FTC Issues Final Rule Applicable to SCUs on Deceptive Mortgage Acts and Practices

August 11, 2011 -The Federal Trade Commission issued a final rule effective August 19, 2011 that requires state-chartered credit unions to comply with certain rules regarding mortgage advertising.

Section 626 of the 2009 Omnibus Appropriations Act directed the FTC to engage in rulemaking concerning mortgage lending pursuant to § 553 of the Administrative Procedure Act. As a result of the Congressional directive that the FTC promulgate the rule pursuant to the Administrative Procedures Act, the FTC determined that its rule will only apply to entities under its § 5 jurisdiction.  This means that the rule covers state-chartered credit unions but exempts federal credits and state and federally chartered banks.  Congress also directed that the rules issued may be enforced by the FTC, the Consumer Financial Protection Bureau (CFPB) and the states.  States can enforce the rules by bringing civil actions in Federal district court or another court of competent jurisdiction to obtain civil penalties.

This final rule prohibits any misrepresentation in any commercial communication regarding any term of any mortgage credit product; and imposes certain record keeping requirements. The final rule can be viewed here. A NASCUS summary of the final rule can be downloaded here. (Member log-in required).

NASCUS will be working with FTC to determine how the agency views enforcement authority over state-chartered credit unions. During the rulemaking process, NASCUS recommended state-chartered credit unions be exempt from this rule because they are already highly regulated in this area and follow other similar regulations.  In the final rule, while making clear state-chartered credit unions are covered, the FTC discusses its joint authority with the CFPB over “non-depository entities.”