Mortgage Lender Agrees to Settle FTC Charges; Prescreened Loan Offers Lacked Proper Opt-Out Notice

A home mortgage lender that sent prescreened offers of credit to consumers without properly informing them of their right to opt out of receiving such offers in the future has agreed to settle Federal Trade Commission charges that it violated federal law. The settlement requires the company to pay a $20,000 civil penalty and bars future violations.

Prescreened offers of credit or insurance typically are mailings sent to selected consumers based on information in their credit report indicating that they meet the offering company’s criteria. The Fair Credit Reporting Act (FCRA) permits lenders or insurers to make prescreened offers if the offer clearly and conspicuously discloses that, among other things, the consumer’s credit report was used to make the offer and that the consumer can opt out of receiving such offers in the future. The FTC’s Prescreen Opt-Out Notice Rule (Prescreen Rule) requires that each written solicitation contain a short and a long notice, and it specifies the format, type size, and content in order to make the notices simple and easy for consumers to see and understand.

According to the FTC’s complaint, the company violated the FCRA and the FTC’s Prescreen Rule by not providing opt-out notices that comply with the Rule. In some instances, for example, the notices did not contain a short notice on the front page of the solicitation as required by the Rule, or the notices did not comply with the Rule’s format requirements.

The settlement requires Metropolitan Home Mortgage, Inc., doing business as Wholesale Home Lenders, to pay a $20,000 civil penalty and bars the company from failing to comply with the Prescreen Rule. The settlement also contains record-keeping and reporting provisions to allow the FTC to monitor compliance with the order.

The Commission vote to authorize staff to refer the complaint and stipulated final order to the U.S. Department of Justice for filing on the FTC’s behalf was 4-0. The documents were filed in the U.S. District Court for the Central District of California, Southern Division.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendant of a law violation. Stipulated orders are subject to court approval and have the force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.