Current through Register 2024 Notice Reg. No. 38, September 20, 2024
(a) In
administering Sections 10232.1 and 10235 of the Code, the commissioner shall take
such action as is appropriate to prevent or halt the publication of advertising that
is false, misleading or deceptive in itself or through the omission of information
necessary to make a representation not misleading in the context in which it is
used. To this end, the commissioner may disapprove or require verification of
representations in advertising submitted pursuant to Section 10232.1 of the Code, or
Section 2847 of these regulations.
In addition to the actual text, consideration shall be given to
such factors as format, pictorial display and emphasis in determining whether an
advertisement is likely to create a false impression.
By way of illustration and not of limitation, advertising
containing any of the following is considered to be false, misleading or deceptive
and will not ordinarily be approved for publication by the commissioner:
(1) The use of "guaranteed," "insured," "bonded,"
"sure," "safe," "sound" or other words or phrases of similar import to describe or
characterize the security of lenders' or purchasers' funds, or the return to lenders
or purchasers from the use of their funds, without an accompanying statement of fact
supporting the use of the words or phrases implying high security. A representation
to the effect that no losses or minimal losses have been sustained by lenders or
purchasers doing business with the licensee shall include the period of time to
which the representation applies.
(2)
The use of terms in the comparative or superlative degree to describe any aspect of
the business of the licensee, or any terms applicable to loans negotiated by the
licensee, without such additional information as necessary to make the
representation unambiguous in the context in which it is used.
(3) A statement that the licensee represents any
lender enumerated in Section 10133.1(a) of the Code unless the licensee has a
contractual arrangement to act as agent or representative for such lender.
(4) An implication contrary to the fact that the
licensee will act in the capacity of a lender rather than as an agent or that a
borrower will be able to obtain a loan without deductions from the principal amount
for the payment of commissions, costs and expenses customarily attendant upon
mortgage loan broker transactions.
(5) A
representation of a specific installment in repayment of a loan without an equally
prominent disclosure of the following information about the loan:
(A) Principal amount
(B) Simple annual interest rate
(C) Annual percentage rate
(D) Number, amount and period of payments
scheduled to the date of maturity
(E)
Balance due at maturity (balloon payment) if not fully
amortized.
(6) A
representation of a specific installment payment, interest rate, annual percentage
rate or other provision concerning a loan unless it is clearly indicated whether the
advertised terms are available for first loans, junior loans or for both first and
junior loans.
(7) A representation or
implication that loans are available on terms more favorable to the borrower than
terms then generally available in the community through mortgage loan brokers or
other sources for loan funds unless the advertised terms are in fact then available
to a borrower without the application of undisclosed, special conditions or
restrictions to qualify the borrower or the security for the loan.
(8) A representation or implication that loans are
available on terms more favorable to the borrower than terms then generally
available in the community through mortgage loan brokers or other sources for loan
funds unless the broker has previously presented evidence satisfactory to the
commissioner that the advertising is not illusory or deceptive in light of all
relevant factors of the broker's business practices including the amount of loan
funds prospectively available to meet borrower demands in response to the
advertising.
(9) A representation that
loans are available at or to a maximum percentage of market value unless there is a
disclosure as to how market value will be determined for purposes of a loan
transaction.
(10) A representation or
implication that the credit rating or other personal financial data of the
prospective borrower will not be a factor in determining eligibility for a loan
unless the broker in fact neither conducts nor causes to be conducted any
investigation or inquiry into any aspect of any prospective borrower's credit rating
or into his personal financial circumstances for the purpose of determining his
qualifications for a loan.
(11) A
representation or implication that a loan can or will be approved by
telephone.
(12) A representation
implying that the Bureau or any other governmental agency has endorsed or approved
any aspect of the licensee's business activities. A statement that the offering
referred to in the advertisement is being made under authority of a permit issued by
the Bureau or by the Department of Business Oversight without more, will not be
considered to be a representation implying endorsement or approval by a governmental
entity.
(13) A representation or
implication contrary to fact as to the number and location of offices maintained by
the licensee for the conduct of his/her mortgage loan brokerage business.
(14) Use of "investment plan," "growth plan," or
similar term to describe a program of a licensee carrying on activities described in
Section 10131.1.
(15) The use of
"savings," "savings plan" or terms of similar import indicating that the licensee is
engaged in business activities requiring a particular license, permit or authority
unless the licensee then has such a license, permit or authority.
(16) A representation of a simple annual interest
rate without an equally prominent disclosure of the annual percentage
rate.
(17) A representation of an
installment in repayment of an adjustable rate, interest only or payment-option loan
without an equally prominent disclosure of the following information about the loan:
(A) Principal amount
(B) Term of loan
(C) Initial interest rate
(D) Number of months the initial interest rate
will be in effect
(E) Fully-indexed
interest rate
(F) Maximum interest
rate
(G) If different, an explanation of
the difference between the payment rate, initial interest rate and fully-indexed
rate.
(H) Annual percentage
rate
(I) How often the interest rate and
payments can change
(J) Maximum periodic
change in the interest rate and payments (periodic caps)
(K) Number of months and percentage of original
loan amount after which minimum payments will not be accepted and the loan
re-amortizes
(L) The monthly payment
based on the maximum interest rate, and the loan balance after all negative
amortization is included, assuming minimum payments are made
(M) If the loan contains a prepayment penalty, a
statement to that effect
(N) If the loan
contains a balloon payment, a statement to that effect
(18) A statement that the licensee can arrange
"low doc/no doc", "no income/no asset", "stated income", "stated asset", "no ratio"
or similar loan products without a statement that these products may have a higher
interest rate, more points or more fees than other products requiring
documentation.
(19) The failure to
include a statement, in an advertisement for investments in trust deeds secured by
one or more interests in real property, that "investments in trust deeds secured by
one or more interests in real property are subject to risk of loss". Any
advertisements, for investments in trust deeds secured by one or more interests in
real property shall be retained for a period of three years from the date of its
last publication or use. After notice, advertisements for investments in trust deeds
secured by one or more interests in real property shall be made available for
examination, inspection, and copying by the commissioner or his or her designated
representative during regular business hours.
1. Amendment filed
12-11-73 as an emergency; designated effective 1-1-74. Certificate of Compliance
included (Register 73, No. 50). For prior history, see Register 68, No.
39.
2. Amendment filed 5-13-82; effective thirtieth day thereafter
(Register 82, No. 20).
3. New subsection (16) filed 11-8-93; operative
12-8-93 (Register 93, No. 46).
4. Editorial correction (Register 95, No.
13).
5. Amendment of section and NOTE filed 9-5-2003; operative 10-5-2003
(Register 2003, No. 36).
6. New subsections (a)(17) and (a)(18) filed
8-29-2007; operative 9-28-2007 (Register 2007, No. 35).
7. New subsection
(a)(19) filed 10-6-2009; operative 11-5-2009 (Register 2009, No. 41).
8.
Change without regulatory effect amending subsection (a)(12) filed 6-30-2014
pursuant to section
100, title 1, California Code of
Regulations (Register 2014, No. 27).
Note: Authority cited: Sections
10080
and
10232.1,
Business and Professions Code. Reference: Sections
10232.1
and
10235,
Business and Professions Code.
