Mortgage Tech Summit AZ 2012 Internet Advertising Compliance

Internet AdvertisingCompliance

Plan Know Your Exposure Determine Your Personal Level of Comfort Chart Your Course of Action

Compliance Risk Compliance risk is the risk to earnings or capital arising from violations

of, or non-conformance with, law, rules, regulations, prescribed practices, or ethical standards.

Compliance risk arises in situations where the laws or rules governing certain activities or clients may be ambiguous or untested. Compliance risk exposes you to fines, civil money penalties, payment of damages. * Civil and Criminal *

Compliance risk can lead to a diminished reputation, limited business opportunities, lessened expansion potential, and lack of contract enforceability.

Compliance risk is often overlooked; a portion of this risk is sometimes referred to as legal risk. This is not limited solely to risk from failure to comply with consumer protection laws; it encompasses all laws as well as prudent ethical standards.

Reputation Risk Reputation risk is the risk to earnings or capital arising from

negative public opinion. This affects your ability to establish new relationships or

services, or continue servicing existing relationships. This risk can expose you to litigation, financial loss, or damage to your reputation.

Reputation risk exposure is present throughout the organization and is why you have the responsibility to exercise an abundance of caution in dealing with your customers and community.

The assessment of reputation risk recognizes the potential impact of the public’s opinion on your company’s value. This risk is inherent in all activities.

Why are we here?

Important But We’re Not Going to Cover Antitrust Violations Copyright Violations Trademark Violations  FACT Act

Security of Sensitive Personal Information Gramm-Leach-Bliley

The Financial Privacy Rule Safeguards Rule Pretexting Provisions

Privacy Spam Communications Decency Act § 230(c) Immunity Predatory Lending

Topics We Should Cover Unlicensed Activity Mortgagee Letter 2011-17 - Use of

HUD/FHA Logo, Name and Acronym in Advertising

Federal Trade Commission Advertising Guidance

Fair Housing

Unlicensed Activity Arizona Rules and Regulations

A person shall not act as a mortgage broker, mortgage banker or loan originator if the person is not licensed pursuant to ARS 6-901, 6-941, or 6-991.

Mortgage Loan Originator Prohibited ActsA loan originator acting on the loan originator's own behalf shall not advertise any solicitation of mortgage business. (A.R.S. § 6-991.02.3)

Unlicensed ActivityA loan originator shall not advertise for mortgage business in any manner without all of the following: (A.R.S. § 6-991.02.14) (a) The name and license number of the employing mortgage broker, mortgage banker or consumer lender.

(b) Approval of the employing mortgage broker, mortgage banker or consumer lender.

(c) The Unique Identifier that the loan originator maintains

with the nationwide mortgage licensing system.

Unlicensed ActivityArizona Administrative Code:

Directly or indirectly makes, negotiates, or offers to make or negotiate" and "Directly or indirectly making, negotiating, or offering to make or negotiate," as those phrases are used in A.R.S. §§ 6-901, 6-941, or 6-971, mean:

Providing consulting or advisory services in connection with a mortgage loan transaction, mortgage banking loan transaction, or commercial mortgage loan transaction;

To an investor, concerning the location or identity of potential borrowers, regardless of whether the person providing consulting or advisory services directly contacts any potential borrowers; or

To a borrower, concerning the location or identity of potential investors or lenders.

Unlicensed ActivityNOTE: This rule is the basis of the Arizona Department of Financial Institutions determination that it is illegal to buy or

sell mortgage leads from an unlicensed company. See http://www.dorothydumnichconsulting.com/DIDYOUKNOW1.asp

Arizona Administrative Code:

Directly or indirectly makes, negotiates, or offers to make or negotiate" and "Directly or indirectly making, negotiating, or offering to make or negotiate," as those phrases are used in A.R.S. §§ 6-901, 6-941, or 6-971, mean:

Providing consulting or advisory services in connection with a mortgage loan transaction, mortgage banking loan transaction, or commercial mortgage loan transaction;

To an investor, concerning the location or identity of potential borrowers, regardless of whether the person providing consulting or advisory services directly contacts any potential borrowers; or

To a borrower, concerning the location or identity of potential investors or lenders.

Use of HUD/FHA Logo, Name and Acronym in Advertising Mortgagee Letter 2011-17 April 15, 2011

This Mortgagee Letter communicates requirements to mortgagees regarding

the use of the official logos, names and acronyms of the U.S. Department ofHousing and Urban Development (HUD or the Department) and the Federal Housing Administration (FHA)  within devices used to advertise or promote the business products or operations of FHA-approved mortgagees.  

… a “Device” constitutes a channel or instrument for soliciting, promoting or advertising FHA products or programs.

Use of HUD/FHA Logo, Name and Acronym in AdvertisingUnder §§ 202 and 536 of the National Housing Act (NHA), HUD may impose sanctions, including civil money penalties, for misuse of the terms “Federal Housing Administration,” “Department of Housing and Urban Development,” “Government National Mortgage Association,” “Ginnie Mae,” the acronyms “HUD,” “FHA,” or “GNMA,” or any official seal or logo of the Department of Housing and

Urban Development.

Use of FHA LogosFHA-approved mortgagees may display the official FHA Approved Lending

Institution logos on a Device for the purpose of describing … the types of loan products offered by the mortgagee.

… must be displayed in a discreet manner.

… must, in each instance, be accompanied by a conspicuous disclaimer that clearly informs the public that the mortgagee authoring the Device is not acting on behalf of or at the direction of HUD/FHA or the Federal government.

The disclaimer should be prominently displayed in a location proximate to where the FHA Approved Lending Institution logo(s) is displayed.

Official FHA Approved LendingInstitution Logos

Use of FHA LogosFHA-approved mortgagees may display the official FHA Approved Lending

Institution logos on a Device for the purpose of describing … the types of loan products offered by the mortgagee.

… must be displayed in a discreet manner.

… must, in each instance, be accompanied by a conspicuous disclaimer that clearly informs the public that the mortgagee authoring the Device is not acting on behalf of or at the direction of HUD/FHA or the Federal government.

The disclaimer should be prominently displayed in a location proximate to where the FHA Approved Lending Institution logo(s) is displayed.

Use of FHA LogosThe Device, when taken as a whole, shall emphasize the HUD-registered business name, alias or d/b/a of the mortgagee and not the Federal government.

… the Device shall be written, formatted and structured in a manner which clearly identifies the mortgagee as the sole author and originator of the Device.

Specifically, the Device should reflect

the mortgagee’s name,

location

and appropriate contact information.

Use of FHA Logos… strictly prohibited from displaying the official FHA Approved Lending Institution logo(s) in a location or manner within a Device that creates the false impression that the Device is an official government form, notice or document or that otherwise conveys the false impression that the Device is authored, approved, or endorsed by the Department or FHA.  

Furthermore, alteration or modification of the FHA Approved Lending Institution logo(s) is strictly prohibited.

** If you’re not FHA approved, you can’t use any of the logos **

Use of FHA LogosMoreover, use of the FHA logo is strictly prohibited. No person, party, company, or firm, including FHA-approved mortgagees, may use the FHA logo.

= BAD!

Use of HUD SealFHA-approved mortgagees, non FHA-approved mortgagees and Third Party Originators are not permitted to display the official HUD seal or any other insignia that imitates an official Federal seal on any Device.

= BAD!

Use of HUD/FHA Names and AcronymsFHA-approved mortgagees may not purport or imply that as a result of their approval to participate in FHA programs that their business products or services are coming directly from HUD or FHA.

The use of the words “federal,” “government,” “national,” “U.S. Department of Housing and Urban Development,” “Federal Housing Administration,” and/or the letters “HUD” or “FHA”

… in a manner that falsely represents that the mortgagee’s business services or products originate from HUD, FHA, the Government of the United States, or any Federal, State or local government agency is strictly prohibited.

Use of HUD/FHA Logo, Name and Acronym in AdvertisingMust retain copies of any Device related to FHA programs for a two years.

Failure to follow HUD/FHA requirements as outlined in this Mortgagee Letter may result in sanctions, including civil money penalties or administrative action against any person, party, company, firm, partnership or business, including non FHA-approved institutions and individuals.

Federal Trade Commission Advertising Guidance … FRAUD

Misrepresentation: Misrepresent material facts Make false promises

Puffing: usually not considered misrepresentation … an opinion that is not necessarily intended as a representation of fact “best customer service in town”

Questions to Consider

• Does your advertising make your customers satisfied that they do business with you?

• Are you avoiding impossible promises and guarantees?

• Are your advertised merchandise or programs readily available?

• Do you mean to sell what you advertise?

Questions to Consider• Do your ads avoid misleading inferences?• Do your advertised terms agree with the facts? • Is your advertising easy to understand without

asterisks and fine print? • Do you believe your own comparatives? • Would you be attracted by what your ad says?

Clear and Consipicous FTC Dot Com Disclosures

http://business.ftc.gov/documents/bus41-dot-com-disclosures-information-about-online-advertising

Reg Z: Misleading Statements and Misrepresentation

Prohibits: Making any statement that the product offered

is a “government loan program”, government-sponsored loan”, or is otherwise endorsed by the government.

Using the term “counselor” in an advertisement to refer to a for-profit …

Triggering Terms Requiring Disclosure

The amount of the down payment The amount of any payment The number of payments The period of repayment The amount of any finance charge

Terms That Do NOT Trigger Required Disclosures

“No down payment.” “12% Annual Percentage Rate loan available

here.” “Easy monthly payments.” “FHA financing available.” or “100% VA

financing available.” “Terms to fit your budget.”

Required Advertising Disclosures

If any triggering terms are used in an ad, all of these disclosures must be made: Amount or percentage of down payment Terms of repayment APR (spelled out in full); if the note rate may

increase (e.g., ARMs), that fact must also be disclosed

If an ad discloses on the APR, the additional disclosures are not required

Federal Fair Housing Act or Title VIII of the Civil Rights Act of 1968A. Prohibits discrimination based on:

1. Race2. Color3. Religion4. Sex5. National origin6. Disability7. Familial status

B. Covers all housing transactions and services including advertising, rentals, sales, lending, and insurance, as well as harassment.

C. Prohibits using discriminatory advertising or any other notice that indicates a limitation or preference or intent to make any limitation, preference, or discrimination.

IMPLY vs. INFER

IMPLY = to put the suggestion into the message (sender implies)

INFER = to take the suggestion out of the message (receiver infers)

IMPLICATION = what the sender has implied

INFERENCE = what the receiver has inferred

http://youtu.be/OV-CI4sG_eo

Fair Housing in Advertising Prohibits using discriminatory

advertising that indicates a limitation or preference.

Advertising can not convey a message • preference for or against any protected

group, whether through words, pictures or other images.

Fair Housing in Advertising Use of Words, Phrases or Symbols

The use of words, phrases, and symbols to convey overt or implicit discriminatory preferences or limitations is prohibited.

Fair Housing in Advertisingcatchwords - words and phrases used in a discriminatory context

should be avoided. (e.g. restricted, exclusive, private, integrated)

Catchwords convey preferences for one group over another or send signals about a community's makeup.

symbols and logotypes which imply a protected class

Fair Housing in Advertisingcolloquialisms - words or phrases used regionally or locally that

seeks to imitate informal speech which imply or suggest a protected class

Colloquialisms or colloquial language is considered to be characteristic of or only appropriate for casual, ordinary, familiar, or informal conversation rather than formal speech or writing.

Be careful with Slang or Dialect

Human Model Advertising Real estate and Lending advertising including photos or

drawings may not be used to indicate exclusiveness. Should be clearly definable as reasonably representing

majority and minority groups in the metropolitan area, both sexes, and when appropriate, families with children.

Should portray persons in equal social settings and indicate to the general public that the housing is open to all without regard to race, color, religion, sex, handicap (disability) familial status or national origin, and is not for the exclusive use of one such group.

Equal Housing Opportunity Symbols All advertising for the sale, rental, or financing of housing

should contain an equal housing opportunity logo, statement or slogan.

Logo or statement should be a part of each advertisement and should be placed in visible location and be a comparable size of other symbols or text used in the advertisement.

Applicable to advertisement for sale, rental and financing of housing.

Ragin v. The New York Times

Ragin v. The New York Times Co., 923 F.2d 995 (2d Cir.), cert. denied, 502 U.S. 821 (1991):

The New York Times, a publisher, was found in violation of the Fair Housing Act for the longstanding practice of allowing the publication of advertisements using "human models" that did not reasonably represent the percentage of blacks and other minorities in the New York City metropolitan area.

The ruling showed that a plaintiff alleging discrimination need not establish that the defendant intended to express a racial preference in the ad.

A.R.S. §§32-2163 D.

Note: the offering of real estate brokerage services for compensation in Arizona through a website requires licensing by ADRE (A.R.S. §§32-2163 D.)

Things to Consider Email correspondence Websites

Blog correspondence (posts and comments) Links to 3rd Party Sites

Real Estate Advice Online Services Zillow Advice, Trulia Advice. Yahoo!

Answers, LinkedIn Answers Interaction in online communities and social

media platforms Facebook Twitter