See interpretation of 24 (i) Prohibited Acts or Practices in Home Secured Credit advertisements in Supplement I. Prohibited acts or practices in advertisements for credit guaranteed by a dwelling. Regulation Z includes several specific prohibited acts or practices in closed credit advertisements guaranteed by a home. This list provides a high-level summary of prohibited practices.
42.TILA Advance Disclosure Requirements Regulation Z currently requires advance disclosures only for loans to purchase or build a consumer's home. The final rule expands this coverage to provide advance TILA disclosures for any closed loan subject to the Real Estate Settlement Procedures Act and secured by a principal home; the rule does not apply to home equity lines of credit, 13 In addition, a new requirement prohibits a lender or anyone from the collection of a fee, other than a credit report fee, from a borrower until the borrower has received the first disclosures from TILA. For mailed-in disclosures, the lender can assume that disclosures have been received three days after mailing and charge at that time. Accordingly, the Commission interprets the Omnibus Appropriations Act, clarified by the CREDIT CARDS Act, to enable it to issue rules that prohibit or restrict unfair or deceptive conduct or that are reasonably related to the objective of preventing unfair or deceptive practices.
However, the FTC points out that all conduct prohibited by the Final Rule is in itself deceptive. The proposed revisions to the TILA advertising rules require additional information on rates, monthly payments and other characteristics of loans. The amendments would also prohibit seven deceptive or misleading advertising practices, including the claim that a rate or payment is fixed when it can change. When advertising issues are identified, management will want to ensure that corrective measures are implemented effectively.
Commission refuses to exempt advertising agencies or real estate professionals from Final Rule. The ad included both an interest rate and an APR at the top; however, the interest rate was shown in a larger and more striking font than the APR. Compliance staff should provide the board of directors and senior management with an overview of Regulation Z changes and explain how the standard will affect the institution's practices and procedures. Section 1026.24 (d) (ii) provides flexibility for creditors to make this disclosure for advertising purposes.
The following example of an exam illustrates the requirement that when an ad indicates specific terms, the terms must be available to qualified applicants. This can happen when a third-party vendor is hired to design the website and the provider is unaware of the advertising rules. It concludes that the prohibitions in the Final Rule on misrepresentations in commercial communications relating to mortgage credit products will provide sufficient protection to consumers. While smaller financial institutions can rely on knowledgeable and long-standing staff to ensure compliance with advertising requirements, robust policies, procedures and tools are beneficial in addressing staff turnover.
Federal Reserve System review data for states' member banks indicate that Regulation Z advertising requirements remain a challenge for financial institutions. In the NPRM, the Commission asked what evidence exists of individuals or entities knowingly providing substantial assistance to those who engage in misleading mortgage advertising and whether the Final Rule should specifically prohibit such conduct. The Final Rule does not cover the practices of entities that are excluded from the FTC's jurisdiction. .