On August 12, the Consumer Financial Protection Bureau issued an order related to the advertising of mortgage rates that may provide valuable insight into the CFPB’s broader perspective on what constitutes misleading statements in advertising and publishing of rates.

The CFPB accused Amerisave Mortgage Corporation (“Amerisave”), its affiliate company Novo Appraisal Management Company (“Novo”), and their owner Patrick Markert of advertising inaccurate interest rates, locking in consumers with costly up-front fees, failing to honor their advertised interest rates, and illegally overcharging consumers for affiliated “third-party” services. Such actions constituted violations of the Consumer Financial Protection Act and the Mortgage Acts and Practices (MAP) Rule. When consumers were directed to Amerisave’s website from online banner ads and searchable rate tables on third-party websites, the quotes that they received were based on FICO scores of 800, even if the consumers entered a lower FICO score. As a result of this “bait-and-switch” mortgage lending scheme, Amerisave and Novo must pay $14.8 million in consumer refunds and a $4.5 million penalty, and Patrick Markert must pay an additional fine of $1.5 million. In addition, Amerisave must stop advertising rates that are misleading on third-party searchable rate tables, refrain from advertising deceptive rates in its banner ads, refrain from providing mortgage quotes based on an undisclosed credit score of 800, and provide the requisite disclosure forms prior to referring customers to its affiliates.

The Truth in Lending Act requires that credit be “actually available” to consumers when advertised. While the CFPB order did not articulate how many consumers must qualify for a rate for it to be “actually available” under Regulation Z, it found that quotes generated based on a sample profile of a consumer with a FICO score of 800—which the majority of the mortgage company’s customers did not have—were misleading. In that regard, the order seems to indicate that a majority of consumers should qualify for a given rate for that rate to be “actually available.” Mortgage lenders, as well as other entities that advertise credit offerings, should advertise rates that will be available to a majority of applicants. When advertising special loan terms that will only be available for a limited period, at some point in the future, or only to highly qualified borrowers, mortgage lenders should take care to clearly convey that information.