YOUR QUESTION
We have been using a marketing company for our advertising. We relied on their compliance to make sure the advertisements met the guidelines. Unfortunately, a banking department just cited us for violations in our advertising. So, we fired the marketing company. Meanwhile, we're stuck. The banking department has asked for all our advertising going back three years!
My partner hired a lawyer to handle our case. The lawyer reviewed the advertisements from the last three years and informed us that there are many violations in them. It is scary how much money we will need to pay in financial penalties. The lawyer says there could also be remuneration to the borrowers. We don't have the money for all of these violations. We just don't. We may have to close down the company. We're going to meet with the department next week to discuss the situation.
I need some more guidance. I want to be more prepared for the meeting. I need to know what we're facing in penalties. We have been told that your firm conducts advertising reviews before their publication, so I hope you can enlighten me about what to expect.
What are the financial and other penalties for violations of mortgage advertisements?
COMPLIANCE SOLUTIONS
Advertising & Marketing Compliance Reviews
Please contact us to discuss these solutions!
ANSWER TO YOUR QUESTION
I am sorry to learn of this happening. This situation is avoidable, yet many companies get caught up in the dragnet of defective advertisements. You can't farm out your liability to marketing companies. Many of them claim to have compliance staff, but in reality, their compliance is sparse, if it exists at all. And forget about the testimonials of their awesome success; for goodness sake, they are marketing companies – what kind of testimonials do you expect them to provide?
Yes, we provide relatively inexpensive advertising and marketing campaign reviews. We've offered advertising compliance for twenty years. The advertising review is expeditious. We hold the final masters in our extranet, so that clients can access them at any time. Our staff works with the client to ensure the advertisements both meet their marketing goals and comply with regulatory mandates. Some clients have even retained us to review the compliance procedures of their marketing companies.
If you want assistance with advertising compliance, please contact me. Get your company into a reliable advertising compliance program. Forget the bells and whistles. Forget the marketing company route!
If you are not an expert in advertising compliance, you need compliance support.
A hefty violation could cost you the company!
Here's what happens when your
advertising compliance is not reliable.
Recently, a company was shuttered for alleged deceptive advertising. Its home office was located in California. It was licensed in 30 states and Puerto Rico. In that case, specifically, the mortgage lender allegedly used the names and logos of the VA and FHA in its advertisements, described loan products as part of a "distinctive program offered by the U.S. government," and instructed consumers to call the "VA Interest Rate Reduction Department" at a phone number belonging to the mortgage lender, thus implying that government agencies sent the mailings. The result of this matter was a consent order permanently banning the company from engaging in any mortgage lending activities, or from "otherwise participating in or receiving remuneration from mortgage lending, or assisting others in doing so." In addition, the company, while neither admitting nor denying the allegations, was required to pay a $1 million civil money penalty.
Fortunately, many compliance departments have a very good understanding of the restrictions on advertising, which are meant to protect consumers from misleading practices and ensure fair access to credit.
Here is a list of a few basic Acts and regulations.
Some Acts and Regulations
Truth in Lending Act (TILA) (Regulation Z)
TILA requires clear and accurate disclosure of loan terms, including the annual percentage rate (APR), loan amount, loan term, and repayment terms, presented clearly and conspicuously. Certain "trigger terms" (for instance, specific interest rates or monthly payment amounts) require additional disclosures.
The MaAP Rule prohibits deceptive or misleading claims in mortgage advertising. This includes misrepresenting loan types, terms, payments, interest rates, the existence of fees or costs, or promising cash-back amounts without specifying conditions. As an example, the use of "fixed" to describe a variable rate is prohibited.
Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act)
This Act requires all licensed Mortgage Loan Originators (MLOs) and companies to prominently display their Nationwide Mortgage Licensing System and Registry (NMLS) ID on all advertising materials. The requirement applies to all formats, including print ads, websites, social media, and email signatures.
Fair Housing Act and Equal Credit Opportunity Act (ECOA)
ECOA, among other things, prohibits discrimination in mortgage advertising based on race, color, religion, sex, national origin, familial status, or disability. Advertisements must not contain discriminatory language or visuals and should reflect inclusive representation. So-called "ad targeting" must avoid using protected characteristics to exclude or prioritize audiences.
Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)
UDAAP prohibits practices that - even if technically compliant with other laws - are unfair, deceptive, or abusive to consumers. Among other things, UDAAP violations can be triggered by omitting key terms, using jargon, or employing "bait-and-switch" tactics.
I hope this list helps you to realize the regulatory minefield you step into when you need to effectuate an advertisement that meets regulatory guidelines.
Key Prohibitions
You do not outline what the specific violations were that attracted the banking department's scrutiny. You mentioned that the department has commenced an administrative action, so you should be aware that other banking departments will likely take notice and possibly conduct their own examinations.
Although you are not our client, I will nevertheless suggest that you review your current and past advertisements for at least the following potential advertising violations. Set up a checklist of possible violations and put extra staff on the task. Please bring your results to the attention of your counsel immediately.
Checklist for Key Advertising Violations
This list is not comprehensive. View it as a starter list and expand on it.
· No misleading statements or inaccurate information about rates, terms, fees, or affiliations. Avoid implying government affiliation if none exists.
· Clear and conspicuous disclosures of all key loan terms. Fine print, jargon, and hard-to-read text are discouraged.
· APR must be disclosed alongside any advertised interest rate or payment amount.
· Truthful representation of loan terms and availability; meaning, do not advertise terms that are not generally available or that most consumers won't qualify for. Avoid terms like "guaranteed approval" or "lowest rates" unless demonstrably true and unconditional.
· Testimonials and endorsements must be truthful and disclose any material connections to the lender (for instance, the compensation).
· Fair Housing Act and ECOA compliance requires inclusive messaging and visuals, avoiding any indication of preference or exclusion. Targeting audiences based on protected characteristics is prohibited.
· NMLS IDs must be prominently displayed on all advertising materials.
Penalties for Advertising Violations
Now to provide a serviceable answer to your question about the financial and other penalties for mortgage advertising violations. Monetary penalties for mortgage advertising violations include significant civil fines (often hundreds of thousands or millions of dollars), potential permanent bans from the mortgage industry, restitution to consumers, and even imprisonment for serious criminal offenses.
Fines are issued by regulatory bodies like the CFPB and the FTC for violations of various laws, including the Truth in Lending Act (TILA) and laws against Unfair, Deceptive, or Abusive Acts and Practices (UDAAP). The outline I'm providing is meant to be a broad overview. Each regulation should be separately consulted for the precise applicability of the penalty mandates.
Types of Financial Penalties
Civil Penalties/Fines
These can range from tens of thousands to millions of dollars, depending on the severity and scale of the violation.
Permanent Bans
Regulators can permanently prohibit a company or individual from participating in mortgage lending activities.
Consumer Restitution
Companies may be ordered to refund money to consumers who were harmed by the deceptive practices.
Criminal Charges
For serious offenses, individuals may face criminal charges, including potential imprisonment.
Regulatory Bodies and Laws
Consumer Financial Protection Bureau (CFPB)
The CFPB enforces federal consumer
financial laws and issues penalties for violations, such as misleading
statements or misrepresenting loan terms. The CFPB can impose three tiers of
civil money penalties for violations of federal consumer financial law,
including TILA and Regulation Z:
· For general violations: Up to $7,034 for each day the violation continues.
· For reckless violations: Up to $35,169 for each day the violation continues.
· For knowing violations: Up to $1,406,728 for each day the violation continues.
Federal Trade Commission (FTC)
The FTC also has the authority to take enforcement action for deceptive advertising, as seen in numerous settlements for misrepresenting mortgage terms. It can fine businesses for deceptive advertising under the FTC Act. The FTC financial penalty for an advertising violation is now up to $53,088 per violation for 2025, according to the Federal Register. This applies to violations of FTC rules or final Commission orders.
The FTC defines a "violation" broadly, potentially applying the penalty to each instance of non-compliance, such as each ad display or social media post, which can lead to substantial financial liability. "Per Violation" penalties can be particularly nasty because this may result in multiple violations. For instance, every display of a misleading advertisement or every fake review can count as a separate violation, significantly increasing the total penalty.
Truth in Lending Act (TILA)
TILA requires clear and accurate disclosure of credit terms, and violations can lead to significant fines and other penalties. (Supra, the CFPB, and as described below.)
Real Estate Settlement Procedures Act (RESPA)
Non-compliance can result in severe civil and criminal penalties. An individual who violates RESPA Section 8 can face both criminal and civil penalties, as follows:
· Civil liability: A borrower adversely affected by the violation can bring a lawsuit to recover an amount equal to three times the charge that was improperly paid.
· Criminal penalty: A fine of up to $10,000 and imprisonment for up to one year.
Regulatory bodies like the CFPB can impose substantial penalties on companies for RESPA violations. The maximum daily fine depends on the severity of the violation, as follows:
· First-tier violation: Up to $7,217 per day for each violation of a law, rule, or final order (as of 2025).
· Second-tier violation: Up to $36,083 per day for each day a reckless violation continues (as of 2025).
· Third-tier violation: Up to $1,443,275 per day for each day a knowing violation continues (as of 2025).
· Consent Orders: In August 2023, the CFPB issued a consent order against a mortgage company for illegal incentives related to referrals, which included a $1.75 million penalty.
Unfair, Deceptive, or Abusive Acts and Practices (UDAAP)
Prohibits practices that mislead or harm consumers, leading to substantial fines. Financial penalties for UDAAP advertising violations include civil money penalties that can range from over $7,000 to over $1.4 million per day, depending on the severity (general, reckless, or knowing violation). These penalties are adjusted annually for inflation. Regulators can also mandate restitution to consumers, requiring companies to pay back harmed customers. The financial institution might face reputational damage or be required to enter into consent orders and implement compliance programs.
Other Consequences
Companies often sign consent orders, agreeing to take specific actions to correct their practices without admitting wrongdoing. But the civil monetary penalties can be very high and possibly fatal to a company's survival. There is also reputational harm, where violations can damage a company's reputation, leading to significant long-term financial consequences. And there is also the possibility of injunctive relief, where companies may be forced to stop certain activities or implement specific compliance plans.
The company may receive a cease-and-desist order, allowing regulators to require a business to stop running the non-compliant advertisement. Additionally, many states have their own consumer protection acts that prohibit unfair and deceptive trade practices; for instance, a TILA violation is often considered a violation of state law, which may expose the mortgage lender to additional fines and liabilities. Also, criminal penalties may apply; while rare for advertising violations, willful and knowing violations of TILA can lead to a $5,000 fine, a year in jail, or both.
One final note: violations of advertising regulations can lead to penalties from private lawsuits and class actions. For instance, while TILA does not have a private right of action specifically for advertising violations, consumers may be able to sue if the misleading advertisement leads to a violation during the loan origination process. In these cases, liability can include:
· Actual Damages: Any financial harm suffered by the consumer because of the violation.
· Statutory Damages: An amount that varies based on the transaction type. For a closed-end mortgage transaction, statutory damages can range from $400 to $4,000, for example.
· Attorneys' Fees and Court Costs: If the consumer wins their case.
· Class Action Lawsuits: For a class action arising from the same violation, statutory damages are capped at the lesser of $1 million or 1% of the creditor's net worth.
This article, Financial Penalties for Advertising Violations, published on October 9, 2025, is authored by Jonathan Foxx, PhD, MBA, the Chairman & Managing Director of Lenders Compliance Group, the first and only full-service, mortgage risk management firm in the United States, specializing exclusively in residential mortgage compliance.
