Subject of Possible Rule Making: Amendment to the Consumer Loan Act (chapter 31.04 RCW) governing contents of advertisements and solicitation to consumers.

     Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 31.04.135 and 31.04.165.

     Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: The department has recently noticed an increasing number of deceptive loan solicitations from mortgage lenders and mortgage brokers advertising loan products to residents of Washington state. These solicitations reference the consumers existing loan with another lender, and give the impression of being from that lender rather than the actual advertiser. The solicitations encourage the consumer to contact the advertiser to refinance their existing loan. Consumers contact the advertiser, thinking they are contacting their existing lender. Such advertising practices may be unfair and deceptive to consumers. The existing rules provide little guidance to licensees or the department regarding the standards for such solicitations.

     These solicitations also leave the impression that the consumer's existing lender shared their confidential loan information with other companies. In fact, the advertisers usually get this information from public sources, such as county records. However, there is an appearance that the existing lender has violated the law and regulations governing the sale of private financial information.

     The department has received a petition for the development of a rule from Sen. Margarita Prentice, Rep. Brian Hatfield, and from representatives of the credit union, banking, and thrift industries.

     The proposed rules will provide standards for the content of solicitations, prohibiting deceptive references to existing lenders, and will require the advertiser to disclose the source of any information about the consumer's loan.

     Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: None.

     Process for Developing New Rule: The department will communicate with consumer loan licensees and all interested parties by mail, will hold meetings, and continue to work with both groups as these rules go forward.

     Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication by contacting Mark Thomson, Director of Consumer Services, (360) 902-8727, mthomson@dfi.wa.gov; or Jeannette Terry, (360) 902-8786, jterry@dfi.wa.gov.

February 21, 2002

Mark Thomson

Acting Director

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