Economic stress has many real estate licensees considering how to connect with previously untapped clientele.
As part of their financial strategy to stay afloat despite reduced sales and leasing of property and origination of mortgages, brokers, agents and mortgage loan originators (MLOs) are doubling down on their solicitation efforts by FARMing past contacts — and others.
But in their rush to reach new and prior clients, these adaptive licensees may have missed an important step or two to comply with telemarketing and advertisement laws. The rules are simple and straightforward.
California’s attorney general recently announced a crackdown on illegal telemarketing, highlighting a number of lawsuits and court rulings against companies guilty of deceptive marketing practices.
Marketing and advertising are a fundamental part of a licensee’s ultimate business success. Potential clients need to be made aware of the licensee’s services. The telemarketing rules permit the achievement of this success while applying guardrails for reasonable conduct in disclosures and timing of calls to customers.
In application, MLOs who use phone calls as part of their marketing need to take note of and follow telemarketing rules.
We will explain.
Telemarketing rules for MLOs
Telemarketing by an MLO is any marketing campaign conducted by telephone to induce consumers to apply to originate a mortgage.
The conduct of an MLO’s telemarketing campaign is regulated and enforced by the Federal Trade Commission (FTC) under their Telemarketing Sales Rule. [16 Code of Federal Regulations §§310]
For starters, an MLO telemarketer must understand that deception is wrongheaded; they may not make false or misleading statements to induce the consumer they call to accept the mortgage the MLO is promoting. [16 CFR §310.3(a)(4)]
Further, the MLO placing a call must immediately, when the person called answers, orally disclose their:
- identity — name of the MLO and their employer;
- purpose of the call as soliciting a mortgage origination application; and
- nature of the particular type of mortgage origination offered on the call. [16 CFR §310.3(d)]
An MLO placing telemarketing calls must also — without first being asked — voluntarily disclose to the person they are calling:
- all costs incurred, directly or indirectly, to originate the specific type of mortgage offered;
- any restrictions or limitations on the use of the funds provided by the mortgage offered;
- conditions for processing the mortgage origination which alter the MLO’s or their employer’s ability to originate the offered mortgage without incurring greater costs, efforts and time;
- any affiliation of the MLO or their employer with any person or government agency including the mortgage lender or originator; and
- in a prize promotion, any conditions regarding receiving a prize, the odds of winning the prize, and that no mortgage origination is required to participate. [16 CFR §310.3(a)(2)]
Time of day avoids abusive call rule
A telemarketing call placed without prior consent is permitted by the Telemarketing Sales Rule. Permitted calls may only be made between 8:00 a.m. and 9:00 p.m. for the time at the location of the person receiving the call. A call placed at any other local time without prior consent constitutes a violation as abusive telemarketing. [16 CFR §310.3(c)]
Further, it’s not enough for an MLO to simply comply with FTC rules for acceptable telemarketing practices. Any MLO who knowingly supports or facilitates a violation of these rules by others — even the company they work for — is also in violation. [16 CFR §310.3(b)]
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Advertising rules for real estate licensees
Advertising introduces and fully identifies the licensee, their activities and services, and the message they want to convey to potential clients. Advertising is a form of communication which uses signs, symbols or actions to create brand awareness and promote a positive image of the licensee.
While telemarketing rules do not apply to material mailed by the MLO or their employer in marketing campaigns which intend to induce the recipient to call about their mortgage origination services when the mailing contains the physical business address of the MLO’s employer, there are additional rules that apply to these mailed advertisements.
When advertising on a website, in print or otherwise, real estate licensees are required to provide their:
- name;
- Department of Real Estate (DRE) license number;
- Nationwide Mortgage Licensing System (NMLS) ID number (when applicable); and
- responsible broker’s identity. [Calif. Business & Professions Code §10140.6]
Solicitation materials licensees use where these requirement apply include:
- business cards;
- stationary;
- websites owned and maintained by the soliciting real estate licensee;
- promotional and advertising flyers, brochures, postal mail, leaflets and FARM letters;
- advertisements in electronic media (including internet, email, radio, cinema and television);
- print advertising in any newspaper or periodical; and
- “for sale,” “for rent,” “for lease,” “open house,” and directional signs that display the name of the licensee. [DRE Regs. §2773]
Noncompliance by an agent or employing broker may result in:
- disciplinary action by the DRE;
- criminal prosecution; or
- both DRE disciplinary action and criminal prosecution.
For more information about advertisement compliance, see the DRE’s Real Estate Advertising Guidelines informational booklet DRE’s website. [See RE 27]
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