Lenders must navigate a complex regulatory environment – and ensuring you stay compliant can be challenging. There are several different statutory provisions that govern marketing by lenders, and keeping track of them, putting procedures in place and staying compliant, is very challenging.
The Sea of Regulations
Long before there was the Consumer Financial Protection Bureau (CFPB), marketing and advertising was – and still is – regulated by the Federal Trade Commission (FTC). Lender advertising falls under the FTC's UDAAP (Unfair, Deceptive, or Abusive Acts or Practices) or UDAP (Unfair or Deceptive Acts or Practices), which generally regulates whether the advertisement is clear, concise, and can be read and understood by the least sophisticated of the recipients of the marketing material.
As we see changes taking place at the CFPB, there are also changes taking place in other regulatory agencies and State Attorneys General are becoming more active as a result. Despite administration changes in Washington, enforcement of these regulations has and will continue.
In addition, virtually every state has their own form of a UDAAP/UDAP law. State banking departments and State Attorneys General are becoming much more vigilant in examining lender marketing materials. Most states are fairly aggressive when it comes to consumer protection.
There are only one or two states that do not have their own UDAAP/UDAP laws, and in those states, borrowers have a private right of action to sue for double, and in some states triple damages. Regardless of what happens with the CFPB, UDAAP/UDAP will always be important.
The Risks of "Rogue" Marketing
It is critical that marketing and compliance leaders and organizations understand and review your advertising and marketing plans in accordance with these laws. Typically, lenders are very spread out, with branches all over the country. This can quickly lead to problems when you have a branch somewhere that goes a little "rogue" and does their own thing without knowing or understanding the laws that govern their activities.
Mitch Kider, Managing Partner at Weiner, Brodsky, Kider PC says the “very best practice” in regards to marketing compliance is that you centralize your compliance review of all marketing materials, including social media, web advertising, print media and all things marketing.
A Tip on Co-Hosting Events with Realtors
One of the best ways for mortgage loan officers (MLOs) to build relationships and grow revenue is by co-hosting an open house or an educational seminar with a Realtor. However, since the CFPB is reluctant to define a "thing of value," the line of how to co-host events while staying compliant, is easily blurred.
If an MLO wants to co-host an open house, Kider says they must not do it for the same Realtor all the time or only for Realtors who are referring them business. The MLO should create a schedule and rotate who they are co-hosting these events with, and make the event informational, talking about key trends in the industry or your mortgage company. And, do not allow the Realtor to endorse you.
Lenders may feel they spend significant time and money abiding by burdensome regulations. But it is important to keep in mind that these regulations are meant to protect consumers – individuals and families working hard to save money and buy their dream home. As your organization works to provide the best possible experience for borrowers and homebuyers, this also means strict adherence to regulatory policies meant to protect these individuals.