Ads Gone Bad—FTC Investigates Mortgage Lenders’ Techniques
By Foreclosure Fighter Staff Writer
We've all heard them-TV or radio commercials promising an unbelievable bargain and then ending with jabber so quick few words can be distinguished. Or we've seen tantalizing Internet pop-ups inviting us to click and receive some fantastic prize. Or we've gotten bright handbills in the mail.
According to NPR news reports, ads like these that tout amazing rates on loans may be in violation of Federal Trade Commission (FTC) laws, particularly the Truth in Lending act.
It's not news to many Americans that people across the country are facing foreclosure and bankruptcy, often because of adjustable rate mortgages (ARMs) that have recently increased drastically. But the reason why may surprise you.
Apparently, some advertisements that have appeared in newspapers, magazines, direct mail, unsolicited email, websites, and faxes may not be in accordance with the applicable laws. And the FTC has warned businesses that they should review their ads, reports NPR, to make sure they meet all legal requirements.
As a consumer, knowing these ads exist-and resisting their deceitful promises-can prevent ensnarement. But how can you recognize when an advertisement is part of a scam? Here are some key warning signs, according to consumeraffairs.com:
- Ads may be in English or Spanish.
- If on the radio, ads may be read too quickly to be understood and processed. If printed, the lettering may be too small to read without strain.
- The ads may promise a very low interest rate (one or two percent) or low monthly payments, but offer no other details.
Often what's left out of these ads is what consumers really need to know, according to the Consumer Affairs News. For example, the low interest rates offered apply only for an introductory period. The low monthly payments last only a certain time, often followed by a much larger final payment. So the ads do their jobs of grabbing consumers' interest-but fail to provide adequate information about what's being advertised.
In the past, Consumer Affairs News reports, more than $320 million has been returned to customers as the result of various legal actions taken against companies in the mortgage lending industry. Subprime lenders have been particularly targeted.
Living in the so-called "Information Age" can be exciting-but it has its drawbacks. The more sources of information and entertainment we use, the more encounters we can have with advertisements of all kinds. As consumers, it can be difficult sorting out who's selling to us, who's helping us, and who's just ripping us off.
Just being aware that lenders are using illegal sales tactics is an invaluable tool in avoiding the disaster of being scammed. As a general rule of thumb, remember: if it sounds too good to be true, then it probably is.