On May 7, 2014, the Federal Trade Commission filed a complaint in the U.S. District Court for the Southern District of Texas, Case No. 4:14cv1262, against GoLoansOnline.com (“GoLoansOnline”), an online company that finds potential borrowers for mortgage companies, alleging violations of the Federal Trade Commission Act, the Mortgage Acts and Practices Advertising Rule, the Truth in Lending Act, and Regulations N and Z. GoLoansOnline was accused of improperly advertising low interest-rate loans as fixed-rate loans. The advertised loans were actually adjustable-rate mortgages that could be more expensive for borrowers over time due to interest rate fluctuation based on credit markets. Advertisements on the company’s website stated bylines such as “Low FHA Fixed Rates 2.25% Low Rates. Free Quotes. No Hidden Costs!” The FTC also alleged that GoLoansOnline failed to make important disclosures such as the annual percentage rate, amount of down payment, and prepayment terms.
The Court entered a Stipulated Order for Permanent Injunction and Civil Penalty Judgment on May 14, 2014 that resolves all matters in dispute in the lawsuit. GoLoansOnline has agreed to pay a civil penalty of $225,000.00. Furthermore, GoLoansOnline is prohibited from (i) misrepresenting the terms and conditions of any financial product or service, or mortgage credit product; (ii) disclosing, selling, or transferring consumer data; and (iii) engaging in any further violations of the Federal Trade Commission Act, Regulation N, the Truth in Lending Act, or Regulation Z.
Regulation N, or the “MAP Rule,” was drafted with the intent of strengthening consumer protection by banning deceptive mortgage claims. According to Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, “Mortgage advertising must be truthful.” When consumers are deceived about the true cost of a mortgage that they cannot actually afford, “the harm can last a long time,” states Rich. Mortgage providers must be mindful about adhering to disclosure requirements and accurately representing the products and services they offer when advertising. This case demonstrates that the FTC will closely monitor advertisements and willingly pursue legal action to enforce adherence to statutory and regulation requirements.