advertising and other requirements for closed-end 

credit. See, e.g., 12 CFR 226.17-.24. 

32 HELOCs typically are ‘‘open-end credit,’’ which 

TILA defines as credit extended to a consumer 

under a plan in which: (1) the consumer reasonably 

contemplates repeated transactions; (2) the creditor 

may impose a finance charge from time to time on 

the outstanding unpaid balance; and (3) the amount 

of credit that may be extended to the consumer 

during the plan’s term is generally made available 

to the extent that any unpaid balance is repaid. See 

15 U.S.C. 1602(i); 12 CFR 226.2(a)(10) and (20). 

33 See generally 12 CFR 226.33 (reverse mortgages 

under Regulation Z), and U.S. Department of 

Housing and Urban Development (HUD), Glossary, 

definition of ‘‘reverse mortgage,’’ available at (http:// 

www.hud.gov/offices/hsg/sfh/buying/glossary.cfm). 

with actual knowledge or knowledge 

fairly implied on the basis of objective 

circumstances that its practices were 

unfair or deceptive and violated the 

rule.17 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, a 

state must give 60 days advance notice 

to the ‘‘primary federal regulator’’ of the 

proposed defendant (unless such notice 

is not feasible), and the regulator has the 

right to intervene in the action. 

B. Advance Notice of Proposed 

Rulemaking 

On June 1, 2009, the Commission 

published in the Federal Register an 

Advance Notice of Proposed 

Rulemaking (ANPR) soliciting 

comments on the contours of a possible 

rule that would prohibit or restrict 

unfair and deceptive acts and practices 

that may occur throughout the life-cycle 

of a mortgage loan,18 i.e., in the 

advertising and marketing of the loan, at 

the time of loan origination, in the home 

appraisal process, and during the 

servicing of the loan.19 The ANPR 

described these services generically as 

‘‘Mortgage Acts and Practices,’’ and the 

rulemaking proceeding was entitled the 

Mortgages Acts and Practices (MAP) 

Rulemaking. In response to the ANPR, 

the Commission received a total of 55 

comments, of which 46 were germane.20

About half of the comments were from 

individuals, with the rest from industry 

trade associations or groups, consumer 

advocacy groups, credit unions, a 

government-sponsored enterprise (GSE), 

a state attorney general, a group of state 

credit union regulators, and a labor 

union. Most of the comments express 

support for FTC regulatory action 

regarding various aspects of the 

mortgage loan life-cycle.21 Several 

comments, however, urge the FTC to 

focus its resources on enforcement or 

wait to gauge the effectiveness of other 

mortgage-related rules promulgated 

recently by other federal agencies before 

proceeding with its own regulations.22

The Commission received several 

comments that focus specifically on 

mortgage advertising; these are 

addressed below.23 Six of these discuss 

various advertising issues,24 while three 

additional comments refer to other 

federal advertising regulations.25

Several commenters expressed various 

degrees of support for FTC rules on 

mortgage advertising generally or 

specific aspects of mortgage advertising 

or marketing.26 Others urged the 

Commission to incorporate through this 

rulemaking aspects of Regulation Z 

under the Truth in Lending Act (TILA)27

to enable the Commission to obtain civil 

penalties for violations of those 

provisions.28 Commenters representing 

banks and credit unions, and a group of 

state credit union regulators, raised 

questions about the application of the 

prospective rules to banking 

subsidiaries or affiliates,29 or to statechartered credit unions.30

As discussed more fully below, 

advertising is the initial step and often 

a crucial part of the mortgage process. 

Consumers may not make well-informed 

decisions if the information they receive 

through advertising is deceptive. The 

Commission therefore has determined to 

issue this NPRM focused exclusively on 

mortgage advertising practices. The 

Commission may issue additional 

proposed rules regarding other aspects 

of the mortgage process in the future. 

II. Mortgage Advertising Practices 

A. Overview 

As discussed in the ANPR, the 

mortgage life-cycle begins when a 

consumer initially shops for a mortgage, 

whether to purchase a home or real 

property,31 refinance an existing 

mortgage, or obtain a home equity loan 

or line of credit (known as a HELOC) 

based on the consumer’s equity in the 

home.32 In this process, the consumer 

may encounter diverse types of 

mortgage products. The loan may either 

be a forward mortgage, the most 

prevalent type of loan, where the 

homeowner borrows funds and remits 

payments for principal, interest, and in 

some cases other charges; or a reverse 

mortgage, a home-secured loan typically 

offered to senior citizens which the 

borrower is not required to repay as long 

as he or she remains in the home and 

which only becomes due when the 

homeowner moves out of or sells the 

home, dies, or fails to satisfy certain 

loan conditions.33 Forward mortgages 

may be traditional, such as 30-year 


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34 In an amortizing loan, the borrower pays 

principal and the full amount of interest that is due 

each month throughout the life of the loan. 

35 Nontraditional mortgages include loan 

products that may offer consumers financial options 

but also pose substantial risk. These include, for 

example, interest-only (I/O) loans and payment 

option ARMs (option ARMs). I/O loans involve an 

initial loan period in which the borrower pays only 

the interest accruing on the loan balance; after the 

initial period, the borrower either makes increased 

payments of principal and interest and/or remits a 

large payment, sometimes referred to as a ‘‘balloon 

payment.’’ Option ARMs offer borrowers several 

choices each month during the loan’s introductory 

period, including a minimum payment that is 

smaller than the interest accruing on the principal. 

After the introductory period, the loan is recast, and 

the borrower’s payments increase to amortize and 

repay principal and the adjustable interest rate over 

the remaining loan term. See generally FTC, 

Comment To Jennifer L. Johnson, Secretary, Board 

of Governors of the Federal Reserve System (Sept. 

14, 2006), at 5-13 (providing comments on the home 

equity lending market and summarizing the 

Commission’s May 2006 alternative mortgage 

workshop, Protecting Consumers in the New 

Mortgage Marketplace), available at (http:// 

www.ftc.gov/opa/2006/09/fyi0661.shtm) (FTC 

Comment on Home Equity Lending and Alternative 

Mortgage Workshop). 

36 Lead generators are business entities that 

provide, in exchange for consideration, consumer 

information to a seller or telemarketer for use in the 

marketing of goods or services. See, e.g., Quik 

Payday, Inc. v. Stork, 549 F.3d 1302, 1304 (10th Cir. 

2008); FTC v. Connelly, No. SA CV 06-701 DOC 

(RNBx), 2006 U.S. Dist. LEXIS 98263, at *11 (C.D. 

Cal. Dec. 20, 2006); United States v. Ameriquest 

Mortg. Co., No. 8:07-cv-01304 CJC-MLG (C.D. Cal. 

2007) (stipulated judgment and order). 

37 Rate aggregators regularly collect and publish 

rates and other information from numerous 

mortgage lenders, mortgage brokers, or other 

sources. Consumers typically can compare mortgage 

credit product terms for free by searching or 

viewing this information sorted by rate, loan 

amount, mortgage credit product, or other criteria. 

Rate aggregators may supply the lenders’ or brokers’ 

contact information, so the consumer can reach 

them directly, or they may act as a lead generator 

and provide the consumer’s information to lenders 

or brokers. 

38 This is particularly true for nontraditional 

mortgages, the terms of which are often unfamiliar 

to consumers. See generally FTC Comment on 

Home Equity Lending and Alternative Mortgage 

Workshop, supra note 35. 

39 Conversely, deceptive claims in marketing 

information undermine the ability of consumers to 

make well-informed decisions. See generally 

Prepared Statement of the Federal Trade 

Commission: Hearing Before the Senate Committee 

on Commerce, Science, and Transportation, 

Subcommittee on Consumer Protection, Product 

Safety, and Insurance, July 14, 2009, available at 

(http://www.ftc.gov/os/2009/07/ 

P094492antifraudlawtest.pdf); Prepared Statement 

of the Federal Trade Commission on ‘‘Foreclosure 

Rescue and Loan Modification Scams’’: Hearing 

Before the House Committee on Financial Services, 

Subcommittee on Housing and Community 

Opportunity, May 6, 2009, available at (http:// 

www.ftc.gov/os/2009/05/ 

P064814foreclosuretescue.pdf); see also Interagency 

Guidance on Nontraditional Mortgage Products 

Risks (Interagency Nontraditional Mortgage 

Guidance), 71 FR 58609 (Oct. 4, 2006) (federal bank 

regulatory agencies’ guidance to address risks 

associated with growing use of mortgage products 

that allow borrowers to defer payment of principal 

and sometimes interest); Interagency Statement on 

Subprime Mortgage Lending (Interagency Subprime 

Mortgage Statement), 72 FR 37569 (July 10, 2007) 

(federal bank regulatory agencies’ guidance to 

address risks with subprime mortgage products and 

lending practices, including adjustable rate 

mortgages with low initial payments that expire 

after a short period and could result in payment 

shock); Federal Financial Institutions Examination 

Council (FFIEC); Reverse Mortgage Products: 

Guidance for Managing Compliance and Reputation 

Risks (FFIEC Reverse Mortgage Guidance), 75 FR 

50801 (Aug. 17, 2010) (guidance issued by federal 

and state bank regulatory agencies on need for 

adequate information and other consumer 

protections regarding reverse mortgage products); 

and Press Release, FTC, FTC Warns Mortgage 

Advertisers and Media That Ads May Be Deceptive, 

Sept. 11, 2007, available at (http://www.ftc.gov/ 

opa/2007/09/mortsurf.shtm). 

40 See Deception Policy Statement, supra note 9, 

at 175-183; see also FTC v. Tashman, 318 F.3d 

1273, 1277 (11th Cir. 2003); FTC v. Gill, 265 F.3d 

944, 950 (9th Cir. 2001); FTC v. QT, Inc., 448 F. 

Supp. 2d 908, 957 (N.D. Ill. 2006), aff’d, 512 F.3d 

858 (7th Cir. 2008); FTC v. Think Achievement 

Corp., 144 F. Supp. 2d 993, 1009 (N.D. Ind. 2000); 

FTC v. Minuteman Press, 53 F. Supp. 2d 248, 258 

(E.D.N.Y. 1998). 

41 FTC v. QT, Inc., 448 F. Supp. 2d at 957. 

42 See FTC v. Cyberspace.com, 453 F.3d 1196, 

1200 (9th Cir. 2006) (‘‘A solicitation may be likely 

to mislead by virtue of the net impression it creates 

even though the solicitation also contains truthful 

disclosures.’’); FTC v. Gill, 265 F.3d at 956 

(affirming deception finding based on ‘‘overall ‘net 

impression’’’ of statements); Removatron Int’l Corp. 

v. FTC, 884 F.2d 1489, 1497 (1st Cir. 1989) 

(advertisement was deceptive despite written 

qualification); Thompson Med. Co. v. FTC, 791 F.2d 

189, 197 (D.C. Cir. 1986) (literally true statements 

may nonetheless be deceptive); FTC v. QT, Inc., 448 

F. Supp. 2d at 958. 

43 See Deception Policy Statement, supra note 9, 

at 177-79. 

44 See id. at 178. 

fixed-rate or adjustable rate amortizing 

mortgages (ARMs),34 or 

nontraditional,35 the latter having 

proliferated in the mortgage marketplace 

in recent years. 

Consumers receive information about 

mortgages through many different 

channels of communication. Some 

consumers seek out mortgage 

information on their own, for example, 

on the Internet or by contacting a real 

estate broker, mortgage lender, mortgage 

broker, or others. Marketers and 

advertisers widely disseminate mortgage 

advertisements to consumers through 

print media (such as newspapers and 

magazines), television, radio, the 

Internet, billboards, and other methods. 

Marketers and advertisers also send 

targeted information to particular 

consumers through direct mail or 

electronic communications such as email or text messages. 

Many types of entities market and 

advertise mortgage products. Mortgage 

lenders, mortgage brokers, mortgage 

servicers, and real estate brokers 

advertise and market mortgage products. 

In addition, advertising agencies, home 

builders, lead generators,36 rate 

aggregators,37 and others also may 

market and advertise mortgage products 

to consumers. Mortgage lenders and 

servicers in particular may market 

products to their current customers, in 

addition to prospective customers. 

B. Deception in Mortgage Advertising 

Advertising and marketing can 

provide consumers with valuable 

information about mortgage options, 

costs, and features. This information is 

critical to the decisions consumers make 

throughout the mortgage origination 

process and is especially important 

because mortgage products typically are 

complex.38 Information is useful for 

decision making, however, only if it is 

truthful and non-misleading.39

Preventing and deterring deception in 

advertisements for mortgages, therefore, 

is a primary objective of FTC law 

enforcement and of the proposed rule. 

In 1984, the FTC issued its Deception 

Policy Statement, setting forth the 

elements of deception. An act or 

practice is deceptive if: (1) there is a 

representation, omission of information, 

or practice that is likely to mislead 

consumers acting reasonably under the 

circumstances; and (2) that 

representation, omission, or practice is 

material to consumers.40

A representation may be express or 

implied. ‘‘Express claims directly 

represent the fact at issue, while 

implied claims do so in an oblique or 

indirect way.’’41 Whether an implied 

claim is made depends on the overall 

net impression that consumers take 

away from an advertisement or other 

representation based on all its elements 

(language, pictures, graphics, etc.).42

The FTC evaluates whether consumers’ 

impression or interpretation of a 

representation or omission is 

reasonable. Reasonableness is evaluated 

based on the sophistication and 

understanding of consumers in the 

group to which the representation is 

targeted, which may be a general 

audience or a specific group, such as 

children or the elderly.43 A claim may 

be susceptible to more than one 

reasonable interpretation, and if one 

such interpretation is misleading, then 

the advertisement is deceptive, even if 

other, non-deceptive interpretations are 

possible.44

A disclaimer or qualifying statement 

may correct a misleading impression, 

but only if it is sufficiently clear and 

prominent to convey the qualifying 

information effectively, i.e., it is both 

noticed and understood by consumers. 

‘‘[I]n many circumstances, reasonable 

consumers do not read the entirety of an 

ad or are directed away from the 

importance of the qualifying phrase by 


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45 Id. at 181. 

46 See, e.g., id. at 180; see also In re Stouffer Food 

Corp., 118 F.T.C. 746 (1994); In re Kraft, Inc., 114 

F.T.C. 40, 124 (1991), aff’d, 970 F.2d 311 (7thCir. 

1992). 

47 Deception Policy Statement, supra note 9, at 

180. 

48 See Kraft, Inc. v. FTC, 970 F.2d 311, 322 (7th 

Cir. 1992); In re Cliffdale Assocs., Inc.,103 F.T.C. 

110, 165 (1984); see also FTC v. SlimAmerica, Inc., 

77 F. Supp. 2d 1263, 1272 (S.D. Fla. 1999). 

49 See Deception Policy Statement, supra note 9, 

at 183. 

50 See FTC v. Pantron I Corp., 33 F.3d 1088, 1095- 

96 (9th Cir. 1994). 

51 See In re Peacock Buick, 86 F.T.C. 1532, 1562 

(1975), aff’d, 553 F.2d 97 (4th Cir. 1977); Deception 

Policy Statement, supra note 9, at 182-83. 

52 See In re Thompson Med. Co., Inc., 104 F.T.C. 

648, 816 (1984), aff’d, 791 F.2d 189 (D.C. Cir. 1986). 

53 Novartis Corp. v. FTC, 223 F.3d 783, 786-87 

(D.C. Cir. 2000). 

54 This discussion is not intended as a 

comprehensive list of all potentially applicable 

mortgage advertising and marketing laws. 

55 These other requirements include mortgage 

advertising mandates under the Helping Families 

Save Their Homes Act of 2009, Pub. L. 111-22, 

§ 203, 123 Stat. 1632 (2009) (codified at 12 U.S.C. 

5201 note), which HUD enforces, and advertising 

regulations and guidance for Federal Housing 

Administration programs, which HUD has issued. 

For example, FHA-approved lenders or mortgagees 

must use their HUD-registered business names in 

advertisements and promotional materials for FHA 

programs and maintain copies of their materials for 

two years. See 75 FR 20718 (Apr. 20, 2010), to be 

codified at 24 CFR 202. Lenders and others are 

permitted to distribute the FHA and fair housing 

logos in marketing materials to prospective FHA 

borrowers. HUD-approved mortgagees are required 

to establish procedures for compliance with FHA 

program requirements, including to avoid engaging 

in false or misrepresentative advertising. See HUD 

Mortgagee Letters 2009-02 and 2009-12, available at 

(http://www.hud.gov/offices/adm/hudclips/letters/ 

mortgagee/2009ml.cfm); see also infra note 116 

(discussing NCUA and OTS advertising 

regulations). 

56 See 73 FR at 44599-602, codified generally at 

12 CFR 226.16, 226.24; see also supra note 28. On 

August 16, 2010, the Board proposed additional 

protections and disclosure requirements for 

mortgage advertisements. See Press Release, Board, 

Federal Reserve Board Proposes Enhanced 

Consumer Protections and Disclosures for Home 

Mortgage Transactions, (http:// 

www.federalreserve.gov/newsevents/press/bcreg/ 

20100816e.htm) (Aug. 16, 2010). 

57 See 15 U.S.C. 1661-62, 1664-65a; 12 CFR 

226.24. For TILA and Regulation Z open-end credit 

advertising requirements, see 15 U.S.C. 1661-63, 

1665-65b; 12 CFR 226.16. 

58 See 15 U.S.C. 1662; 12 CFR 226.24(a). 

59 See 15 U.S.C. 1664; 12 CFR 226.24(b). 

60 See 15 U.S.C. 1664; 12 CFR 226.24(c). For 

closed-end credit advertisements, the Board also 

expressly prohibits advertising any rate that is 

lower than the rate at which interest is accruing, 

such as an effective rate, payment rate, or qualifying 

rate. See 74 FR 44581-82, 44608, codified at Federal 

Reserve Board Official Staff Commentary 

(Regulation Z Commentary), 12 CFR 226.24(c)-2, 

Supp. I. The Board promulgated this rule using its 

authority under TILA Section 105. Id. In some 

circumstances, for closed-end credit secured by a 

dwelling, advertisements must provide other 

disclosures relating to rates. See, e.g., 12 CFR 

226.24(f). 

61 See 15 U.S.C. 1664; 12 CFR 226.24(c). 

62 See 15 U.S.C. 1664; 12 CFR 226.24(d). In some 

circumstances, for closed-end credit secured by a 

dwelling, advertisements must provide other 

disclosures relating to payments. See, e.g., 12 CFR 

226.24(f). 

63 See 12 CFR 226.24(i); see also 73 FR at 44586- 

590, 44602, 44610. As noted above, the Board 

promulgated these rules using its authority under 

TILA Section 129(l)(2), which is part of HOEPA. 

See supra note 28. 

64 See, e.g., 12 CFR 226.16(d). The Board 

promulgated these rules using its authority under 

TILA Section 105(a). See supra note 28. 

65 See 16 CFR 226.16(d)(5). 

66 See Regulation Z Commentary, 12 CFR 

226.16(d)-4, Supp. I; 75 FR 7658, 7898 (Feb. 22, 

2010); see also 12 CFR 226.16(f). 

67 State advertising requirements differ from one 

another in the practices, types of credit, and entities 

covered. See, e.g., Me. Rev. Stat. Ann. tit. 9-A, 9- 

301 (2009); Md. Code Regs. 09.03.06.05 (2009); Nev. 

Rev. Stat. Ann. 645B.196 (2009); N.Y. Bank. Law 

595-a (Consol. 2010). 

68 Title V of the Housing and Economic Recovery 

Act of 2008, Pub. L. 110-289 (2008) (codified at 12 

the acts or statements of the seller;’’45

thus, a fine print disclosure at the 

bottom of a print advertisement or a 

brief video superscript in a television 

advertisement is unlikely to qualify a 

claim effectively.46 Similarly, because 

consumers ‘‘may glance only at the 

headline’’ of an advertisement, ‘‘accurate 

information in the text may not remedy 

a false headline.’’47

A representation, omission, or 

practice is material if it is likely to affect 

a consumer’s choice of or conduct 

regarding a product.48 If consumers are 

likely to have chosen differently but for 

the claim, the claim is likely to have 

caused consumer injury.49 Express 

claims are presumed material.50

Similarly, information regarding the 

cost of a product or service is presumed 

material.51 Intentional implied claims,52

and claims about the purpose and 

efficacy of a product or service,53 are 

also presumed material. 

C. Other Mortgage Advertising 

Requirements54

In addition to the FTC Act, mortgage 

advertisers and marketers are subject to 

TILA (including HOEPA) and 

Regulation Z, among other legal 

requirements.55 In July 2008, the 

Federal Reserve Board issued many new 

mortgage advertising rules under 

Regulation Z; these rules took effect on 

October 1, 2009.56

For example, for closed-end credit, 

TILA and Regulation Z contain four 

basic requirements for mortgage 

advertisements.57 First, an 

advertisement must reflect terms 

actually available to the consumer.58

Second, required disclosures must be 

made clearly and conspicuously in the 

advertisement.59 Third, any 

advertisement that includes any credit 

rate must state the annual percentage 

rate, or ‘‘APR.’’60 The APR must be 

stated at least as conspicuously as a 

stated interest rate.61 Fourth, if any 

major triggering loan term (e.g., a 

monthly payment amount) is advertised, 

other major terms, including the APR, 

must also be advertised.62

For closed-end credit secured by a 

dwelling, Regulation Z also prohibits 

the following advertising claims based 

on the Board’s conclusion that they are 

misleading or deceptive: (1) advertising 

as ‘‘fixed’’ a rate or payment that will 

change after a period of time, unless the 

advertisement meets certain criteria, 

such as having an equally prominent 

and closely proximate disclosure that 

the rate or payment is ‘‘fixed’’ for only 

a limited period of time; (2) comparing 

actual or hypothetical rates or payments 

to the rates or payments on an 

advertised loan, unless the 

advertisement discloses the rates or 

payments that will apply over the full 

term of the advertised loan; (3) 

misrepresenting an advertised loan as 

part of a ‘‘government loan program’’ or 

otherwise endorsed or sponsored by a 

government entity; (4) using the name of 

the consumer’s current lender, unless 

the advertisement has an equally 

prominent disclosure of the person 

actually disseminating the 

advertisement and includes a clear and 

conspicuous statement that the 

advertiser is not associated with the 

consumer’s current lender; (5) making 

any misleading claim that an advertised 

loan will eliminate debt or result in a 

waiver or forgiveness of a consumer’s 

existing loan terms with, or obligations 

to, another creditor; (6) using the term 

‘‘counselor’’ in an advertisement to refer 

to a for-profit mortgage broker or 

mortgage lender; and (7) advertising 

mortgages in a language other than 

English while providing critical 

advertising disclosures only in 

English.63

TILA and Regulation Z require certain 

other advertising disclosures for 

HELOCs, a type of open-end credit.64

HELOC advertisements may not refer to 

a home equity plan as ‘‘free money’’ or 

contain a similarly misleading term.65

For example, such an advertisement 

could not state ‘‘no closing costs’’ or ‘‘we 

waive closing costs’’ if consumers may 

be required to pay any closing costs.66

The states also have enacted various 

laws or regulations that address aspects 

of deceptive mortgage advertising 

practices,67 including laws 

implementing the federal Secure and 

Fair Enforcement for Mortgage 

Licensing Act of 2008 (SAFE Act), 

which requires a nationwide licensing 

and/or registration system for mortgage 

loan originators.68


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U.S.C. 5101). Since the SAFE Act’s enactment on 

July 30, 2008, the states have been moving to enact 

or amend laws to license mortgage loan originators. 

See generally (http://www.csbs.org); see also HUD 

SAFE Mortgage Licensing Act, available at (http:// 

hud.gov/offices/hsg/rmra/safe/sfea.cfm). Various 

new state SAFE laws address advertising in 

different ways. See, e.g., H.B. 1085, 67th Gen. 

Assem., Reg. Sess. (Colo. 2009); S.B. 948, 2009 Gen. 

Assem., Reg. Sess. (Conn. 2009); S.B. 1218, 25th 

Leg., 1st Spec. Sess. (Haw. 2009); H.B. 4011, 96th 

Gen. Assem., Reg. Sess. (Ill. 2009); A.B. 3816, 213th 

Leg., 2nd Ann. Sess. (N.J. 2009). The federal 

banking agencies and Farm Credit Administration 

also are implementing a registration system and 

other requirements for mortgage loan originators. 

See 74 FR 27386 (June 9, 2009). 

69 See infra Part III.B.4. 

70 See Table B - List of FTC Mortgage Advertising 

Enforcement Actions, infra. 

71 See, e.g., FTC v. Mortgages Para Hispanos.com 

Corp., No. 4:06-cv-19 (E.D. Tex. 2006); FTC v. 

Ranney, No. 04-F-1065 (MJW) (D. Colo. 2004); FTC 

v. Chase Fin. Funding, Inc., No. SACV04-549 GLT 

(ANx) (C.D. Cal. 2004); FTC v. OSI Fin. Servs., Inc., 

No. 02-C-5078 (N.D. Ill. 2002); United States v. 

Mercantile Mortg. Co., No. 02-C-5079 (N.D. Ill. 

2002); FTC v. Assocs. First Capital Corp., No. 1:01- 

00606 JTC (N.D. Ga. 2001); FTC v. First Alliance 

Mortg. Co., No. SACV 00-964 DOC (EEx) (C.D. Cal. 

2000). 

72 See, e.g., FTC v. Safe Harbour Found. of Fla., 

Inc., No. 08-C-1185 (N.D. Ill. 2008); FTC v. Ranney, 

No. 04-F-1065 (MJW) (D. Colo. 2004). 

73 See, e.g., FTC v. 30 Minute Mortg., Inc., No. 03- 

60021 (S.D. Fla. 2003); FTC v. Chase Fin. Funding, 

Inc., No. SACV04-549 GLT (ANx) (C.D. Cal. 2004). 

74 See, e.g., In re Am. Nationwide Mortg. Co., Inc., 

F.T.C. Dkt. No. C-4249 (2009); In re Michael 

Gendrolis, F.T.C. Dkt. No. C-4248 (2009); FTC v. 

Chase Fin. Funding, Inc., No. SACV04-549 GLT 

(ANx) (C.D. Cal. 2004); FTC v. First Alliance Mortg. 

Co., No. SACV 00-964 DOC (EEx) (C.D. Cal. 2000); 

United States v. Unicor Funding, Inc., No. SACV99- 

1228 (C.D. Cal. 1999); FTC v. Assocs. First Capital 

Corp., No. 1:01-00606 JTC (N.D. Ga. 2001); FTC v. 

Safe Harbour Found. of Fla., Inc., No. 08-C-1185 

(N.D. Ill. 2008); In re FirstPlus Fin. Group, Inc., 

F.T.C. Dkt. No. C-3984 (2000). 

75 See, e.g., In re Shiva Venture Group, Inc., 

F.T.C. Dkt. No. C-4250 (2009); FTC v. Ranney, No. 

04-F-1065 (MJW) (D. Colo. 2004). 

76 See, e.g., FTC v. First Alliance Mortg. Co., No. 

SACV 00-964 DOC (EEx) (C.D. Cal. 2000). 

77 See, e.g., id.; FTC v. Assocs. First Capital Corp., 

No. 1:01-00606 JTC (N.D. Ga. 2001). 

78 See, e.g., id.; FTC v. OSI Fin. Servs., Inc., No. 

02-C-5078 (N.D. Ill. 2002); United States v. 

Mercantile Mortg. Co., No. 02-C-5079 (N.D. Ill. 

2002); In re FirstPlus Fin. Group, Inc., F.T.C. Dkt. 

No. C-3984 (2000). 

79 See, e.g., FTC v. 30 Minute Mortg., Inc., No. 03- 

60021 (S.D. Fla. 2003). 

80 See, e.g., In re Am. Nationwide Mortg. Co., Inc., 

F.T.C. Dkt. No. C-4249 (2009); In re Shiva Venture 

Group, Inc., F.T.C. Dkt. No. C-4250 (2009); In re 

Michael Gendrolis, F.T.C. Dkt. No. C-4248 (2009). 

The FTC also sent over 200 warning letters in 2007 

to mortgage lenders, mortgage brokers, and media 

outlets regarding mortgage advertising claims, 

including teaser rates, that could be deceptive or 

violate TILA. See Press Release, FTC, FTC Warns 

Mortgage Advertisers and Media That Ads May Be 

Deceptive (Sept. 11, 2007), available at (http:// 

www.ftc.gov/opa/2007/09/mortsurf.shtm). 

81 See, e.g., In re Am. Nationwide Mortg. Co., Inc., 

F.T.C. Dkt. No. C-4249 (2009). 

82 See, e.g., FTC v. Chase Fin. Funding, Inc., No. 

SACV04-549 (GLT (ANx) C.D. Cal. 2004); FTC v. 

OSI Fin. Servs., Inc., No. 02-C-5078 (N.D. Ill. 2002). 

83 See, e.g., FTC v. OSI Fin. Servs., Inc., No. 02- 

C-5078 (N.D. Ill. 2002). 

84 See, e.g., FTC v. Assocs. First Capital Corp., 

No. 1:01-00606 JTC (N.D. Ga. 2001). The complaint 

in that case alleged, among other things, that the 

defendants included credit insurance products in 

the loan package without the borrower’s knowledge. 

85 See, e.g., FTC v. Capital City Mortg. Corp., No. 

1:98CV237 (D.D.C. 1998). 

86 See, e.g., FTC v. Assocs. First Capital Corp., 

No. 1:01-00606 JTC (N.D. Ga. 2001). In addition, in 

making these statements, the lender allegedly did 

not reveal that the loans were interest-only and that 

borrowers would owe the entire principal amount 

in a large balloon payment at the end of the loan 

term. 

87 See, e.g., In re FirstPlus Fin. Group, Inc., F.T.C. 

Dkt. No. C-3984 (2000). 

88 See, e.g., In re Lomas Mortg. U.S.A., Inc., 116 

F.T.C. 1062 (1993). 

89 See, e.g., FTC v. 30 Minute Mortg. Inc., No. 03- 

60021 (S.D. Fla. 2003). 

90 See, e.g., In re Michael Gendrolis, F.T.C. Dkt. 

No. C-4248 (2009). 

91 See, e.g., United States v. Unicor Funding, Inc., 

No. SACV99-1228 (C.D. Cal. 1999). 

92 See FTC v. Mortgages Para Hispanos.com 

Corp., No. 4:06-cv19 (E.D. Tex. 2006). 

93 See In re Felson Builders, Inc., 119 F.T.C. 652 

(1995). 

94 See, e.g., In re Lenox Fin. Mortg., LLC, No. 

2007-017383 (Ariz. Sup. Ct. 2007) (assurance of 

discontinuance), available at (http://www.azag.gov/ 

press_releases/sept/2007)/ 

LenoxFinancialAssurance&Approval.pdf. 

95 See, e.g., State v. Lifetime Fin., Inc., No. 

LC080829 (Cal. Super. Ct. 2008), available at 

(http://www.ag.ca.gov/cms_attachments/press/ 

pdfs/n1533_complaint_for_civil_penalties.pdf); 

State v. Green River Mortg., No. 2009CV89 (Colo. 

Dist. Ct. 2009), press release available at (http:// 

www.coloradoattorneygeneral.gov/press/news/ 

Continued 

None of these federal or state 

measures duplicates the specificity and 

breadth of practices, and diversity of 

entities69 covered in the proposed rule. 

D. Consumer Protection Problems in 

Mortgage Advertising 

The FTC has substantial law 

enforcement experience with mortgage 

advertising practices. Since 1995, the 

Commission has brought 18 law 

enforcement actions, including three in 

2009, against individuals or companies 

that allegedly engaged in unfair or 

deceptive practices and/or violations of 

TILA in connection with mortgage 

advertising.70 These actions have 

targeted large and small mortgage 

lenders, mortgage brokers, and others, 

located throughout the country.71 The 

cases have involved advertisements and 

marketing materials in various media, 

including print advertisements,72

unsolicited emails,73 direct mail 

marketing,74 Internet advertisements 

and websites,75 telemarketing,76 and inperson sales presentations.77 The 

alleged violations have included 

deceptive claims – often made to 

subprime borrowers – about key terms 

and other aspects of the loans, such as: 

∑ misrepresentations of the loan 

amount or the amount of cash 

disbursed;78

∑ claims for loans with specified 

terms, when no loans with those terms 

were available from the advertiser;79

∑ claims of low ‘‘teaser’’ rates and 

payment amounts, without disclosing 

that the rates and payments would 

increase substantially after a limited 

period of time;80

∑ misrepresentations that rates were 

fixed for the full term of the loan;81

∑ misrepresentations about, or failure 

to adequately disclose, the existence of 

a prepayment penalty82 or large balloon 

payment due at the end of the loan;83

∑ claims about the monthly payment 

amounts that the borrower would owe, 

without disclosing the existence, cost, 

and terms of credit insurance products 

‘‘packed’’ into the loan;84

∑ claims that the loans were 

amortizing, when, in fact, they involved 

interest-only transactions;85

∑ claims of mortgage payment 

amounts that failed to include loan fees 

and closing costs of the kind typically 

included in loan amounts; 86

∑ false or misleading savings claims in 

high loan-to-value loans;87

∑ false or misleading claims regarding 

the terms or nature of interest rate lockins;88

∑ false claims that an entity was a 

national mortgage lender;89

∑ failure to disclose adequately that 

the advertiser, not the consumer’s 

current lender, was offering the 

mortgage;90 and 

∑ false or misleading claims that 

consumers were ‘‘pre-approved’’ for 

mortgage loans.91

In addition, the Commission has 

brought actions against mortgage 

companies that allegedly deceptively 

offered loans to consumers whose 

primary language was a language other 

than English. One action challenged as 

deceptive a mortgage company’s alleged 

practice of stating loan terms orally to 

Spanish-speaking consumers in 

Spanish, only to provide loan 

documents with different and less 

favorable terms in English.92 In a second 

case, the company allegedly offered 

certain mortgage terms in both Chinese 

and English advertisements, but failed 

to disclose a large balloon payment.93

Numerous states have brought 

enforcement actions under state laws 

alleging deceptive mortgage advertising 

and marketing, challenging 

misrepresentations about: (1) the lack of 

closing costs;94 (2) low fixed or teaser 

rates or payments;95 (3) the advertiser’s 


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attorney_general_announces_settlement_barring 

_mortgage_broker_operating_inside); State v. One 

Source Mortg., Inc., No. 07CH34450 (Ill. Cir. Ct. 

2007), press release available at (http:// 

www.ag.state.il.us/pressroom/2007_11/ 

20071126.html); In re Paramount Equity Mortg., 

Inc., No. C-07-405-08-SC01 (Wash. Dep’t of Fin. 

Inst. 2008), available at (http://www.dfi.wa.gov/ 

CS%20Orders/C-07-405-08-SC01.pdf). 

96 See, e.g., State v. Sroka, No. 2007-16-61 (Idaho 

Dep’t of Fin. 2007), available at (http:// 

finance.idaho.gov/ConsumerFinance/Actions/ 

Administrative/2007-16- 

61_Sroka_Terrazas_Order_Cease_and_Desist.pdf); 

State v. Sage, No. 2007-8-45 (Idaho Dep’t of Finance 

2007), press release available at (http:// 

finance.idaho.gov/PR/2007/ 

PressRel_Sage_CDOrder.pdf);State v. Goldstar 

Home Mortg., No. 09AB-CV02310 (Mo. Cir. Ct. 

2009) press release available at (http://ago.mo.gov/ 

newsreleases/2009/ 

AG_Koster_files_lawsuits_after_mortgage_fraud/). 

97 See, e.g., State v. Ellis, No. 07CH34451 (Ill. Cir. 

Ct. 2007), press release available at (http:// 

www.ag.state.il.us/pressroom/2007_11/ 

20071126.html). 

98 See, e.g., State v. Advantage Mortg. Serv., Inc., 

No. C107 (Neb. Dist. Ct. 2007), available at (http:// 

www.ndbf.ne.gov/forms/ 

Advantage_Mortgage_Complaint.pdf). 

99 See, e.g., State v. Upstate Capital, Inc., No. 08- 

036 (N.Y. Office of Att’y Gen. 2008), press release 

available at (http://www.ag.ny.gov/media_center/ 

2008/apr/apr24a_08.html). Other cases have 

charged other entities with deceptive advertising, 

including using the words ‘‘United States of 

America’’ or an image of the Statute of Liberty, 

when the advertiser had no affiliation with the 

government (see State v. Island Equity Mortg., Inc., 

(N.Y. Banking Dep’t 2007), available at (http:// 

www.banking.state.ny.us/ea070412.htm), and 

falsely representing that the advertisers were 

affiliated with a government program (see In re 

Assurity Fin. Servs., LLC, No. C-07-320-08-SC01 

(Wash. Dep’t of Fin. Inst. 2008), available at (http:// 

www.dfi.wa.gov/CS%20Orders/C-07-320-08- 

SC01.pdf); see also State v. Am. Advisors Group, 

Inc., No. 2010CH00158 (Ill Cir. Ct. filed Feb. 8, 

2010), available at (http://www.scribd.com/doc/ 

33748621/People-Illinois-v-American-AdvisorsGroup-Complaint); State v. Hartland Mortg. Ctrs., 

Inc., No. 10CH05339 (Ill. Cir. Ct. filed Feb. 8, 2010), 

press release available at (http://www.ag.state.il.us/ 

pressroom/2010_02/20100208.html). HUD also 

recently took action against two lenders for 

deceptive advertising of HUD-insured reverse 

mortgages. See Press Release, HUD, FHA Withdraws 

Three Lenders, Suspends a Fourth (Feb. 25, 2010), 

available at (http://portal.hud.gov/portal/page/ 

portal/HUD/press/ 

press_releases_media_advisories/2010/HUDNo.10- 

019). 

100 See, e.g., In re Paramount Equity Mortg., Inc., 

No. C-07-405-08-SC01 (Wash. Dep’t of Fin. Inst. 

2008), available at (http://www.dfi.wa.gov/ 

CS%20Orders/C-07-405-08-SC01.pdf). 

101 See, e.g., id. 

102 Proposed § 321.2(c). This definition is largely 

based on that in Regulation Z. See 12 CFR 

226.2(a)(14). One difference is that the proposed 

rule covers all shared equity and shared 

appreciation mortgages offered to consumers, 

whereas certain types of such mortgages may not be 

considered ‘‘credit’’ under Regulation Z. See 

Regulation Z Commentary, 12 CFR 226.2(a)(14)-1 

and 226.17(c)(1)-11, Supp. I. In shared equity and 

shared appreciation mortgages, the consumer 

receives cash, a lower interest rate, or other 

favorable terms in exchange for agreeing to share 

with the lender or other company all or part of the 

consumer’s total equity or the appreciation in the 

consumer’s equity when the loan comes due, or at 

some other point during the loan. 

103 Proposed § 321.2(e). Both primary and 

secondary (or vacation) homes are covered if they 

are used as collateral for the loan. The term 

‘‘dwelling’’ in the proposed rule is based on that 

used in TILA and Regulation Z. See 15 U.S.C. 

1602(v) and 12 CFR 226.2(a)(19). 

Note that some aspects of the Regulation Z 

advertising rules apply only to credit secured by a 

dwelling and not by real property. See 12 CFR 

226.16(d); 12 CFR 226.24(f) and (i). 

104 Proposed § 321.2(b). Thus, credit offered or 

extended to an organization or governmental entity 

is not covered. 

105 Construction financing and other forms of 

credit in which multiple advances may be common 

are also covered. In these transactions, some or all 

of the advances may be estimates (as to their dollar 

amount or the date on which they will occur). 

106 The proposed rule’s prohibitions apply 

uniformly to closed-end and open-end credit. In 

contrast, the Regulation Z advertising provisions 

(including restrictions on deceptive claims) are 

different for closed-end and open-end credit. See, 

e.g.,12 CFR 226.24(i) and 12 CFR 226.16(d)(5) and 

(f). 

affiliation with the consumer’s current 

lender;96 (4) the availability of 

government grants for home repairs;97

(5) the savings available by 

refinancing;98

(6) reverse mortgage terms and 

government affiliation;99 (7) the 

availability of rates compared to 

competitors;100 and (8) the advertiser’s 

self-description as a ‘‘bank.’’101

III. Discussion of the Proposed Rule 

The Commission’s law enforcement 

experience, state law enforcement 

activities and legislation, and the 

comments received in response to the 

ANPR demonstrate that deceptive 

claims in mortgage advertising and 

marketing pose a risk of significant 

harm to consumers. In addition to 

continuing to engage in aggressive law 

enforcement against those who make 

such claims, the FTC believes that a rule 

prohibiting misrepresentations in 

mortgage advertising would enable the 

agency to protect prospective borrowers 

more effectively by establishing clear 

standards for advertisers, increasing the 

efficiency of law enforcement efforts, 

and serving as a deterrent to unlawful 

behavior. In particular, as discussed 

above, the proposed rule would allow 

the Commission to seek civil penalties 

for violations, thereby enhancing the 

effect of the Commission’s law 

enforcement actions. Civil penalties 

may be an especially useful deterrent in 

cases in which consumer redress or 

disgorgement is not available or not 

feasible. 

A. Section 321.1: Scope 

As detailed in Part I.A, 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 

issue rules ‘‘related to unfair or 

deceptive acts or practices.’’ The 

Commission’s rulemaking authority also 

is limited by the Credit CARD Act to 

persons over whom the FTC has 

enforcement power under the FTC Act. 

B. Section 321.2: Definitions 

1. Sections 321.2(e): ‘‘mortgage credit 

product;’’ 321.2(d): ‘‘dwelling;’’ and 

321.2(b): ‘‘consumer’’ 

The proposed rule would prohibit any 

person from making any material 

misrepresentation in any commercial 

communication regarding any term of 

any mortgage credit product. Proposed 

§ 321.2(f) defines ‘‘mortgage credit 

product.’’ To fall within that definition, 

the product must meet three criteria. 

First, it must be a form of ‘‘credit.’’ The 

term ‘‘credit’’ is defined as ‘‘the right to 

defer payment of debt or to incur debt 

and defer its payment.’’102 Second, the 

credit must be secured either by real 

property or a dwelling. The term 

‘‘dwelling’’ is defined as ‘‘a residential 

structure that contains one to four units, 

whether or not that structure is attached 

to real property’’ and includes ‘‘an 

individual condominium unit, 

cooperative unit, mobile home, and 

trailer, if it is used as a residence.’’103

Third, the credit must be offered to a 

consumer primarily for personal, family, 

or household purposes. ‘‘Consumer’’ is 

defined as a ‘‘natural person to whom a 

mortgage credit product is offered or 

extended.’’104 Personal, family or 

household purposes would include, for 

example, home purchase or 

improvement loans, debt consolidation 

or home equity transactions, credit for 

medical or dental expenses, and 

educational loans. Credit offered or 

extended primarily for a business 

purpose would not be covered, even if 

it is secured by a lien on a dwelling. The 

determination of whether the credit is 

‘‘primarily’’ for personal, family, or 

household use, rather than ‘‘primarily’’ 

for business use, requires an assessment 

of all of the facts of a particular 

transaction. 

Assuming they meet the above 

criteria, the proposed definition covers 

both closed-end credit (e.g., installment 

financing) 105 and open-end credit (e.g., 

HELOCs);106 traditional, fully 

amortizing loans and nontraditional or 


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107 Covered alternative loans include, for 

example, hybrid ARMs, teaser rate or teaser 

payment loans with low rates or payments that 

expire after a short period, interest-only and balloon 

mortgages, negative amortization mortgages, shared 

equity and shared appreciation mortgages, 

buydowns, and payment option ARMs. For a 

discussion of the various types of mortgage loans 

and their features, see generally Interagency 

Subprime Mortgage Statement and Interagency 

Nontraditional Mortgage Guidance, supra note 39; 

Conference of State Bank Supervisors (CSBS), 

Guidance on Nontraditional Mortgage Product Risks 

for State-Licensed Entities (Nov. 14, 2006), 

available at (http://www.banking.mt.gov/content/ 

pdf/CSBS-AARMR_FINAL_GUIDANCE.pdf) (issuing 

parallel guidance to federal bank regulatory 

agencies for residential mortgage brokers and 

mortgage bankers); CSBS et al., Statement on 

Subprime Mortgage Lending(July 16, 2007), 

available at (http://www.csbs.org/regulatory/policy/ 

policy-guidelines/Documents/Final_CSBS-AARMRNACCA_StatementonSubprimeLending.pdf) 

(issuing similar guidance to federal bank regulatory 

agencies for residential mortgage brokers and 

mortgage bankers). 

108 See supra note 33 and accompanying text. 

109 See proposed § 321.2(a). 

110 Based on this definition, the proposed rule 

has broader applicability than the Board’s 

advertising rules in Regulation Z, which exempt 

personal contacts, communications about existing 

accounts, and certain educational materials. See 

Regulation Z Commentary, 12 CFR 226.2(a)(2), 

Supp. I. 

111 The proposed rule broadly prohibits 

misleading claims in any language. In comparison, 

for closed-end credit, Regulation Z specifically bans 

providing information about some trigger terms or 

required disclosures only in a foreign language in 

the advertisement but, at the same time, providing 

information about other trigger terms or required 

disclosures only in English in that advertisement. 

See 12 CFR 226.24(i)(7). As discussed below, see 

infra Part IV.B.2(3), the Commission seeks comment 

on whether the proposed rule should address the 

use of multiple languages in marketing mortgages 

to consumers whose primary language is not 

English. 

112 Id. This definition is based on that used in 

Regulation Z. See 12 CFR 226.2(a)(22). 

113 See supra notes 36-37. One commenter raised 

the need for coverage of mortgage rate aggregators, 

among others, in the prospective advertising rules. 

See HPC at 3. 

114 The Commission’s jurisdiction includes 

nonfederally-insured, state-chartered credit unions, 

nonfederally-insured credit unions in Puerto Rico 

and other U.S. territories, and any credit unions 

with no deposit insurance. 

115 See supra note 30. 

116 Federally-insured credit unions are prohibited 

generally by NCUA’s regulations from using 

advertising or promotional material that contains 

inaccurate, misleading, or deceptive claims 

concerning their products, services, or financial 

condition. See 12 CFR 740.2. 

In addition, some commenters asserted that 

subsidiaries of banks or thrifts should not be 

covered by the prospective rules or are subject to 

rules administered by the federal banking agencies. 

See ABA at 3-6; CMC/AFSA at 3-5; see also, e.g., 

12 CFR 563.27 (OTS regulations prohibiting thrifts 

from using advertisements or other representations 

that are inaccurate or misrepresent the services or 

contracts offered). 

117 While there are similarities between the 

proposed rule and existing federal and state 

requirements, none of the existing requirements 

duplicate all of the operative provisions of the 

proposed rule. 

118 In other words, nothing in the other agencies’ 

regulations would require entities to make claims 

that the proposed rule prohibits. 

alternative financing;107 and forward 

and reverse mortgages.108

2. Section 321.2(g): ‘‘term’’ 

The proposed rule would apply to any 

‘‘term’’ of any mortgage credit product. 

Under the proposal, ‘‘term’’ is defined 

broadly to mean ‘‘any of the fees, costs, 

obligations, or characteristics of, or 

associated with, the product.’’ It also 

includes any of the conditions on, or 

related to, the availability of the 

product. ‘‘Term’’ is intended to cover all 

aspects of a mortgage credit product 

without exception. 

3. Section 321.2(a): ‘‘commercial 

communication’’ 

As discussed above, the proposed rule 

applies to claims made in any 

‘‘commercial communication,’’ which is 

defined as follows: 

any written or verbal statement, 

illustration, or depiction, whether in 

English or any other language, that is 

designed to effect or create interest in 

purchasing 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 phrase 

‘‘commercial communication.’’ 109

This definition encompasses 

commercial communications110 in any 

medium and in any language(s).111

4. Section 321.2(f): ‘‘person’’ 

The proposed rule applies to any 

‘‘person,’’ defined as ‘‘any individual, 

group, unincorporated association, 

limited or general partnership, 

corporation, or other business entity.’’112

Thus, any individual or entity that 

makes representations in a commercial 

communication about a mortgage credit 

product is a ‘‘person’’ for purposes of the 

proposed rule. The types of entities the 

proposed rule covers include mortgage 

lenders, mortgage brokers, mortgage 

servicers, real estate agents and brokers, 

advertising agencies, home builders, 

lead generators, rate aggregators, and 

others under the Commission’s 

jurisdiction.113 As mandated by the 

Omnibus Appropriations Act, 

individuals and entities that are 

excluded from the FTC’s jurisdiction are 

not covered by the proposed rule. 

Consistent with the FTC’s 

jurisdiction, the proposed rule covers all 

credit unions except federally-chartered 

credit unions.114 Several representatives 

of credit unions (and a group of state 

credit union regulators) filed comments 

on the ANPR.115 Some commenters 

urged the Commission to exclude statechartered credit unions so as not to put 

them at a competitive disadvantage 

relative to federally-chartered credit 

unions. Commenters also noted that the 

advertising practices of state-chartered 

credit unions that are federally insured 

are subject to existing NCUA advertising 

regulations.116

The proposed rule does not grant any 

exemptions beyond those already 

provided by the FTC Act. To the extent 

that other federal agencies regulate the 

advertising of certain financial 

institutions,117 the proposed rule, which 

simply prohibits misrepresentations, 

would not conflict with those 

regulations.118 Nor does the 

Commission believe that prohibiting 

certain financial institutions from 

making deceptive claims would 

establish a competitive disadvantage. 

Entities not covered by the proposed 

rule remain subject to general federal 

and state truth-in-advertising laws. The 

Commission seeks comment on whether 

the rule should grant any exemptions 

beyond those in the FTC Act. 

C. Section 321.3: Prohibited 

Representations 

1. Discussion 

Proposed § 321.3 prohibits any 

material misrepresentation, whether 

made expressly or by implication, in 

any commercial communication, 

regarding any term of any mortgage 

credit product. FTC and state cases 

provide numerous examples of 

misrepresentations made in mortgage 

advertising. Proposed §§ 321.3(a)-(s) set 

forth a non-exclusive list of 

misrepresentations that would violate 

the proposed rule. This list addresses 

the most common misrepresentations 

that have appeared in state and federal 

enforcement actions over the past 

several years and is intended to provide 

illustrative guidance about the kinds of 

claims that are prohibited. For 

discussion purposes, the list of 

representations covered by the proposed 

rule is informally grouped into three 

categories below. 

As noted above, a claim is deceptive 

under Section 5 of the FTC Act if there 


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119 Cliffdale, 103 F.T.C. at 165. 

120 Id.; see also Novartis, 223 F.3d.at 786; supra 

notes 48-53 and accompanying text. 

121 See, e.g., In re Shiva Venture Group, Inc., 

F.T.C. Dkt. No. C-4250 (2009); In re Michael 

Gendrolis, F.T.C. Dkt. No. C-4248 (2009); In re Am. 

Nationwide Mortg. Co., Inc., F.T.C. Dkt. No. C-4249 

(2009); FTC v. OSI Fin. Servs., Inc., No. 02-C-5078 

(N.D. Ill. 2002); United States v. Mercantile Mortg. 

Co., No. 02-C-5029 (N.D. Ill. 2002); FTC v. Capital 

City Mortg. Corp., No. 1:98CV237 (D.D.C. 1998). 

122 A payment rate is the rate used to calculate 

the consumer’s monthly payment amount and is not 

necessarily the same as the interest rate. If the 

payment rate is less than the interest rate, the 

consumer’s monthly payment amount does not 

include the full interest owed each month; the 

difference between the amount the consumer pays 

and the amount the consumer owes is added to the 

total amount due from the consumer. 

The proposed rule prohibits misrepresentations 

about payment rates and any other rate, for both 

closed-end and open-end credit. In comparison, 

Regulation Z bans advertising of payment rates for 

closed-end credit. See Regulation Z Commentary, 

12 CFR 226.24(c)-2, Supp. I. Regulation Z also bans 

advertising of effective rates and qualifying rates 

(which are similar terms for payment rates) for 

closed-end credit. Id; see also 73 FR 44581-82. The 

Board enacted this prohibition under Section 105 

of TILA. See supra note 28. 

123 See, e.g., FTC v. Safe Harbour Found. of Fla., 

Inc., No. 08-C-1185 (N.D. Ill. 2008) (severely 

understated APR). 

Deceptive payment rate claims were at the heart 

of three enforcement actions announced in 

February 2009. See In re Am. Nationwide Mortg. 

Co., Inc., F.T.C. Dkt. No. C-4249 (2009); In re Shiva 

Venture Group, Inc., F.T.C. Dkt. No. C-4250 (2009); 

In re Michael Gendrolis, F.T.C. Dkt. No. C-4248 

(2009). 

124 The Commission has challenged deceptive 

comparisons in financing that include, among other 

things, savings rates in non-mortgage contexts. See 

In re Automatic Data Processing, 115 F.T.C. 841 

(1992) (alleged deceptive comparisons in 

automobile financing). Section 321.3(b) would 

prohibit these types of promotions when used in 

the mortgage context. 

125 See, e.g., FTC v. Ranney, No. 04-F-1065 (MJW) 

(D. Colo. 2004); FTC v. Chase Fin. Funding, Inc., 

No. SACV04-549 GLT (ANx) (C.D. Cal. 2004) 

(allegedly promoting ‘‘NO COSTS . . . NO KIDDING’’ 

and ‘‘no-fee’’ loans, when in fact, the loans included 

such charges); see also FTC v. Assocs. First Capital 

Corp., No. 1:01-00606 JTC (N.D. Ga. 2001); FTC v. 

First Alliance Mortg. Co., No. SACV 00-964 DOC 

(EEx) (C.D. Cal. 2000). 

126 See, e.g., FTC v. Assocs. First Capital Corp., 

No. 1:01-00606 JTC (N.D. Ga. 2001). 

127 The Commission has alleged deceptive 

practices involving add-ons to non-mortgage 

personal loans as well. See FTC v. Stewart Fin. Co. 

Holdings, Civ. No. 1:03-CV-2648-JTC (N.D. Ga. 

2003). 

128 See, e.g., United States v. Mercantile Mortg. 

Co., No. 02-C-5079 (N.D. Ill. 2002); FTC v. OSI Fin. 

Servs., Inc., No. 02-C-5078 (N.D. Ill. 2002); FTC v. 

Assocs. First Capital Corp., No. 1:01-00606 JTC 

(N.D. Ga. 2001). 129 See, e.g., United States v. Mercantile Mortg. 

Co., No. 02-C-5079 (N.D. Ill. 2002); FTC v. OSI Fin. 

Servs., Inc., No. 02-C-5078 (N.D. Ill. 2002); FTC v. 

Chase Fin. Funding Inc., No. SACV 04-549 GLT 

(ANx) (C.D. Cal. 2004); see also FTC Bureau of 

Consumer Protection, Bureau of Economics, and 

Office of Policy Planning, Comments before Board 

of Governors of Federal Reserve System, Dkt. No. 

R-1305, Apr. 8, 2008, n.11, available at (http:// 

www.ftc.gov/os/2008/04/V080008frb.pdf). 

130 The Commission has charged mortgage 

brokers and other entities with falsely promising 

consumers low fixed payments and rates on their 

mortgage loans, including promising ‘‘30 year fixed. 

1.95%,’’ ‘‘3.5% fixed payment loan,’’ and other rates 

that were not, in fact, fixed. See, e.g., In re Am. 

Nationwide Mortg. Co., Inc., F.T.C. Dkt. No. C-4249 

(2009); FTC v. Chase Fin. Funding, Inc., No. SACV 

04-549 GLT (ANx) (C.D. Cal. 2004); see also FTC v. 

30 Minute Mortg., Inc., No. 03-60021 (S.D. Fla. 

2003); Andrews v. Chevy Chase Bank, 240 F.R.D. 

612 (E.D. Wis. 2007) (describing payment option 

ARM sold as ‘‘fixed rate’’ when interest was only 

fixed for one month, although payments were fixed 

for a year). 

Proposed § 321.3(g) has broader applicability than 

a similar provision in Regulation Z, which applies 

only to closed-end dwelling-secured credit and 

requires specific advertising disclosures. See 12 

CFR 226.24(i)(1). 

131 Proposed § 321.3(h) has broader applicability 

than a similar provision in Regulation Z, which 

applies only to closed-end dwelling-secured credit 

and requires specific advertising disclosures. See 12 

CFR 226.24(i)(2). 

132 See, e.g., In re FirstPlus Fin. Group, Inc., 

F.T.C. Dkt. No. C-3984 (2000). 

is a ‘‘representation, omission, or 

practice that . . . is likely to mislead 

consumers acting reasonably under the 

circumstances, and . . . the 

representation, omission, or practice is 

material.’’119 Information is ‘‘material’’ if 

it is ‘‘likely to affect [a consumer’s] 

choice of, or conduct regarding, a 

product.’’120 The types of information in 

the representations specified in § 321.3 

of the proposed rule involve matters 

central to consumers’ decisions about 

mortgage credit products. Thus, the 

types of misrepresentations the 

proposed rule prohibits are ‘‘material.’’ 

a. Fees or Costs 

In general, proposed §§ 321.3(a)-(f) 

address representations related to fees 

or costs associated with a mortgage 

credit product. Proposed § 321.3(a) 

covers misrepresentations about interest 

charged for the product, including but 

not limited to misrepresentations about 

(1) whether the loan includes a negative 

amortization feature;121 (2) the amount 

of interest owed each month that is 

included in the consumer’s payments, 

loan amount, or total amount due; and 

(3) the interest owed each month that is 

not included in the payments but is 

instead added to the total amount due. 

Proposed § 321.3(b) bars 

misrepresentations about the APR, 

simple annual rate, periodic rate, or any 

other rate, including but not limited to 

a payment rate.122 The Commission has 

challenged deceptive rate claims in 

many cases, some of which included 

allegations that originators understated 

the true rate by more than 100 

percent.123 This provision also is 

intended to cover false or misleading 

savings rate claims in financing 

promotions. The Commission has 

challenged, for example, deceptive 

claims that consumers will save money 

(such as at a particular rate of savings) 

by accepting the credit offer.124

Proposed § 321.3(c) bars 

misrepresentations about the existence, 

nature, or amount of fees or costs 

associated with any mortgage credit 

product. It also prohibits false or 

misleading claims that no fees are 

charged, for example, if the fees and 

costs, although not paid separately, are 

included in the loan amount or total 

amount due from the consumer. This 

provision covers fees and costs imposed 

at any point during the life of the 

loan.125

Proposed § 321.3(d) covers 

misrepresentations about terms 

associated with additional products or 

features that may be sold in conjunction 

with a mortgage credit product.126 Thus, 

this provision covers claims made in 

cross-selling other products or features 

in mortgage credit product offers, 

including but not limited to credit 

insurance, credit disability insurance, 

car clubs, or other ‘‘add-ons’’ to the 

loan.127

Proposed § 321.3(e) covers 

misrepresentations relating to the taxes 

on or insurance for the dwelling 

associated with a mortgage credit 

product, for example, claims about 

whether tax or insurance charges are 

included in the overall monthly 

payment or are made separately. Prior 

Commission cases have challenged 

claims that the advertised monthly 

payment included tax and insurance 

charges, when in fact it did not.128

Proposed § 321.3(f) bars 

misrepresentations about the existence 

or amount of any penalty for making 

prepayments on the mortgage. The 

Commission has brought several cases 

against entities that allegedly deceived 

consumers about prepayment 

penalties.129

b. Obligations or Characteristics 

Proposed §§ 321.3(g)-(p) generally 

address representations related to 

obligations or characteristics associated 

with a mortgage credit product. 

Proposed § 321.3(g) prohibits 

misrepresentations pertaining to the 

variability of interest, payments, or 

other terms of mortgage credit products, 

including but not limited to, for 

example, misrepresentations using the 

word ‘‘fixed’’ when terms are variable or 

limited in duration.130 Proposed 

§ 321.3(h) bars false or misleading 

comparisons between rates or 

payments,131 including but not limited 

to comparisons involving savings. It also 

bars false or misleading comparisons 

between rates or payments available for 

different parts of the loan term.132


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133 For example, the FTC charged a company 

with misrepresenting that a loan was fully 

amortizing when, in fact, it consisted of interestonly payments with a large balloon payment. FTC 

v. Capital City Mortg. Corp., No. 1:98CV237 (D.D.C. 

1998). 

134 See FTC v. Assocs. First Capital Corp., No. 

1:01-00606 JTC (N.D. Ga. 2001) (alleging deceptive 

representations about loan amounts in home equity 

mortgages); FTC v. First Alliance Mortg. Co., No. 

SACV 00-964 DOC (EEx) (C.D. Cal. 2000) (same as 

above); see also United States v. Mercantile Mortg. 

Co., No. 02-C-5079 (N.D. Ill. 2002) (alleging 

deceptive representations about cash dispersal 

amounts in home equity loans or refinances); FTC 

v. OSI Fin. Servs., Inc., No. 02-C-5078 (N.D. Ill. 

2002) (same as above). 

135 This provision covers, for example: (1) 

misrepresentations about whether certain payments 

are part of the loan (see, e.g., FTC v. OSI Fin. Servs., 

Inc., No. 02-C-5078 (N.D. Ill. 2002); United States 

v. Mercantile Mortg. Co., No. 02-C-5079 (N.D. Ill. 

2002)); (2) false claims that an aspect of the loan 

would cover the payments due (see FTC v. Ranney, 

No. 04-F-1065 (MJW) (D. Colo. 2004)); and (3) 

claims that ‘‘no payments’’ are required on a reverse 

mortgage that falsely imply that consumers never 

have to repay the loan or make related tax and 

insurance payments. See FFIEC Reverse Mortgage 

Guidance, supra note 39, at 50809 (although reverse 

mortgages generally do not require the consumer to 

remit payments for principal, interest, and related 

loan costs during the time the consumer remains in 

the home, repayment of these amounts can become 

due if the consumer moves out of the home; also, 

reverse mortgages generally do not include escrow 

accounts for taxes and property insurance, and if 

the consumer does not remit payments separately 

for these amounts, the consumer could lose the 

home). 

136 For example, it would violate this section for 

a reverse mortgage lender to represent that ‘‘no 

matter what, you can stay in your home for life,’’ 

when the lender can force the sale of the property 

if the consumer does not adequately maintain the 

property. 

137 Proposed § 321.3(m) has broader applicability 

than a similar provision in Regulation Z, which 

applies only to closed-end dwelling-secured credit. 

See 12 CFR 226.24(i)(5). 

138 Thus, this provision covers false or misleading 

claims of debt elimination, debt forgiveness, or 

savings associated with mortgage credit products. 

See, e.g., In re FirstPlus Fin. Group, Inc., F.T.C. Dkt. 

No. C-3984 (2000); FTC v. Safe Harbour Found. of 

Fla., Inc., No. 08-C-1185 (D.C. Ill. 2008). 

139 The FTC has challenged many of these types 

of claims in its loan modification cases, including 

in cases where the defendants allegedly claimed, in 

part through the use of names, seals, or symbols, 

that the mortgage credit product was a government 

benefit or that the lender was affiliated with the 

government. See, e.g., FTC v. Ryan, No. 1:09-cv00535-HHK (D.D.C. 2009). 

Proposed § 321.3(n) has broader applicability 

than a similar provision in Regulation Z, which 

applies only to closed-end dwelling-secured credit 

and is limited to claims about the loan program 

advertised. See 12 CFR 226.24(i)(3). In comparison, 

the Commission’s proposed rule applies to both 

closed-end and open-end credit secured either by 

real property or a dwelling, covers claims about the 

loan program as well as the provider of the 

advertisement, and expressly references use of 

symbolic representations. 

140 See, e.g., In re Michael Gendrolis, F.T.C. Dkt. 

No. C-4248 (2009). This section also covers false or 

misleading ‘‘trigger lead’’ solicitations, in which 

entities: (1) obtain information about the consumer 

from sources such as prescreened lists sold by 

consumer reporting agencies; (2) based on that 

information, contact the consumer to promote a 

mortgage credit product or term; and (3) 

misrepresent their identity as the consumer’s 

current lender or servicer. See CMC/AFSA at 2, 7. 

Proposed § 321.3(o) has broader applicability 

than a similar provision in Regulation Z, which 

applies only to closed-end dwelling-secured credit 

and is limited to representations about lenders. See 

12 CFR 226.24(i)(4). In comparison, the 

Commission’s proposed rule applies to both closedend and open-end credit secured either by real 

property or a dwelling and bars misrepresentations 

about both servicers and lenders. 

141 Issues concerning the consumer’s right to 

reside in the dwelling have frequently arisen in the 

sale of reverse mortgages. See generally, U.S. Gov’t 

Accountability Office (GAO), GAO-09-606, Reverse 

Mortgages: Product Complexity and Consumer 

Protection Issues Underscore Need for Improved 

Controls over Counseling for Borrowers (2009) (GAO 

Reverse Mortgage Report). 

142 See, e.g., United States v. Unicor Funding, 

Inc., No. 99-1228 (C.D. Cal. 1999); In re Lomas 

Mortg. U.S.A., Inc., 116 F.T.C. 1062 (1993) ; FTC v. 

Safe Harbour Found. of Fla., Inc., No. 08-C-1185 

(D.C. Ill. 2008); FTC v. Assocs. First Capital Corp., 

No. 1:01-00606 JTC (N.D. Ga. 2001). 

143 Such misrepresentations have been identified 

as problematic in the offering of reverse mortgages, 

see, e.g., FFIEC Reverse Mortgage Guidance, supra 

note 39,and GAO Reverse Mortgage Report, supra 

note 141, and of loan modifications, see generally 

MARS NPRM, supra note 19. 

Proposed § 321.3(s) has broader applicability than 

a similar provision in Regulation Z, which applies 

only to closed-end dwelling-secured credit and 

addresses advertisements that use the term 

‘‘counselor’’ to refer to a for-profit mortgage broker 

or creditor, its employees, or others working for the 

broker or creditor in offering, originating, or selling 

mortgages. See 12 CFR 226.24(i)(6). In comparison, 

the Commission’s proposed rule applies to both 

closed-end and open-end credit secured either by 

real property or a dwelling and bans 

misrepresentations regardless of the type of forprofit entity involved. 

Proposed § 321.3(i) prohibits 

misrepresentations about the type of 

mortgage credit product that is offered, 

e.g., false claims that a mortgage is fully 

amortizing.133 Proposed § 321.3(j) bars 

misrepresentations about the amount of 

the obligation or the existence, nature, 

or amount of cash or credit the 

consumer could receive.134 This would 

include, for example, false claims that 

the consumer will receive a certain 

amount of cash by obtaining a home 

equity loan, or will receive a certain 

amount of credit through a purchase 

money loan. Proposed § 321.3(k) 

prohibits misrepresentations about the 

existence, number, amount, or timing of 

any minimum or required payments.135

Proposed § 321.3(l) prohibits 

misrepresentations about the potential 

for default on the mortgage credit 

product, including but not limited to 

misrepresentations about the 

circumstances under which the 

consumer could default for nonpayment 

of taxes or insurance, failure to maintain 

the property, or not complying with 

other obligations.136 Proposed 

§ 321.3(m) bars misrepresentations 

about the effectiveness of the mortgage 

credit product in helping consumers 

resolve problems in paying debts.137

This section covers false or misleading 

claims that the lender’s or servicer’s 

product (through a waiver, forgiveness, 

or otherwise) will reduce, eliminate, or 

restructure a debt or any other 

obligation of any person.138 Proposed 

§ 321.3(n) prohibits misrepresentations 

about the association between a 

mortgage credit product or a provider of 

such product and any other person or 

program, including but not limited to 

any affiliation with an organizational or 

governmental program, benefit, or 

entity.139 Proposed § 321.3(o) covers 

misrepresentations about the source of 

the mortgage credit product and the 

commercial communications for it, 

including but not limited to claims that 

the communication is made by or on 

behalf of the consumer’s current 

mortgage lender or servicer.140 Proposed 

§ 321.3(p) prohibits misrepresentations 

about the consumer’s right to reside in 

the dwelling that is the subject of the 

mortgage credit product, including but 

not limited to false or misleading claims 

about how long or under what 

conditions a consumer can stay in the 

dwelling.141

c. Conditions on or Related to 

Availability 

Proposed §§ 321.3(q)-(s) address 

representations that pertain to the 

availability of the mortgage credit 

product and related advice. Proposed 

§§ 321.3(q) and 321.3(r) bar 

misrepresentations about the 

consumer’s ability to obtain, or 

likelihood of obtaining, any mortgage 

credit product or term thereof, or any 

refinancing or modification of a 

mortgage credit product or term thereof. 

This includes false or misleading claims 

about whether the consumer or the 

consumer’s property has been 

preapproved or guaranteed for any such 

product or term.142 Proposed § 321.3(s) 

bars misrepresentations about the 

availability, nature, or substance of 

counseling services or any other expert 

advice offered to the consumer 

regarding any mortgage credit product 

term, including but not limited to the 

qualifications of those offering the 

services or advice.143

2. Advertising Disclosures 

The proposed rule does not include 

any affirmative advertising disclosure 

requirements. The Commission 

tentatively concludes that it is 

unnecessary to mandate advertising 

disclosures in the proposed rule and 

that not doing so will eliminate the 

possibility of inconsistencies with other 

federally- or state-mandated disclosure 

requirements for mortgage advertising. 


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144 See Deception Policy Statement, supra note 9, 

at 176-77. 

145 A failure to disclose also can be an unfair 

practice if it causes or is likely to cause substantial 

consumer injury that is not outweighed by 

countervailing benefits and is not reasonably 

avoidable. See, e.g., In re Int’l Harvester Co., 104 

F.T.C. 949, 1062 (1984). Omissions may be unfair 

in the mortgage advertising context if the 

information that is not disclosed concerns aspects 

of the transaction that are so central to making an 

informed decision that its omission is likely to be 

injurious. See id. Much of this information is 

already required to be disclosed by TILA and 

Regulation Z. 

146 See, e.g.,12 CFR 226.4; 226.14; 226.16(b) and 

(d)(1), (2) and (6); 226.22; and 226.24(d) and (f)(2). 

147 Other consumer protection laws also include 

prohibitions on requiring consumers to waive their 

statutory rights. See, e.g., 15 U.S.C. 1693l 

(Electronic Fund Transfer Act). 

148 This provision is similar in many respects to 

the recordkeeping requirements set forth in the 

FTC’s Telemarketing Sales Rule (TSR), including 

the mandate to retain scripts, advertisements, and 

promotional materials. See 16 CFR 310.5. The 

Telemarketing Sales Act expressly authorized the 

Commission to impose recordkeeping requirements. 

15 U.S.C. 6102(a)(3). Although the Omnibus 

Appropriations Act, as clarified by the Credit CARD 

Act, does not contain a specific provision on 

recordkeeping, the proposed recordkeeping 

requirements are reasonably related to the statutory 

goal of preventing deception. 

149 Proposed § 321.5(b); see also 16 CFR 310.5(b) 

(TSR). 

150 As noted in Part I.A.3, supra, the Omnibus 

Appropriations Act, as clarified by the Credit CARD 

Act, permits both the Commission and states to 

enforce the rules issued in connection with this 

rulemaking. See Credit CARD Act § 511(a)(1)(C) and 

(a)(2). 

Under Section 5 of the FTC Act, it is 

a deceptive practice to omit qualifying 

information when making a literally 

truthful claim, if the omission of that 

information is likely to mislead 

reasonable consumers in a material 

way.144 For example, a closed-end 

mortgage advertisement likely would be 

deceptive if it represented that a loan 

has a very low interest rate, but failed 

to disclose that the rate would 

substantially increase after a few 

months. Such claims often are referred 

to as ‘‘half truths.’’ Mortgage 

advertisements that include half truths 

in most cases also would be considered 

to have made implied 

misrepresentations that would fit into 

the specific categories of 

misrepresentations in the proposed rule. 

Continuing with the above example, a 

claim that a loan has a very low interest 

rate, in the absence of any qualifying 

information, is likely to imply to 

reasonable consumers that the rate lasts 

at least for longer than a few months. 

Thus, the proposed rule’s prohibition on 

misrepresentations likely will cover the 

sorts of half truths that arise when 

mortgage advertisers fail to make 

material disclosures.145

In addition, there are already 

substantial federal and state regulations 

applicable to mortgage advertisements. 

Mandating advertising disclosures in 

this rule would create potential conflicts 

and inconsistencies with the disclosure 

provisions of these other requirements 

to which covered entities are also 

subject, particularly TILA and 

Regulation Z. For example, under TILA 

and Regulation Z, the APR must be 

calculated following certain procedures, 

and it must be disclosed in mortgage 

advertisements in some 

circumstances.146 If the Commission 

were to determine that, under the 

proposed rule, the APR to be disclosed 

in advertisements must be calculated 

using different costs and procedures 

than those established by TILA and 

Regulation Z, that determination would 

result in inconsistent federal 

requirements and inconsistent 

disclosures, leading to consumer 

confusion and increased burden on 

business. 

Although the proposed rule does not 

include affirmative advertising 

disclosure requirements, the 

Commission specifically requests 

comment on whether there are any 

advertising disclosures that the 

Commission should consider 

mandating. 

D. Section 321.4: Waiver Not Permitted 

Proposed § 321.4 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 this rule.’’ The 

Commission intends the proposed rule 

to protect consumers from being 

deceived in making decisions about the 

most important financial product most 

of them will obtain in their lifetimes. 

The Commission is unaware of any 

circumstances under which advertisers 

of mortgage loans should be able to 

circumvent the proposed rule – i.e., to 

make misrepresentations – by placing 

purported waivers in their contracts or 

other agreements with consumers.147

E. Section 321.5: Recordkeeping 

Requirements 

Proposed § 321.5 sets forth specific 

categories of records that persons 

covered by the proposed rule would be 

required to retain.148 A failure to keep 

such records would be an independent 

violation of the rule.149

Specifically, for a period of 24 months 

from the last date of dissemination of 

the applicable commercial 

communication, covered persons would 

have to retain the following information: 

(1) Copies of all materially different 

commercial communications 

disseminated, including but not 

limited to sales scripts, training 

materials, related marketing materials, 

websites, and weblogs; 

(2) Documents describing or evidencing 

all mortgage credit products available 

to consumers during the time period 

in which each commercial 

communication was disseminated, 

including but not limited to the 

names and terms of each such 

mortgage credit product available to 

consumers; and 

(3) Documents describing or evidencing 

all additional products or services 

(such as credit insurance or credit 

disability insurance) that are or may 

be offered or provided with the 

mortgage credit products available to 

consumers during the time period in 

which each commercial 

communication was disseminated, 

including but not limited to the 

names and terms of each such 

additional product or service 

available to consumers. 

The Commission believes that a 

record retention requirement is 

necessary to ensure that covered 

persons are complying with the 

requirements of the proposed rule.150

Specifically, the requirement that 

covered persons retain copies of their 

commercial communications would 

enable the FTC to review those 

communications for any 

misrepresentations that violate the rule 

and to bring law enforcement actions as 

appropriate. Moreover, covered persons 

may offer consumers many different 

mortgage credit products, and may also 

offer or provide additional products or 

services with the mortgage credit 

products. Therefore, it is important for 

covered persons to maintain copies of 

documents describing all of those 

products and services, so that the 

Commission and state enforcement 

agencies can review those items in 

assessing whether the claims being 

made for them violate the rule. 

The Commission recognizes that 

recordkeeping provisions impose 

compliance costs; however, many 

covered persons already retain in the 

ordinary course of their business the 

types of documents that the proposed 

rule would require be retained. To 

further reduce any burden, the proposed 

rule would permit entities to keep the 

records in any legible form and in the 

same manner, format, or place as they 

keep such records in the ordinary 

course of business. 

The proposed rule also seeks to limit 

the retention requirements to avoid 

imposing any unnecessary burden. For 

example, covered entities must retain 

only ‘‘materially different’’ commercial 


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Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60363 

151 Credit CARD Act § 511(a)(2). 

152 See 16 CFR 310.9. 

153 The Commission has previously included 

‘‘assisting and facilitating’’ counts in at least two 

dozen cases filed under the TSR. See, e.g., FTC v. 

Assail, Inc., No. W03CA007 (W.D. Tex. 2004); 

United States v. DirecTV, Inc., No. SACV05 1211 

DOC (C.D. Cal. 2005). 

communications. The proposed rule 

imposes a 24-month record retention 

period, which the Commission believes 

would strike an appropriate balance 

between ensuring efficient and effective 

compliance efforts, while avoiding the 

imposition of unnecessary costs. 

F. Section 321.6: Actions by States 

The Omnibus Appropriations Act, as 

clarified by the Credit CARD Act, 

permits states to enforce the rules issued 

in connection with this rulemaking.151

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. 

Section 321.6 of the proposed rule 

provides that states have the authority 

to file actions against those who violate 

the rule. 

G. Section 321.7: Severability 

Proposed § 321.6 states that the 

provisions of this rule are separate and 

severable from one another. This 

provision, which is modeled after a 

similar provision in the TSR,152 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. Requests for Comment 

The Commission seeks comment on 

the proposed rule. Without limiting the 

scope of issues on which it seeks 

comments, the FTC is particularly 

interested in receiving comments on the 

questions that follow. In responding to 

these questions, please include detailed 

factual supporting information if 

possible. 

A. General Questions for Comment 

(1) How would the proposed rule 

affect commercial communications 

about mortgage credit products? Useful 

comments would include information 

about the types of commercial 

communications provided by particular 

persons, how these persons provide 

commercial communications, and the 

impact of the proposed rule on them. 

(2) What types of mortgage credit 

products currently are being offered to 

consumers or may be offered in the 

future? In what ways do the fees, costs, 

obligations, characteristics of, 

conditions on, or availability associated 

with the different types of mortgage 

credit products vary? 

(3) What would be the effects of the 

proposed rule (including any benefits 

and costs) on consumers? Would the 

costs and benefits to consumers differ 

depending on the coverage of the 

proposed rule? How? 

(4) In addition to the evidence cited 

in this NPRM, what evidence is there 

that consumers are likely to be misled 

by claims made relating to mortgage 

credit products? Are consumers likely to 

be misled by particular covered 

persons? Which ones? Are consumers 

likely to be misled by specific types of 

claims? Which ones? 

(5) What would be the effects of the 

proposed rule (including any benefits 

and costs) on covered persons? 

(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 for Comment on 

Proposed Provisions 

1. Section 321.2; Definitions 

(1) Does the definition of ‘‘mortgage 

credit product’’ in proposed § 321.2(e) 

adequately describe the products the 

proposed rule should cover? If not, how 

should it be modified? In particular, 

should the definition be modified to 

include credit in addition to that which 

‘‘is offered or extended to a consumer 

primarily for personal, family, or 

household purposes’’? If so, what 

additional credit should be covered? 

What would be the costs and benefits of 

the modified definition? 

(2) Does the definition of ‘‘term’’ in 

proposed § 321.2(g) adequately describe 

the various aspects of mortgage credit 

products that the proposed rule should 

cover? If not, how should it be 

modified? What would be the costs and 

benefits of the modified definition? 

(3) Does the definition of ‘‘commercial 

communication’’ in § 321.2(a) 

adequately describe the conduct the 

proposed rule should cover? If not, how 

should it be modified? What would be 

the costs and benefits of the modified 

definition? 

Does the definition adequately 

address communications made in 

languages other than English that the 

proposed rule should cover? If not, how 

should it be modified? What would be 

the costs and benefits of the modified 

definition? 

(4) Does the definition of ‘‘person’’ in 

§ 321.2(f) adequately describe those 

whom the proposed rule should cover? 

If not, how should it be modified? For 

example, should any other entities be 

covered? What would be the costs and 

benefits of the modified definition? 

(i) Should state-chartered credit 

unions be excluded from coverage? Why 

or why not? Should such an exclusion 

apply to all forms of state-chartered 

credit unions, or only to some of these 

entities? Why or why not? 

(ii) Should subsidiaries or affiliates of 

banks and thrifts be excluded from 

coverage? Why or why not? 

2. Section 321.3: Prohibited 

Representations 

(1) Proposed § 321.3 bans persons 

from making misrepresentations in 

commercial communications regarding 

any term of any mortgage credit product 

and provides numerous non-exclusive 

examples pertaining to fees, costs, 

obligations, or characteristics of, or 

associated with, the product. It also 

includes misrepresentations of any of 

the conditions on or related to the 

availability of the product. How 

widespread is each prohibited 

misrepresentation? Should any of the 

misrepresentations be deleted? Why? 

Should any other misrepresentations be 

added? Is so, what other 

misrepresentations should be added? 

Why? 

(2) The proposed rule does not 

specifically address practices related to 

persons giving substantial assistance or 

support to those who make 

misrepresentations covered by the 

proposed rule and who know or 

consciously avoid knowing that those 

they assist are engaging in such 

conduct. Some individuals and 

companies engaged in unlawful 

practices may rely on the support and 

assistance of other persons. In some 

nonmortgage transaction cases, for 

example, the Commission has charged 

lead generators – who obtained 

information from consumers for use by 

third parties – with providing knowing, 

substantial assistance in violation of the 

TSR.153

Should the rule include a specific 

prohibition on the provision of 

substantial assistance or support to 

others who violate the rule? If so, what 

specific conduct should be covered by 

the rule? What evidence exists that 

mortgage entities receive substantial 

assistance or support from other persons 

to deceptively advertise mortgage credit 

product terms? What evidence exists 

about the types of persons who provide 

such substantial assistance or support to 


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60364 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

154 According to the 2000 Census, at least 18% 

of the population (47 million people) speak a 

language other than English at home. See U.S. 

Census Bureau, Language Use and EnglishSpeaking Ability: 2000, at 2 (Oct. 2003), available 

at (http://www.census.gov/prod/2003pubs/c2kbr29.pdf). 

155 See supra note 111. 

156 See FTC v. Mortgages Para Hispanos.com 

Corp., No. 4:06-cv-19 (E.D. Tex. 2006). GAO is 

currently studying the relationship between English 

fluency and financial literacy and whether 

individuals whose native language is a language 

other than English are impeded in their financial 

affairs. See Credit CARD Act § 513. 

157 See Laborers Int’l Union at 4-5. 

158 See supra Parts III.C.2 and IV.C.2 and note 28. 

159 See, e.g., 12 CFR 226.16 and 226.24(c), (d), (e), 

(f), and (g), respectively. 

others? For example, is there evidence 

that lead generators or third-party 

vendors provide substantial assistance 

to mortgage entities, by identifying 

potential customers or performing backroom operations, in support of those 

who engage in practices that would 

violate the proposed rule? What 

evidence exists that persons may know 

or consciously avoid knowing that the 

mortgage entities they assist are making 

misrepresentations covered by the rule? 

What evidence exists that consumers are 

likely to be injured from any such 

substantial assistance and support? 

What would be the costs and benefits of 

such a prohibition? 

(3) Increasingly, many consumers in 

our society use languages other than 

English as their primary language.154 As 

a result, consumers may be exposed to 

more advertisements and offers that 

‘‘mix languages’’ in connection with 

mortgage products.155 For example, in a 

recent FTC case, the Commission 

alleged that a mortgage broker engaged 

in deception when it offered payments 

and other mortgage terms in promotions 

to Spanish-speaking borrowers in 

Spanish, but the terms in the documents 

at closing, which were provided only in 

English, were less favorable.156 One 

comment submitted in response to the 

MAP ANPR raises concerns about 

practices involving non-English 

speakers. It notes that, in some 

instances, sales and loan representatives 

of some home builders or their affiliated 

lenders have conducted transactions 

primarily in Spanish, but mortgage 

documents were provided only in 

English, making it difficult for buyers to 

understand or reject mortgage terms.157

The proposed rule broadly prohibits 

material misrepresentations in 

commercial communications regardless 

of the language in which the claim is 

made. Are more protections warranted 

to prevent the use of multiple languages 

– or ‘‘mixing’’ languages – in a way that 

makes it difficult for consumers to 

understand mortgage terms? What 

evidence exists of the use of mixed 

languages in commercial 

communications for mortgage credit 

product terms in a deceptive or unfair 

manner? Is there evidence of mortgage 

brokers or other entities, in marketing to 

non-English speaking consumers, using 

a language other than English to convey 

a claim, while contradicting that claim 

in English – e.g., using the consumer’s 

primary language to convey a very low 

interest rate, while using English to 

communicate that the rate will increase 

after only a few months? Have such 

practices occurred in both open-end and 

closed-end mortgage credit 

advertisements? What evidence is there 

of mortgages being marketed in 

languages other than English with 

contradictory information or additional 

material terms provided only in English 

in a manner that is deceptive or unfair? 

Should the rule address the mixing of 

languages in commercial 

communications through disclosure 

requirements? If so, how should it do 

so? Should, for example, it prohibit the 

use of a foreign language to convey 

some material terms in a commercial 

communication when other material 

terms are disclosed only in English? 

What would be the costs and benefits of 

doing so? 

3. Section 321.5: Recordkeeping 

(1) Proposed § 321.5(a) requires a 24- 

month document retention period. 

Should the proposed rule include a 

record retention requirement? Is the 

specified period of time adequate for 

effective and efficient law enforcement? 

Does it impose unnecessary costs on 

persons making commercial 

communications covered by the 

proposed rule? Should the Commission 

consider an alternative 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 would be 

the appropriate time period, and why. 

(2) Proposed § 321.5(a) sets forth 

specific categories of records that 

persons covered by the proposed rule 

are required to retain. Do these 

categories adequately describe the 

records needed to ensure that covered 

persons are complying with the 

requirements of the proposed rule? If 

not, how should the categories by 

modified? 

(3) Proposed § 321.5(b) permits 

persons covered by the proposed rule 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 

appropriate? Should the Commission 

specify how documents should be 

retained? If so, explain what would be 

the appropriate standard for retaining 

documents. 

C. Other Issues 

1. Effective Dates 

The proposed rule generally prohibits 

misrepresentations in commercial 

communications about the terms of 

mortgage credit products, consistent 

with the prohibition on deceptive 

claims that would violate Section 5 of 

the FTC Act. The persons subject to the 

proposed rule are within the 

Commission’s jurisdiction under the 

FTC Act, and thus are already 

prohibited from such conduct. 

Nonetheless, to afford affected persons 

time to adjust to the proposed rule’s 

new recordkeeping requirements, the 

Commission proposes an effective date 

of 30 days following publication of the 

final rule in the Federal Register. Is this 

time period appropriate? If yes, why? If 

not, what period would be more 

appropriate, and why? What would be 

the costs and benefits of any such 

modified time period? 

2. Advertising Disclosures 

The proposed rule does not require 

affirmative advertising disclosures. Are 

affirmative advertising disclosures 

needed to prevent deception related to 

commercial communications for 

mortgage credit products? If so, what 

advertising disclosures are needed, and 

why is the failure to provide them 

unfair or deceptive? Should these 

advertising disclosures be triggered by 

terms that may be included in the 

commercial communication, or should 

they be nontriggered disclosures that are 

required in all commercial 

communications for mortgage credit 

products, regardless of the content of 

the communication? Should any 

advertising disclosures vary based on 

the types of media in which the 

commercial communication is made, for 

example, direct mail, newspaper, radio, 

television, or electronic? If so, how? 

Should the rule incorporate any 

mortgage advertising requirements that 

the Board promulgated under Section 

105 of TILA?158 If so, which should be 

incorporated? Should the rule 

incorporate the requirements that apply 

to advertisements for open-end credit, 

closed-end credit, or both?159 Should 

the rule incorporate any other 

requirements from Regulation Z, such as 

those pertaining to ‘‘definitions’’ or 

calculations of terms (that may appear 

in the advertising requirements, among 


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160 See, e.g., 12 CFR 226.2 (definitions); 12 CFR 

226.4 (finance charge calculation); 12 CFR 226.14 

(open-end APR calculation); and 12 CFR 226.22 

(closed-end APR calculation). 

161 See, e.g., 12 CFR 226.24(b). The Commission 

is aware that different formulations of the ‘‘clear and 

conspicuous’’ standard are used in Regulation Z, 

including, in some instances, requirements for 

‘‘equally prominent,’’ ‘‘closely proximate,’’ or 

‘‘proximate’’ advertising disclosures. See 12 CFR 

226.24(b), Supp. I, and 73 FR 44522. 

162 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). 

163 See 16 CFR 1.26(b)(5). 

164 Proposed § 321.5 sets forth the recordkeeping 

requirements. 

165 See 44 U.S.C. 3502(3)(a). 

others), such as the ‘‘finance charge’’ and 

‘‘APR’’?160

Is a mortgage advertiser’s failure to 

comply with any of Regulation Z’s 

requirements an unfair or deceptive act 

or practice under the FTC Act? Would 

requiring mortgage advertisers to 

comply with any of Regulation Z’s 

requirements be reasonably related to 

the prevention of unfair or deceptive 

acts or practices? What are the 

advantages and disadvantages of 

incorporating disclosure requirements 

into the rule? 

For any advertising disclosures that 

should be required, how should they be 

reconciled with the disclosures required 

in mortgage advertisements under TILA 

and Regulation Z? In addition, if the 

rule were to include advertising 

disclosure requirements, should all the 

disclosure standards be the same as or 

different from those in Regulation Z 

(e.g., ‘‘clear and conspicuous’’)?161

Should the analysis differ based on the 

type of medium, for example, print, 

radio, television, or electronic? 

In addition, for any Regulation Z 

disclosures that should be incorporated 

into the rule, how should the rule 

address changes over time that occur in 

disclosures required by Regulation Z or 

the Regulation Z Commentary? Would 

additional requirements be needed to 

address this issue? What forms of testing 

or other empirical evidence, if any, 

would be appropriate to measure the 

effectiveness of any required advertising 

disclosures in the rule? What would be 

the costs and benefits of such testing? 

D. Instructions for Submitting 

Comments 

Interested parties are invited to 

submit written comments electronically 

or in paper form. Comments should 

refer to ‘‘Mortgage Acts and Practices – 

Advertising Rulemaking, Rule No. 

R011013’’ 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 secrets and commercial or 

financial information obtained from a 

person and 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).162

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 

(https://ftcpublic.commentworks.com/ 

ftc/mapadrulenprm) 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 (https:// 

ftcpublic.commentworks.com/ftc/ 

mapadrulenprm). 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 (http://www.ftc.gov) to 

read the Notice and the news release 

describing it. 

A comment filed in paper form 

should include the reference ‘‘Mortgage 

Acts and Practices – Advertising 

Rulemaking, Rule No. R011013’’ 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. 

All comments on any proposed 

recordkeeping requirements should 

additionally be sent to the Office of 

Management and Budget (OMB). 

Comments may be submitted by U.S. 

Postal Mail to: Office of Information and 

Regulatory Affairs, Office of 

Management and Budget, Attention: 

Desk Officer for Federal Trade 

Commission, New Executive Office 

Building, Docket Library, Room 10102, 

725 17th Street, NW, Washington, DC 

20503. Comments, however, should be 

submitted via facsimile to (202) 395- 

5167 because U.S. Postal Mail is subject 

to lengthy delays 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 of 

individuals before their comments are 

place 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.163

VI. Paperwork Reduction Act 

The Commission is submitting this 

proposed rule and a Supporting 

Statement to the OMB for review under 

the Paperwork Reduction Act (PRA), 44 

U.S.C. 3501-21. The recordkeeping 

requirements164 of the proposed rule 

constitute a ‘‘collection of information’’ 

for purposes of the PRA.165 The 

proposed rule does not impose a 


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166 See Proposed § 321.5(a)(1)-(3). 

167 Some covered persons, particularly mortgage 

brokers and lenders, are subject to state 

recordkeeping requirements for mortgage 

advertisements. See, e.g., Fla. Stat. 494.00165 

(2009); Ind. Code. Ann. 23-2-5-18 (2009); Minn. 

Stat. 58.14 (2009); Wash. Rev. Code 19.146.060 

(2010). Many mortgage brokers, lenders, and 

servicers are also subject to state recordkeeping 

requirements for mortgage transactions and related 

documents, and these may include descriptions of 

mortgage credit products. See, e.g., Mich. Comp. 

Laws Serv. 445.1671 (2009); N.Y. Banking Law 597 

(Consol. 2010); Tenn. Code Ann. 45-13-206 (2009). 

168 See 44 U.S.C. 3502(3)(A); 5 CFR 1320.3(b)(2). 

169 No general source provides precise numbers 

of the various categories of covered persons. 

Commission staff, therefore, has used the following 

sources and inputs to arrive at this estimated total: 

(1) 1.1 million real estate brokers and agents – from 

the National Association of Realtors, see (http:// 

www.realtor.org) (last visited June 28, 2010); (2) 

175,000 home builders – from the National 

Association of Home Builders, see (http:// 

www.NAHB.org) (last visited June 28, 2010); (3) 350 

finance companies – from the American Financial 

Services Association, see (http:// 

www.afsaonline.org) (last visited June 28, 2010); (4) 

22,170 advertising agencies – from the North 

American Industry Classification System 

Association’s database of U.S. businesses, see 

(http://www.naics.com/naics54.htm) (last visited 

June 28, 2010); (5) 1,000 lead generators and rate 

aggregators – based on staff’s administrative 

experience. These inputs add to 1,298,520; for 

rounding, and to account further for potentially 

unspecified other covered persons, however, staff 

has increased the resulting total to 1.3 million. 

170 The Commission does not know what 

percentage of these persons are, in fact, engaged in 

covered conduct under the proposed rule, 

i.e.,providing commercial communications about 

mortgage credit product terms. For purposes of 

these estimates, the Commission has assumed all of 

them are covered by the recordkeeping provisions 

and are not retaining these records in the ordinary 

course of business. 

171 This estimate is based on mean hourly wages 

for office file clerks provided by the Bureau of 

Labor Statistics. See U.S. Bur. of Labor Statistics, 

National Compensation Survey: Occupational 

Earnings in the United States, 2009, Bulletin 2738, 

June 2010, at 3-23, tbl. 3, available at (http:// 

www.bls.gov/ncs/ncswage2009.htm). 

172 5 U.S.C. 601-612. 

173 5 U.S.C. 603-605. Covered entities under the 

proposed rule will be classified as small entities 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), 

available at (http://www.sba.gov/idc/groups/public/ 

documents/sba_homepage/serv_sstd_tablepdf.pdf). 

Because a wide range of individuals and companies 

may make representations in commercial 

communications regarding any term of a mortgage 

product, no one classification is applicable to this 

rulemaking. 

The range in size standard for most of the 

potentially relevant professional and support 

services is $7 million or less in annual receipts. 

This standard applies to, for example, real estate 

credit, mortgage and nonmortgage loan brokers, 

other nondepository credit intermediation, other 

activities related to credit intermediation (such as 

servicing), secondary market financing (such as 

Fannie Mae and Freddie Mac), marketing 

consulting services, advertising agencies, public 

relations agencies, display advertising, direct mail 

advertising, advertising material distribution 

services, other services related to advertising, and 

all other professional, scientific and technical 

services. 

The range in size standard varies greatly for the 

following other types of entities that are potentially 

covered by the proposed rule: offices of real estate 

agents and brokers ($2 million or less); housing 

construction/builders ($33.5 million or less); and 

credit unions ($175 million or less). 

disclosure requirement. The associated 

PRA burden analysis follows: 

A. Recordkeeping Requirements 

As discussed in the preamble, the 

proposed rule requires covered persons 

to retain copies of materially different 

commercial communications 

disseminated and documents describing 

or evidencing all mortgage credit 

products available to consumers during 

the relevant time period and all 

additional products or services (such as 

credit insurance or credit disability 

insurance) that are or may be offered or 

provided with the mortgage credit 

products.166 A failure to keep such 

records would be an independent 

violation of the rule. 

Commission staff believes these 

recordkeeping requirements pertain to 

records that are usual and customary 

and kept in the ordinary course of 

business for many covered persons, 

such as mortgage brokers, lenders, and 

servicers.167 As to these persons, the 

retention of these documents does not 

constitute a ‘‘collection of information,’’ 

as defined by OMB’s regulations that 

implement the PRA.168 Other covered 

persons, however, such as real estate 

agents and brokers, advertising agencies, 

home builders, lead generators, rate 

aggregators, and others, may not 

currently maintain these records in the 

ordinary course of business. Thus, the 

recordkeeping requirements for those 

persons would constitute a ‘‘collection 

of information.’’ 

B. Estimated Hours Burden and 

Associated Labor Costs 

Commission staff estimates that the 

proposed rule’s recordkeeping 

requirements will affect approximately 

1.3 million persons169 who would not 

otherwise retain such records in the 

ordinary course of business. As noted, 

this estimate includes real estate agents 

and brokers, advertising agencies, home 

builders, lead generators, rate 

aggregators, and others that may provide 

commercial communications regarding 

mortgage credit product terms.170

Although the Commission cannot 

estimate with precision the time 

required to gather and file the required 

records, it is reasonable to assume that 

covered persons will each spend 

approximately 3 hours per year to do 

these tasks, for a total of 3.9 million 

hours (1.3 million persons x 3 hours). 

Staff further assumes that office support 

file clerks will handle the proposed 

rule’s record retention requirements at 

an hourly rate of $13.63.171 Based upon 

the above estimates and assumptions, 

the total annual labor cost to retain and 

file documents is $53,157,000 (3.9 

million hours x $13.63 per hour). 

Absent information to the contrary, 

staff anticipates that existing storage 

media and equipment that covered 

persons use in the ordinary course of 

business will satisfactorily 

accommodate incremental 

recordkeeping under the proposed rule. 

Accordingly, staff does not anticipate 

that the proposed rule will require any 

new capital or other non-labor 

expenditures. 

C. Questions for Comment 

The Commission invites comments 

that will enable it to: (1) evaluate 

whether the proposed record retention 

requirements 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 collection 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 

collection 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. 

VII. Regulatory Flexibility Act 

The Regulatory Flexibility Act of 

1980172 requires the Commission to 

provide an Initial Regulatory Flexibility 

Analysis with a proposed rule, and a 

Final Regulatory Flexibility Analysis 

with a final rule, unless the Commission 

certifies that it does not anticipate that 

the proposed rule will have a significant 

economic impact on a substantial 

number of small entities.173

The Commission anticipates that the 

proposed Mortgage Acts and Practices – 

Advertising Rule will have no 

significant economic impact on a 

substantial number of small entities. As 

noted above, the proposed rule will 

prevent deceptive mortgage advertising 

practices by prohibiting 

misrepresentations and imposing a 

related recordkeeping requirement. The 

proposed rule’s reach is limited to 

entities that are within the FTC’s 

jurisdiction under the FTC Act. Under 

the FTC Act, the Commission has 

jurisdiction over any person, 


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174 No general source provides precise numbers 

of the various categories of covered persons. 

Commission staff, therefore, has used the following 

sources and inputs to arrive at this estimated total: 

(1) 51,000 mortgage lenders and mortgage brokers 

– from various online state regulatory agency 

resources and the Nationwide Mortgage Licensing 

System and Registry Consumer Access, see (http:// 

www.nmlsconsumeraccess.org) (last visited 

between May 17 - June 28, 2010); (2) 60 mortgage 

servicers – from several sources including lists of 

servicers participating in various federal programs, 

available at (http://makinghomeaffordable.gov/ 

contact_servicer.html) and (http://hopenow.com/ 

members.php) (both last visited June 28, 2010) 

(excluding lenders who are also servicers under 

these programs); and (3) 1.3 million others – see 

supra note 169 (explaining estimate). 

175 Staff estimates that the annual labor cost for 

each covered person to file or retain documents 

under the recordkeeping provisions is $39.72 (3 

hours x $13.24 per hour). See supra Part VI.B. 

176 Cf. U.S. Small Bus. Admin. Office of 

Advocacy, A Guide for Government Agencies – How 

to Comply with the Regulatory Flexibility 19 (2003), 

available at (http://www.sba.gov/advo/laws/ 

rfaguide.pdf) (citing 126 Cong. Rec. S10,938 (Aug. 

6, 1980) (identifying 175 annual staff hours for 

recordkeeping as a ‘‘significant impact’’)). 

177 See supra note 169. 

178 See supra Part VI.B (discussing professional 

skills and equipment that staff estimates are needed 

for compliance). 

partnership, or corporation that engages 

in unfair or deceptive acts or practices 

in or affecting commerce, excepting, 

among others, banks, savings and loan 

institutions, federal credit unions, nonprofits, and common carriers. Thus, the 

proposed rule would broadly apply to 

any covered entity that makes 

representations in a commercial 

communication about any term of a 

mortgage credit product. Although the 

Commission does not know the precise 

number of entities that may be subject 

to the proposed rule, it estimates that 

the proposed rule will cover 

approximately 1.35 million entities.174

This number includes mortgage lenders, 

mortgage brokers, mortgage servicers, 

real estate agents and brokers, 

advertising agencies, home builders, 

lead generators, rate aggregators, and 

others under the Commission’s 

jurisdiction. It is not known, however, 

how many of those entities are small 

entities, and the Commission welcomes 

comment on those issues. The 

Commission nonetheless believes that 

the proposed rule will not have a 

significant economic impact on any of 

the small entities subject to it. 

The proposed rule generally prohibits 

misrepresentations, consistent with the 

prohibition on deceptive claims that 

would violate Section 5 of the FTC Act. 

The proposed rule elaborates on this 

prohibition by including specific 

examples of types of misrepresentations 

covered by the proposed rule, but it 

does not require affirmative disclosures. 

The entities subject to the proposed rule 

are within the Commission’s 

jurisdiction under the FTC Act, and 

thus are already prohibited from such 

conduct. The proposed rule imposes a 

recordkeeping requirement, but it is 

limited to a specific subset of relevant 

documents that Commission staff 

believes many entities covered by the 

proposed rule already retain in the 

ordinary course of business. For those 

entities that may not already do so, staff 

estimates minimal burden and expense 

for each entity to comply with the 

proposed rule’s requirements.175 For 

these reasons, the Commission believes 

that the proposed rule is not likely to 

have a significant economic impact176

on a substantial number of small 

entities. Accordingly, this document 

serves as notice to the Small Business 

Administration of the Commission’s 

certification that it does not anticipate 

the proposed rule will have a significant 

economic impact on a substantial 

number of small entities. Nonetheless, 

the FTC has prepared the following 

analysis. 

A. Description of the Reasons That 

Action by the Agency is Being 

Considered 

The Commission proposes, and seeks 

comment on, a proposed rule to 

implement Section 626 of the Omnibus 

Appropriations Act, as amended by the 

Credit CARD Act, which directs the 

Commission to initiate a rulemaking 

related to unfair or deceptive acts or 

practices with respect to mortgage loans. 

Section 511 of the Credit CARD Act 

clarified that the rule will cover only 

those entities over which the FTC has 

jurisdiction under the FTC Act. Through 

this document, the Commission 

proposes, and seeks comment on, 

prohibited misrepresentations and 

recordkeeping provisions aimed at 

mortgage credit product commercial 

communications in order to prevent 

deceptive practices that harm 

consumers, 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 

related to unfair or deceptive acts or 

practices with respect to mortgage loans. 

Through the rulemaking, the 

Commission seeks to prevent deceptive 

acts and practices in the mortgage 

advertising industry, which has been 

the subject of numerous law 

enforcement actions under Section 5 of 

the FTC Act and TILA. 

C. Small Entities to Which the Proposed 

Rule Will Apply 

The proposed rule will apply to any 

person who makes any representation in 

any commercial communication 

regarding any term of any mortgage 

credit product. Based upon its 

knowledge of the industry, the 

Commission believes that a variety of 

individuals and companies under its 

jurisdiction will be covered by the 

proposed rule, including but not limited 

to mortgage lenders, mortgage brokers, 

mortgage servicers, real estate agents 

and brokers, advertising agencies, home 

builders, lead generators, rate 

aggregators, and others. 

In response to a request for comments 

in the ANPR, the Commission received 

no empirical data regarding the numbers 

or revenues of any of these types of 

entities. On the basis of other available 

data, however, Commission staff 

estimates that there are approximately 

1.35 million entities subject to the 

proposed rule.177 However, staff does 

not have sufficient data to readily 

estimate the number of such covered 

persons, if any, that are small entities. 

Accordingly, the Commission 

specifically requests additional 

comment on: (1) the number of 

individuals and companies that make 

commercial communications regarding 

mortgage credit products; and (2) the 

number of such entities, if any, that are 

small entities. 

D. Projected Reporting, Recordkeeping, 

and Other Compliance Requirements 

The proposed rule sets forth specific 

categories of records that covered 

persons would be required to retain. 

The Commission believes that these 

recordkeeping requirements are 

necessary to ensure that covered entities 

are complying with the requirements of 

the proposed rule. They would enable 

the Commission to review copies of 

commercial communications for any 

misrepresentations that violate the rule 

and to bring law enforcement actions as 

appropriate. The Commission 

recognizes that recordkeeping 

provisions impose compliance costs; 

however, many covered entities already 

retain in the ordinary course of business 

the types of documents that the 

proposed rule would require be 

retained. For those entities that may not 

already do so, staff estimates minimal 

burden and expense for each entity to 

comply with the requirements.178 To 


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179 See supra notes 117-118 and accompanying 

text. 

180 See supra Parts III.C.2 and IV.C.2. 181 See id. 

further reduce any burden, the proposed 

rule would permit covered entities to 

keep the records in any legible form and 

in the same manner, format, or place as 

they keep such records in the ordinary 

course of business. The proposed rule 

also attempts to avoid imposing any 

unnecessary burden by limiting the 

recordkeeping requirements only to, for 

example, ‘‘materially different’’ 

commercial communications. It also 

limits the timeframe for recordkeeping 

to 24 months. 

E. Duplicative, Overlapping, or 

Conflicting Federal Rules 

As noted above, TILA (including 

HOEPA) and Regulation Z regulate 

mortgage advertisements. The states 

have also enacted various laws or 

regulations that address aspects of 

deceptive mortgage advertising 

practices. None of the federal or state 

measures duplicates the specificity and 

breadth of practices, or diversity of 

entities covered in the proposed rule. In 

addition, the Commission does not 

believe that its proposed rule conflicts 

with any of these other requirements, 

but it invites comment on this issue.179

As noted above, the Commission is 

not proposing any affirmative disclosure 

requirements, but it is has requested 

comment on whether any such 

disclosures are needed to prevent 

deception related to commercial 

communications for mortgage credit 

products.180 However, such disclosures 

could raise substantial conflicts with 

other mortgage advertising 

requirements, including those in TILA 

and Regulation Z. The Commission is 

interested in receiving comments in this 

area.181

F. Significant Alternatives to the 

Proposed Rule Amendments 

As previously noted, the proposed 

rule is intended to prevent deceptive 

acts and practices in mortgage 

advertising. The proposed rule is 

intended to achieve that goal without 

creating unnecessary compliance costs. 

Thus, the Commission does not propose 

to impose any affirmative disclosure 

requirements for advertisements at this 

time. Further, as discussed above, 

Commission staff believes that many 

covered entities already retain in the 

ordinary course of business the types of 

documents that the proposed rule 

would require be retained. In addition, 

proposed § 321.5(b) states that entities 

may keep such records in any legible 

form and in the same manner, format, or 

place as they keep such records in the 

ordinary course of business. 

The proposed rule also limits the 

types of information that must be 

retained to avoid imposing any 

unnecessary burden. For example, 

covered persons must retain only 

‘‘materially different’’ versions of 

commercial communications and 

related materials. Finally, the proposed 

rule calls for a 24-month record 

retention period, which the Commission 

believes would strike an appropriate 

balance between ensuring efficient and 

effective compliance efforts, while 

avoiding the imposition of unnecessary 

costs. 

Furthermore, the recordkeeping 

requirements are format-neutral; 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. 

TABLE A - LIST OF COMMENTERS AND SHORT-NAMES/ACRONYMS

Short-name/Acronym Commenter 

Adcock Adcock 

ABA American Bankers Association 

ASA American Society of Appraisers 

Anderson Anderson, Lisa 

AG Mass. Attorney General, Commonwealth of Massachusetts 

Beasley Beasley 

BECU Boeing Employees’ Credit Union 

Bracco Bracco, Larry 

CRL Center for Responsible Lending 

Ciavarella Ciavarella (3 comments) 

CMC/AFSA Consumer Mortgage Coalition and American Financial Services Association 

CUNA Credit Union National Association 

Crosby Crosby, Tracy 

EJF Empire Justice Center 

Freddie Mac Federal Home Loan Mortgage Corporation 

Feinman Feinman, Anita 

Flaker Flaker 

Franciulli Franciulli, Patricia 

GCUA Georgia Credit Union Affiliates 

Goodman Goodman, Al 

Harris Harris, Kathleen 

HPC Housing Policy Council 

Howard Howard, Marilyn (2 comments) 

Kochanski Kochanski, David 

Laborers Int’l Union Laborers International Union of North America 

MBA Mortgage Bankers Association 

MICA Mortgage Insurance Companies of America 


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TABLE A - LIST OF COMMENTERS AND SHORT-NAMES/ACRONYMS—Continued 

Short-name/Acronym Commenter 

NAR National Association of REALTORS 

NASCUS National Association of State Credit Union Supervisors 

NCRC National Community Reinvestment Coalition 

NCLC National Consumer Law Center 

Norman Norman 

Obduskey Obduskey, Dennis (2 comments) 

P. P. (Anonymous) 

Reid Reid, Harry (United States Senate) 

Rice Rice, Richard 

Scheu Scheu, Toni 

Smith Smith, J. 

Tucker Tucker, James 

Yachovich Yackovich, Beverly G. & Edward 

Yoshida Yoshida, Gena 

Zager Zager, Jeremy (Sterling Van Dyke Credit Union) 

TABLE B - LIST OF FTC MORTGAGE ADVERTISING ENFORCEMENT ACTIONS

∑ FTC v. Assocs. First Capital Corp., No. 1:01-00606 (N.D. Ga. 2001) 

∑ FTC v. Capital City Mortg. Corp., No. 1:98CV237 (D.D.C. 1998) 

∑ FTC v. Chase Fin. Funding, Inc., No. SACV04-549 GLT (ANx) (C.D. Cal. 2004) 

∑ FTC v. First Alliance Mortg. Co., No. SACV 00-964 DOC (EEx) (C.D. Cal. 2000) 

∑ FTC v. Mortgages Para Hispanos.com Corp., No. 4:06-cv-19 (E.D. Tex. 2006) 

∑ FTC v. Ranney, No. 04-F-1065 (MJW) (D. Colo. 2004) 

∑ FTC v. Ryan, No. 1:09-cv-00535-HHK (D.D.C. 2009) 

∑ FTC v. OSI Fin. Servs., Inc., No. 02-C-5078 (N.D. Ill. 2002) 

∑ FTC v. Safe Harbour Found. of Fla., Inc., No. 08-C-1185 (N.D. Ill. 2008) 

∑ FTC v. 30 Minute Mortg., Inc., No. 03-60021 (S.D. Fla. 2003) 

∑ In re Am. Nationwide Mortg. Co., Inc., F.T.C. Dkt. No. C-4249 (2009) 

∑ In re Felson Builders, Inc., 119 F.T.C. 642 (1995) 

∑ In re FirstPlus Fin. Group, Inc., F.T.C. Dkt. No. C-3984 (2000) 

∑ In re Lomas Mortg. U.S.A., Inc., 116 F.T.C. 1062 (1993) 

∑ In re Michael Gendrolis, F.T.C. Dkt. No. C-4248 (2009) 

∑ In re Shiva Venture Group, Inc., F.T.C. Dkt. No. C-4250 (2009) 

∑ United States v. Mercantile Mortg. Co., No. 02-C-5079 (N.D. Ill. 2002) 

∑ United States v. Unicor Funding, Inc., No. 9901228 (C.D. Cal. 1999) 

VIII. Proposed Rule 

List of Subjects in 16 CFR part 321 

Advertising, Communications, 

Consumer protection, Credit, Mortgages, 

Trade practices 

■ 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 321, to read as 

follows: 

PART 321 – MORTGAGE ACTS AND 

PRACTICES – ADVERTISING RULE 

Section Contents 

321.1 Scope of regulations in this part. 

321.2 Definitions. 

321.3 Prohibited representations. 

321.4 Waiver not permitted. 

321.5 Recordkeeping requirements. 

321.6 Actions by states. 

321.7 Severability. 

Authority: Sec. 626, Pub. L. 111-8, 123 

Stat. 524 (15 U.S.C. 1638 note), as amended 

by sec. 511, Pub. L. 111-24, 123 Stat. 1734 

(15 U.S.C. 1638 note). 

§ 321.1 Scope of regulations in this part. 

This part implements the Omnibus 

Appropriations Act of 2009, sec. 626, 

Pub. L. 111-8, 123 Stat. 524 (2009) (15 

U.S.C. 1638 note), as amended by the 

Credit Card Accountability 

Responsibility and Disclosure Act of 

2009, sec. 511, Pub. L. 111-24, 123 Stat. 

1734 (2009) (15 U.S.C. 1638 note). This 

part applies to persons over which the 

Federal Trade Commission has 

jurisdiction under the Federal Trade 

Commission Act. 

§ 321.2 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 purchasing 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. 

‘‘Commercial communication’’ includes 

but is not limited to promotional 

materials and items as well as Web 

pages. 

(b) ‘‘Consumer’’ means a natural 

person to whom a mortgage credit 

product is offered or extended. 

(c) ‘‘Credit’’ means the right to defer 

payment of debt or to incur debt and 

defer its payment. 

(d) ‘‘Dwelling’’ means a residential 

structure that contains one to four units, 

whether or not that structure is attached 

to real property. The word includes an 

individual condominium unit, 

cooperative unit, mobile home, and 

trailer, if it is used as a residence. 

(e) ‘‘Mortgage credit product’’ means 

any form of credit that is secured by real 

property or a dwelling and that is 

offered or extended to a consumer 


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60370 Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 

primarily for personal, family, or 

household purposes. 

(f) ‘‘Person’’ means any individual, 

group, unincorporated association, 

limited or general partnership, 

corporation, or other business entity. 

(g) ‘‘Term’’ means any of the fees, 

costs, obligations, or characteristics of or 

associated with the product. It also 

includes any of the conditions on or 

related to the availability of the product. 

§ 321.3 Prohibited representations. 

It is a violation of this rule for any 

person to make any material 

misrepresentation, expressly or by 

implication, in any commercial 

communication, regarding any term of 

any mortgage credit product, including 

but not limited to misrepresentations 

about: 

(a) The interest charged for the 

mortgage credit product, including but 

not limited to misrepresentations 

concerning: (1) the amount of interest 

that the consumer owes each month that 

is included in the consumer’s payments, 

loan amount, or total amount due, or (2) 

whether the difference between the 

interest owed and the interest paid is 

added to the total amount due from the 

consumer; 

(b) The annual percentage rate, simple 

annual rate, periodic rate, or any other 

rate; 

(c) The existence, nature, or amount 

of fees or costs to the consumer 

associated with the mortgage credit 

product, including but not limited to 

misrepresentations that no fees are 

charged; 

(d) The existence, cost, payment 

terms, or other terms associated with 

any additional product or feature that is 

or may be sold in conjunction with the 

mortgage credit product, including but 

not limited to credit insurance or credit 

disability insurance; 

(e) The terms, amounts, payments, or 

other requirements relating to taxes or 

insurance associated with the mortgage 

credit product, including but not 

limited to misrepresentations about: (1) 

whether separate payment of taxes or 

insurance is required, or (2) the extent 

to which payment for taxes or insurance 

is included in the loan payments, loan 

amount, or total amount due from the 

consumer; 

(f) Any prepayment penalty 

associated with the mortgage credit 

product, including but not limited to 

misrepresentations concerning the 

existence, nature, amount, or terms of 

such penalty; 

(g) The variability of interest, 

payments, or other terms of the 

mortgage credit product, including but 

not limited to misrepresentations using 

the word ‘‘fixed;’’ 

(h) Any comparison between: 

(1) Any rate or payment that will be 

available for a period less than the full 

length of the mortgage credit product, 

and 

(2) Any actual or hypothetical rate or 

payment; 

(i) The type of mortgage credit 

product, including but not limited to 

misrepresentations that the product is or 

involves a fully amortizing mortgage; 

(j) The amount of the obligation, or 

the existence, nature, or amount of cash 

or credit available to the consumer in 

connection with the mortgage credit 

product, including but not limited to 

misrepresentations that the consumer 

will receive a certain amount of cash or 

credit as part of a mortgage credit 

transaction; 

(k) The existence, number, amount, or 

timing of any minimum or required 

payments, including but not limited to 

misrepresentations about any payments 

or that no payments are required in a 

reverse mortgage or other mortgage 

credit product; 

(l) The potential for default under the 

mortgage credit product, including but 

not limited to misrepresentations 

concerning the circumstances under 

which the consumer could default for 

nonpayment of taxes, insurance, or 

maintenance, or for failure to meet other 

obligations; 

(m) The effectiveness of the mortgage 

credit product in helping the consumer 

resolve difficulties in paying debts, 

including but not limited to 

misrepresentations that any mortgage 

credit product can reduce, eliminate, or 

restructure debt or result in a waiver or 

forgiveness, in whole or in part, of the 

consumer’s existing obligation with any 

person; 

(n) The association of the mortgage 

credit product or any provider of such 

product with any other person or 

program, including but not limited to 

misrepresentations that: 

(1) The provider is, or is affiliated 

with, any governmental entity or other 

organization, or 

(2) The product is or relates to a 

government benefit, or is endorsed, 

sponsored by, or affiliated with any 

government or other program, including 

but not limited to through the use of 

formats, symbols, or logos that resemble 

those of such entity, organization, or 

program; 

(o) The source of any commercial 

communication, including but not 

limited to misrepresentations that a 

commercial communication is made by 

or on behalf of the consumer’s current 

mortgage lender or servicer; 

(p) The right of the consumer to reside 

in the dwelling that is the subject of the 

mortgage credit product, or the duration 

of such right, including but not limited 

to misrepresentations concerning how 

long or under what conditions a 

consumer with a reverse mortgage can 

stay in the dwelling; 

(q) The consumer’s ability or 

likelihood to obtain any mortgage credit 

product or terms, including but not 

limited to misrepresentations 

concerning whether the consumer has 

been preapproved or guaranteed for any 

such product or terms; 

(r) The consumer’s ability or 

likelihood to obtain a refinancing or 

modification of any mortgage credit 

product or terms, including but not 

limited to misrepresentations 

concerning whether the consumer has 

been preapproved or guaranteed for any 

such refinancing or modification; and 

(s) The availability, nature, or 

substance of counseling services or any 

other expert advice offered to the 

consumer regarding any mortgage credit 

product term, including but not limited 

to the qualifications of those offering the 

services or advice. 

§ 321.4 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 this rule. 

§ 321.5 Recordkeeping requirements. 

(a) Any person subject to this rule 

shall keep, for a period of twenty-four 

months from the last date of 

dissemination of the applicable 

commercial communication, the 

following evidence of compliance with 

this rule: 

(1) Copies of all materially different 

commercial communications 

disseminated, including but not limited 

to sales scripts, training materials, 

related marketing materials, websites, 

and weblogs; 

(2) Documents describing or 

evidencing all mortgage credit products 

available to consumers during the time 

period in which each commercial 

communication was disseminated, 

including but not limited to the names 

and terms of each such mortgage credit 

product available to consumers; and 

(3) Documents describing or 

evidencing all additional products or 

services (such as credit insurance or 

credit disability insurance) that are or 

may be offered or provided with the 

mortgage credit products available to 

consumers during the time period in 


jdjones on DSK8KYBLC1PROD with PROPOSALS-1
Federal Register / Vol. 75, No. 189 / Thursday, September 30, 2010 / Proposed Rules 60371 

which each commercial communication 

was disseminated, including but not 

limited to the names and terms of each 

such additional product or service 

available to consumers. 

(b) Any person subject to this rule 

may keep the records required by 

paragraph (a) of this section in any 

legible 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 paragraph (a) of this 

section shall be a violation of this rule. 

§ 321.6 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 

Omnibus Appropriations Act of 2009, 

sec. 626, Pub. L. 111-8, 123 Stat. 524 

(2009) (15 U.S.C. 1638 note), as 

amended by the Credit Card 

Accountability Responsibility and 

Disclosure Act of 2009, sec. 511, Pub. L. 

111-24, 123 Stat. 1734 (2009) (15 U.S.C. 

1638 note). 

§ 321.7 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. 2010–24353 Filed 9–29–10: 8:45 am] 

BILLING CODE 6750–01–S 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–119046–10] 

RIN 1545–BJ54 

Requirements of a Statement 

Disclosing Uncertain Tax Positions; 

Correction 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Correction to notice of proposed 

rulemaking and a notice of public 

hearing. 

SUMMARY: This document contains a 

correction to a notice of proposed 

rulemaking and a notice of public 

hearing that was published in the 

Federal Register on Thursday, 

September 9, 2010 (75 FR 54802) 

allowing the IRS to require corporations 

to file a schedule disclosing uncertain 

tax positions related to the tax return as 

required by the IRS. 

FOR FURTHER INFORMATION CONTACT: 

Kathryn Zuba, (202) 622–3400 (not tollfree number). 

SUPPLEMENTARY INFORMATION: 

Background 

The correction notice that is the 

subject of this document is under 

section 6012 of the Internal Revenue 

Code. 

Need for Correction 

As published, the notice of proposed 

rulemaking and notice of public hearing 

(REG–119046–10) contains an error that 

may prove to be misleading and is in 

need of clarification. 

Correction of Publication 

Accordingly, the publication of the 

notice of proposed rulemaking and 

notice of public hearing (REG–119046– 

10), which was the subject of FR Doc. 

2010–22624, is corrected as follows: 

On page 54802, column 3, under the 

caption DATES, lines 4 and 5, the 

language ‘‘public hearing scheduled for 

October 15, 2010, at 10 a.m., must be 

received’’ is corrected to read ‘‘public 

hearing scheduled for October 19, 2010, 

at 10 a.m., must be received’’ 

LaNita Van Dyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel, (Procedure and Administration). 

[FR Doc. 2010–24488 Filed 9–29–10; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE INTERIOR 

Office of Surface Mining Reclamation 

and Enforcement 

30 CFR Part 901 

[SATS No. AL–075–FOR; Docket ID: OSM– 

2010–0009] 

Alabama Regulatory Program 

AGENCY: Office of Surface Mining 

Reclamation and Enforcement, Interior. 

ACTION: Proposed rule; public comment 

period and opportunity for public 

hearing on proposed amendment. 

SUMMARY: We, the Office of Surface 

Mining Reclamation and Enforcement 

(OSM), are announcing receipt of a 

proposed amendment to the Alabama 

regulatory program (Alabama program) 

under the Surface Mining Control and 

Reclamation Act of 1977 (SMCRA or the 

Act). Alabama proposes revisions to its 

Program regarding their Surface Mining 

Commission, who is eligible to apply for 

and obtain a mining license, hearing 

officers, license fees, and several minor 

editorial changes throughout the 

document such as changing ‘‘him’’ to 

‘‘him or her’’ and ‘‘chairman’’ to ‘‘chair’’. 

Alabama intends to revise its program to 

improve operational efficiency. 

This document gives the times and 

locations that the Alabama program and 

proposed amendment to that program 

are available for your inspection, the 

comment period during which you may 

submit written comments on the 

amendment, and the procedures that we 

will follow for the public hearing, if one 

is requested. 

DATES: We will accept written 

comments on this amendment until 

4 p.m., c.d.t., November 1, 2010. If 

requested, we will hold a public hearing 

on the amendment on October 25, 2010. 

We will accept requests to speak at a 

hearing until 4 p.m., c.d.t. on October 

15, 2010. 

ADDRESSES: You may submit comments, 

identified by SATS No. AL–075–FOR by 

any of the following methods: 

• E-mail: swilson@osmre.gov. Include 

‘‘SATS No. AL–075–FOR’’ in the subject 

line of the message. 

• Mail/Hand Delivery: Sherry Wilson, 

Director, Birmingham Field Office, 

Office of Surface Mining Reclamation 

and Enforcement, 135 Gemini Circle, 

Suite 215, Homewood, Alabama 35209. 

• Fax: (205) 290–7280. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Instructions: All submissions received 

must include the agency name and 

docket number for this rulemaking. For 

detailed instructions on submitting 

comments and additional information 

on the rulemaking process, see the 

‘‘Public Comment Procedures’’ heading 

of the SUPPLEMENTARY INFORMATION

section of this document. 

Docket: For access to the docket to 

review copies of the Alabama program, 

this amendment, a listing of any 

scheduled public hearings, and all 

written comments received in response 

to this document, you must go to the 

address listed below during normal 

business hours, Monday through Friday, 

excluding holidays. You may receive 

one free copy of the amendment by 

contacting OSM’s Birmingham Field 

Office or going to http:// 

www.regulations.gov. 

Sherry Wilson, Director, Birmingham 

Field Office, Office of Surface Mining 

Reclamation and Enforcement, 135 

Gemini Circle, Suite 215, Homewood, 

Alabama 35209, Telephone: (205) 290– 

7282, E-mail: swilson@osmre.gov. 


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