Rising Interest Rates Likely to Lead to Increased Scrutiny of Variable Rate Loan Marketing

On March 21, 2018 the Federal Reserve lifted its federal funds rate by a quarter percentage point to a range of 1.5% to 1.75%, the highest level since 2008. The Fed also significantly boosted its economic forecast and hinted that it may be more aggressive in its plan to continue to raise rates, signaling that the market should prepare for higher interest rates. For consumers with variable rate loan products, the rise in interest rates will result in the first substantial increase in loan payments in more than 10 years.

If history is our guide, the increase in interest rates will lead to an increase in consumer complaints of deceptive marketing for variable rate loan products. The Federal Trade Commission (“FTC”) takes such complaints seriously and has a history of investigations and enforcement actions based on deceptive marketing of financial products. For newer lenders who entered the lending marketplace after 2008, this may be the first time their variable rate marketing is scrutinized by the FTC. It’s a good time for all lenders to perform a “check-up” of variable rate marketing campaigns for compliance with the FTC’s rules and regulations and avoid allegations of deceptive or misleading ad copy.

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