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Time for a national lending standard

National Mortgage Professional
May 12, 2005

Uncle Sam cracks down: Consumer privacy, Do-Not-Call violators hit for non-compliancemortgagepress.comconsumer protections laws, compliance, do-not-call lists In a possible signal of increased government enforcement, the Federal Communications Commission and Federal Trade Commission have come down hard on two mortgage companies for failure to comply with consumer protection laws. By conducting nationwide compliance sweeps and responding to consumer complaints, these regulatory organizations are pursuing maximum fines on companies found in non-compliance. On Feb. 22, the FCC proposed a $770,000 forfeiture against Phoenix-based Dynasty Mortgage LLC for apparently violating the National Do-Not-Call (DNC) Registry, rules designed to curb telemarketing abuse. The FCC alleged that Dynasty Mortgage made 70 calls to 50 homes in Arizona and California that were registered on the federal DNC list. The company continued its telemarketing activity even after receiving a citation warning the company of its potential penalties. In addition, Dynasty apparently misinformed customers that it was exempt from the commission's rules. The FCC lobbied for the maximum fine for each violation, $11,000, and the five-member commission ruled in a unanimous decision. Curtis White, the company's president, is expected to launch an appeal, stating that Dynasty has systems in place to ensure that those registered on the National DNC Registry are not called, and while there may be a "flaw in the system," it was willing to work on fixing the problem. According to the FCC forfeiture notice, Dynasty obtained its leads from a lead broker, who claimed the list had been "scrubbed" prior to Dynasty's purchase. However, the FCC noted that purchasing a "scrubbed" list does not fulfill compliance with the law. To date, mortgage companies have been the leading industry named in DNC citations issued by the federal government. John Eubank, president of Fairfax, Va.-based Nationwide Mortgage Group, has also felt the sting of non-compliance. The FTC charged the 12-year-old firm with violating the Gramm-Leach-Bliley Safeguards Rule, which requires institutions to implement security policies and procedures for the protection of customers" personal and financial information. Although the FCC did not cite any specific incidents of lost or stolen information, it charged Nationwide Mortgage with failure to assess the risks to sensitive customer information, implement safeguards to control these risks, train employees on information security issues, oversee loan holders handling of customer information, or monitor its computer network for vulnerabilities. A number of conditions outline the settlement, including periodic updates of Eubank's compliance activities over the next 10 years, but it's the price of security requirements that will close Nationwide Mortgages five-person office. Eubank estimates that it will cost $60,000 to meet the FCC demands, a fine that he cannot afford. For more information, visit www.ftc.gov or www.fcc.gov.
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