These days it seems like all you hear are discussions about the CFPB and the new ways it is thinking about identifying unfair or deceptive practices, not to mention all of the mortgage-related developments flying around. With fears of fraud and deceit in the air, it is important to ensure that your advertising review practices are updated and thorough.
Advertising review has always been about preventing an unfair or deceptive act or practice by ensuring that claims in advertising are neither false nor misleading and that necessary disclosures are contextually relevant. Here is a review of general advertising review principles and a quick list of areas where you may need to update your practices:
SUBSTANTIATE YOUR CLAIMS If advertising for your reverse mortgage products claims that the loan can be completed within a certain timeframe, make sure you have substantiation for that claim. In other words, you want to have documentation prior to making the claim in an ad showing that many applicants succeed in closing their reverse mortgages within the period of time advertised. Make sure to update your substantiation over time and adjust the claims in your advertising accordingly.
IT’S ALL IN THE DISCLOSURES Be careful about making claims in advertising that require extensive disclosures. Since mentioning specifics about reverse mortgage products (such as terms, interest rates or payment amounts) requires extensive Regulation Z disclosures, be sure that there is enough room on the ad for the disclosures to be readable and relevant to the consumer. If you find yourself making disclosures smaller and smaller in order to fit them on the page, consider removing the claim giving rise to some or all of the disclosures from the ad instead.
IMPROVING YOUR IMAGE When reviewing advertising, it is important to remember the adage “a picture is worth a thousand words.” Make sure that you pay close attention to the images in your advertising and make sure that the image itself is neither misleading nor in conflict with the ad’s message. For example, showing a picture of a young family in an ad for a reverse mortgage conflicts with one of the basic tenets of the product and could be viewed as misleading.
DISCLOSURES ABOUT DISCLOSURES Within the art of advertising review is the sub-specialty artistic discipline of achieving proper disclosure. In the majority of regulatory or class actions resulting from unfair or deceptive advertising, improper or inadequate disclosure is at the heart of why the ad is found to be unfair or deceptive. The disclosure should be proximate to the claim giving rise to it, prominent enough to attract the consumer’s attention (and in a large enough font to be readable), and feature clear and understandable language. And, of course, the disclosure should only clarify the claim, not qualify the claim.
UPDATING YOUR ADVERTISING REVIEW PRACTICES Advertising is following technology and expanding into corners of a consumer’s life not imaginable just a decade ago. Here are some tips for advertising in some of these new, hot areas: -Make sure to disclose properly in mobile ads -Review the privacy policies for social media sites before asking for consumer input or conducting conversations with consumers on those sites -Follow best practices for text message campaigns -Many mobile phone users access standard websites from their mobile phone — review Web advertising with an eye toward optimization for the mobile experience
Remember that the risks associated with unfair or deceptive advertising claims are particularly high because there are so many quarters from which a legal action can come. Almost every state has statutes addressing unfair or deceptive acts or practices, many of which have private rights of action, allowing consumers to bring individual and class-action lawsuits on the basis of an ad. Those same statutes also provide for enforcement by state attorneys general, and these lawsuits are even more dangerous than private class actions. Unlike a class-action plaintiff, a state attorney general is generally not required to prove that a deceptive ad actually caused damage by misleading consumers. Rather, an attorney general typically needs to prove only that an ad has the tendency to mislead consumers.
To compound the risks of litigation under state law, the CFPB has its own authority to investigate and take enforcement action under the “unfair, deceptive or abusive” provisions of the Dodd-Frank Act. The bureau can gather information about potential violations through its examination authority over mortgage companies, or through civil investigative demands. It also has the power to bring enforcement actions in federal court or in administrative proceedings. And the remedies it can seek can be draconian: restitution, disgorgement, rescission or reformation of consumer contracts, and civil monetary penalties as high as $1 million per day for a willful violation.
