Using the catch phrase "Zip, Zero, Nada," Heritage Homes Group claimed in ads on websites, and in newspapers, flyers, and direct mail, that consumers could finance their homes without a down payment or closing costs. In fact, they were required to pay a "good faith deposit," settlement costs, and an annual fee, according to the complaint.
Heritage Homes newspaper advertisement (click to enlarge)
The defendants' ads also touted specific monthly payment amounts, such as $1,198 per month, but they failed to disclose that to get such a low monthly payment, consumers would have to obtain financing through the USDA Rural Development Loan Program, which requires them to meet specific credit and income criteria. The defendants also failed to make adequate disclosures about the annual percentage rates consumers would pay for the mortgages.
The complaint alleges that the operation violated 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.
Under the settlement, Heritage Homes Group, Inc. and four affiliated companies are prohibited from:
The FTC established the MAP Rule, which later became Regulation N, to strengthen consumer protections by banning deceptive claims about mortgages. The rule allows the FTC to seek civil penalties for violations. The settlement with defendants imposes a $650,000 civil penalty, which is suspended because of the operation's poor financial condition. If it is later determined that the financial information the defendants provided the FTC was false, the full amount of the judgment will become due.
For consumer information about mortgages, see Homes and Mortgages.
In addition to Heritage Homes Group, Inc., the complaint names Heritage Building Group, Inc.; Heritage Highgate, Inc.; Heritage Partners, Inc.; and CJL Realty management, LLC.
The Commission vote to authorize the staff to refer the complaint to the Department of Justice, and to approve the proposed consent decree, taken before Commissioner Terrell McSweeny joined the agency, was 4-0.
The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Eastern District of Pennsylvania, and the consent decree was entered on June 6, 2014
NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Consent decrees have the force of law when signed by the District Court judge.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's website providesfree information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, andsubscribe to press releases for the latest FTC news and resources.
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