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Turns out the ads that claimed consumers could refinance their mortgages for free were less than forthcoming.

For that reason, an Internet-based operation that finds potential borrowers for mortgage refinancing lenders will pay a $500,000 civil penalty to settle Federal Trade Commission (FTC) charges that it deceived consumers.

“An ad that says you can refinance your mortgage for free is clearly deceptive if you have to pay money at some point before you sign on the dotted line,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Lead generators need to understand that federal laws governing truth in advertising apply to them as well as everybody else.”

According to the FTC , Colorado-based Intermundo Media, LLC -- using the name “Delta Prime Refinance” -- designed and distributed the deceptive refinancing ads as a part of its lead-generation service. The agency's complaint said the company ran these ads on Google, Microsoft, AOL, and Yahoo, as well as on its own websites. When consumers clicked on the ads, they were sent to a landing page where they provided contact information, which was ultimately passed on to providers of mortgage refinancing.

Claims were “deceptive”

Delta Prime Refinance made deceptive and unsupported claims in its ads that overstated how much consumers could reduce their payments if they refinanced their mortgages, how low their annual percentage rate would be, and how easy it would be for them to qualify for refinancing, according to the complaint.

Some ads falsely claimed there were no hidden fees, and that the mortgage refinancing was “free,” according to the FTC. Others claimed that fixed interest rates were available, when in fact the rates and the amount consumers spent on interest were variable.

The complaint charges Delta Prime Refinance with violating the Federal Trade Commission Act, the Mortgage Acts and Practices Advertising Rule, or “MAP” Rule and Regulation N, and the Truth in Lending Act and Regulation Z.

Settlement terms

Under the terms of the settlement -- in addition to paying the $500,000 civil penalty -- Intermundo Media is prohibited from:

  • misrepresenting the terms and conditions of any financial product or service, and any term or condition of a mortgage credit product;
  • disclosing, selling, or transferring the consumer data obtained through the Delta Prime Refinance lead generation service; and
  • violating the FTC Act; the MAP Rule and Regulation N; and the Truth in Lending Act and Regulation Z.

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