Agency Information Collection Activities; Proposed Collection; Comment Request

AGENCY:

Federal Trade Commission (FTC or Commission).

ACTION:

Notice.

SUMMARY:

The information collection requirements described below will be submitted to the Office of Management and Budget (OMB) for review, as required by the Paperwork Reduction Act (PRA). The FTC seeks public comments on its proposal to extend, for three years, the current PRA clearance for its portion of the information collection requirements contained in the Consumer Financial Protection Bureau's Regulation O (the Mortgage Assistance Relief Services Rule). The FTC shares enforcement of Regulation O with the Consumer Financial Protection Bureau (CFPB). This clearance expires on January 31, 2017.

DATES:

Comments must be received on or before January 17, 2017.

ADDRESSES:

Interested parties may file a comment online or on paper by following the instructions in the Request for Comments part of the Supplementary Information section below. Write “Regulation O, PRA Comment, FTC File No. P134812” on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/regulationopra by following the instructions on the web-based form. If you prefer to file your comment on paper, mail or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite CC-5610 (Annex J), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex J), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT:

Requests for copies of the collection of information and supporting documentation should be addressed to Rebecca Unruh, Attorney, Division of Financial Practices, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW., CC-10232, Washington, DC 20580, (202) 326-3365.

SUPPLEMENTARY INFORMATION:

Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Public Law 111-203, 124 Stat. 1376 (2010), transferred the Commission's rulemaking authority under the mortgage provisions in section 626 of the 2009 Omnibus Appropriations Act, as amended, to the CFPB. On December 16, 2011, the CFPB republished the Mortgage Assistance Relief Services (“MARS”) Rule as Regulation O (12 CFR part 1015). As a result, the Commission subsequently rescinded its MARS Rule (16 CFR part 322). Nonetheless, under the Dodd-Frank Act, the FTC retains its authority to bring law enforcement actions to enforce Regulation O.

Regulation O contains information requirements that have been approved by OMB under the PRA, 44 U.S.C. 3501 et seq. The discussion below details the nature of and justification for the information collection requirements of Regulation O for which the FTC, as a co-enforcer, seeks OMB clearance renewal for its share of the estimated PRA burden.

Disclosure Requirements

In commercial communications for a general audience, MARS providers are required to make the following disclosure:

(1) “(Name of company) is not associated with the government and our service is not approved by the government or your lender”; and

(2) In some instances, that “[e]ven if you accept this offer and use our service, your lender may not agree to change your loan.”

In addition, MARS providers must disclose to consumers, in any subsequent commercial communication directed to a specific consumer, the following information:

(1) That “You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us (insert amount or method for calculating the amount) for our services”;

(2) That “(Name of company) is not associated with the government and our service is not approved by the government or your lender”; and

(3) In some instances, that “[e]ven if you accept this offer and use our service, your lender may not agree to change your loan.”

Furthermore, MARS providers are required to disclose to consumers in all communications in which the provider represents that the consumer should temporarily or permanently discontinue payments, in whole or in part, the following information:

“If you stop paying your mortgage, you could lose your home and damage your credit rating.”

Finally, after a provider has obtained an offer of mortgage assistance relief from the lender or servicer and presented the consumer with a written agreement incorporating the offer, the MARS provider must disclose the following:

(1) “This is an offer of mortgage assistance relief service from your lender [or servicer]. You may accept or reject the offer. If you accept the offer, you will have to pay us [same amount as disclosed pursuant to § 1015.4(b)(1)] for our services”; and

(2) A description of all “material differences” between the terms, conditions, and limitations of the consumer's current mortgage and those associated with the offer for mortgage relief, provided in a written notice from the consumer's lender or servicer.

Regulation O also requires that the disclosures be “clear and prominent,” as defined specific to the media used.

These disclosures are necessary for the following reasons:

• Non-affiliation with the government or lenders: Federal and state law enforcement officials have brought numerous law enforcement actions against MARS providers who have misrepresented their affiliation with government agencies or programs, lenders, or servicers, in connection with offering MARS. These providers have used a variety of techniques to create such misimpressions, including advertising under trade names that resemble the names of legitimate government programs. Given that the government, for-profit entities, and nonprofit entities assist financially distressed consumers with their mortgages, and the frequency of deceptive affiliation claims, the requirement that MARS providers disclose their nonaffiliation with the government or with consumers' lenders or servicers is reasonably related to the goal of preventing deception.
• Risk of Nonpayment of Mortgage: Law enforcement experience and the FTC's rulemaking record for the former MARS Rule demonstrates that MARS providers frequently encourage consumers, often through deception, to stop paying their mortgages and instead pay providers. Consumers who rely on these deceptive statements frequently suffer grave financial harm. Requiring MARS providers who encourage consumers not to pay their mortgages to disclose the risks of following this advice is necessary to prevent deception.
• Total amount a consumer must pay: The total cost of MARS is perhaps most material to consumers in making well-informed decisions about whether to purchase those services. Requiring the clear and prominent disclosure of total cost information in every communication directed at a specific consumer before the consumer enters into an agreement would decrease the likelihood that MARS providers will deceive prospective customers with incomplete, inaccurate, or confusing cost information. Requiring MARS providers to disclose total cost information clearly and prominently is reasonably related to the prevention of deception.
• Right to accept or reject offer of mortgage assistance: To effectuate fully the advance fee ban under 12 CFR 1015.5, which prohibits providers from collecting fees until the consumer has accepted the results obtained by the provider, it also is necessary for a MARS provider to inform consumers that they may withdraw from the service and may accept or reject the result delivered by the provider. This disclosure is reasonably related to preventing unfair and deceptive acts and practices by MARS providers.
• No guarantee: Law enforcement experience and the FTC's rulemaking record reveals that MARS providers often misrepresent their likelihood of success in obtaining a significant loan modification for consumers. These deceptive success claims lead consumers to overestimate MARS providers' abilities to obtain substantial loan modifications or other relief. Requiring MARS providers to inform consumers that lenders might not agree to change consumers' loans, even if those consumers purchase the services that the MARS provider offers, is reasonably related to the goal of preventing deception.
• Written Notice from Lender or Servicer: Based on law enforcement experience and the rulemaking record, providing the consumer with a notice from the consumer's lender or servicer describing all material differences between the consumer's current mortgage loan and the offered mortgage relief is essential to consumers' ability to evaluate whether they should accept the offer. Requiring that the lender or servicer prepare the written disclosure also better ensures that the information provided is consistent with the terms of the offer, and mitigates the risk that MARS providers would mislead consumers about the offer. This disclosure is reasonably related to the goal of protecting consumers from deception.

Recordkeeping Requirements

Regulation O's recordkeeping requirements pertain to records that are customarily kept in the ordinary course of business, such as copies of contracts and consumer files containing the name and address of the borrower and materially different versions of sales scripts and related promotional materials. Thus, the retention of these documents does not constitute a “collection of information,” as defined by OMB's regulations that implement the PRA.

Burden Statement

Because the FTC and CFPB share enforcement authority for this rule, the FTC is seeking clearance for one-half of the following estimated PRA burden that the FTC attributes to the disclosure and recordkeeping requirements under Regulation O. The potential entities providing MARS services are varied, and there are no ways to formally track them. By extension, there is no clear path to track how many affected individual entities have newly entered and departed from one year to the next or from one triennial PRA clearance cycle to the next. However, based on law enforcement experience and the CFPB's recent analysis conducted after the MARS Rule was restated as Regulation O, the FTC estimates that Regulation O affects roughly 107 MARS providers. This estimate informs the additional estimates detailed below.

Estimated annual hours burden: 321 (for the FTC).

The above hours estimate is based on the assumption that compliance with all MARS disclosures requires 6 hours of labor annually. Multiplying this figure by 107 entities yields a total burden of 642 hours, of which 321 hours are attributed to the FTC.

Estimated associated labor cost: $10,677 (for the FTC).

Commission staff assumes that a compliance officer or equivalent will prepare the required disclosures for 6 hours annually at an hourly rate of $33.26. Thus, the estimated labor cost is $21,353 (107 providers × 6 hours × $33.26) of which the FTC assumes half, or $10,677.

Estimated non-labor cost: $29,425 (for the FTC).

Based on the CFPB's analysis, the FTC assumes that each of the estimated 107 MARS providers bears an additional $550 in material fees for acquiring relevant legal and technical compliance information, for a total additional burden of $58,850, of which the FTC assumes half, or $29,425. Based on law enforcement experience, the FTC assumes that any disclosures will likely be made electronically and thus will not generate additional non-labor costs such as printing and distribution.

Request for Comments

Under the PRA, 44 U.S.C. 3501-3521, federal agencies must obtain approval from OMB for each collection of information they conduct or sponsor. “Collection of information” means agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. 44 U.S.C. 3502(3); 5 CFR 1320.3(c). As required by section 3506(c)(2)(A) of the PRA, the FTC is providing this opportunity for public comment before requesting that OMB extend the existing paperwork clearance for the regulations noted herein.

Pursuant to Section 3506(c)(2)(A) of the PRA, the FTC invites comments on:

(1) Whether the disclosure and recordkeeping requirements are necessary, including whether the information will be practically useful;

(2) the accuracy of our burden estimates, including whether the methodology and assumptions used are valid;

(3) ways to enhance the quality, utility, and clarity of the information to be collected; and

(4) ways to minimize the burden of the collection of information. All comments should be filed as prescribed in the ADDRESSES section above, and must be received on or before January 17, 2017.

You can file a comment online or on paper. Write “Regulation O, PRA Comment, FTC File No. P134812” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm . As a matter of discretion, the Commission tries to remove individuals' home contact information from comments before placing them on the Commission Web site.

Because your comment will be made public, you are solely responsible for making sure that your comment does not include any sensitive personal information, such as a Social Security number, date of birth, driver's license number or other state identification number or foreign country equivalent, passport number, financial account number, or credit or debit card number. You are also solely responsible for making sure that your comment does not include any sensitive health information, such as medical records or other individually identifiable health information. In addition, do not include any “[t]rade secret or any commercial or financial information which is . . . privileged or confidential,” as discussed in section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do not include competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.

If you want the Commission to give your comment confidential treatment, you must file it in paper form, with a request for confidential treatment, and you must follow the procedure explained in FTC Rule 4.9(c), 16 CFR 4.9(c). Your comment will be kept confidential only if the FTC General Counsel grants your request in accordance with the law and the public interest. Postal mail addressed to the Commission is subject to delay due to heightened security screening. As a result, the Commission encourages you to submit your comments online. To make sure that the Commission considers your online comment, you must file it at https://ftcpublic.commentworks.com/ftc/regulationopra by following the instructions on the web-based form. If this Notice appears at http://www.regulations.gov,, you also may file a comment through that Web site.

If you file your comment on paper, write “Regulation O, PRA Comment, FTC File No. P134812” on your comment and on the envelope, and mail it to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW., Suite CC-5610, (Annex J), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610, (Annex J), Washington, DC 20024. If possible, submit your paper comment to the Commission by courier or overnight service.

The FTC Act and other laws that the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. The Commission will consider all timely and responsive public comments that it receives on or before January 17, 2017. You can find more information, including routine uses permitted by the Privacy Act, in the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm .