Regulation N - SS - 2019 - FINAL

Supporting Statement
Regulation N
12 C.F.R. Part 1014
OMB Control No. 3084-0156
Background
The Federal Trade Commission (FTC or Commission) requests renewal of the existing
Paperwork Reduction Act (PRA) clearance from the Office of Management and Budget (OMB)
for its allotted burden associated with recordkeeping requirements of Regulation N (the
Mortgage Acts and Practices—Advertising Rule), at 12 C.F.R. 1014. That clearance expires on
January 31, 2020. Under the Dodd-Frank Act, the Commission shares enforcement authority
with the Consumer Financial Protection Bureau (CFPB). Thus, the two agencies share burden
estimates for Regulation N. 1
(1)

Necessity for Collecting the Information

Regulation N’s recordkeeping requirements constitute a “collection of information” for
purposes of the PRA. The Rule does not impose a disclosure requirement.
Regulation N prohibits misrepresentations about the terms of mortgage credit products in
commercial communications and requires that covered persons keep certain related records for a
period of twenty-four months from last dissemination. Specifically, covered persons must retain:
(1) copies of all materially different commercial communications disseminated, including but not
limited to sales scripts, training materials, related marketing materials, websites, and weblogs; (2)
documents describing or evidencing all mortgage credit products available to consumers during
the time period in which each commercial communication was disseminated, including but not
limited to the names and terms of each such mortgage credit product available to consumers; and
(3) documents describing or evidencing all additional products or services (such as credit
insurance or credit disability insurance) that are or may be offered or provided with the mortgage
credit products available to consumers during the time period in which each commercial
communication was disseminated, including but not limited to the names and terms of each such
additional product or service available to consumers. A failure to keep such records is an
independent violation of the rule.
The information that must be retained under the rule is needed to ensure efficient and
1

The CFPB’s associated PRA clearance for Regulation N was approved by the OMB on July 2, 2019,
through July 31, 2022 (OMB Control Number 3170–0009).
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effective law enforcement to address deceptive practices that occur in the mortgage advertising
area. To gauge whether covered persons are complying with the proposed rule or making
prohibited misrepresentations, the FTC, the CFPB and state enforcement agencies need to
review the commercial communications that were disseminated and the information about the
mortgage credit products and relevant additional products or services available during the time
period in which each commercial communication was disseminated. The Commission’s law
enforcement experience establishes the need for strong recordkeeping provisions to foster
effective enforcement of the rule.
These requirements are pursuant to the Dodd-Frank Act, and section 626 of the 2009
Omnibus Appropriations Act, Pub. L. No. 111-8, 123 Stat. 524, 678 (2009) (codified at 15
U.S.C. § 1638 note), as clarified by section 511 of the Credit Card Accountability and
Responsibility and Disclosure Act of 2009, Pub. L. No. 111-24 (Credit CARD Act).
(2)

Use of the Information

As noted above, the Commission, the CFPB and state law enforcement agencies use the
required recordkeeping information for enforcement purposes. Without it, the ability of these
agencies to enforce the rule’s prohibitions on deceptive practices would be significantly
impaired.
(3)

Consideration of the Use of Improved Information Technology

The recordkeeping provisions do not limit use of available technology to maintain
required records. Rather, they allow covered persons to retain them in any legible form,
and in the same manner, format, or place as such records are kept in the ordinary course of
business. Thus, the rule is consistent with the aims of the Government Paperwork
Elimination Act, 44 U.S.C. § 3504 note.
(4)

Efforts to Identify Duplication

The recordkeeping provisions do not duplicate any other federal information
collection requirements. To the extent that some states require retention of mortgage
advertisements and other records that may include evidence of mortgage credit products or
relevant additional products or services, covered persons subject to those requirements would
already retain this information, and the rule’s provisions do not require separate or
duplicative storage or collection of such records.

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(5)

Efforts to Minimize Burden on Small Organizations

The Commission believes that are no feasible or appropriate exemptions for small
entities. Because the population of affected persons likely includes both small and large
entities, exemptions based on size would undermine the protective purposes of this rulemaking,
which is designed to prevent misrepresentations in commercial communications about mortgage
credit products. In any event, the rule seeks to minimize compliance burdens for all entities.
For example, covered persons must retain only “materially different” commercial
communications disseminated and may do so in any legible form, and in the same manner,
format, or place as they keep such records in the ordinary course of business. The rule also
limits the record retention period to two years.
(6)

Consequences of Conducting the Collection Less Frequently

The rule seeks to minimize the frequency and extent of recordkeeping to avoid
imposing any unnecessary burden. As noted, covered persons must retain only “materially
different” commercial communications disseminated. The records that must be retained are
necessary to enable the Commission and state agencies to review the commercial
communications for any misrepresentations that violate the rule and to bring enforcement
actions as appropriate. In addition, the Commission believes that a two-year record retention
period strikes an appropriate balance between ensuring efficient and effective compliance
efforts, while avoiding the imposition of unnecessary costs.
(7)

Circumstances Requiring Collection Inconsistent with Guidelines

The collection of information in the rule is consistent with all applicable
guidelines contained in 5 C.F.R. §1320.5(d)(2).
(8)

Consultation Outside the Agency

For the current PRA clearance request, the FTC sought public comment on the Rule’s
information collection requirements and on the associated estimates of PRA burden. See 84 Fed.
Reg. 51,160 (September 27, 2019). No germane comments were received. 2 Pursuant to the
OMB regulations that implement the PRA (5 C.F.R. Part 1320), the FTC is providing a second
opportunity for public comment while seeking OMB approval to extend the existing paperwork
clearance for the Rule. The Commission has consulted with and will continue to consult with the
CFPB, and, as appropriate, federal banking agencies.
2

The Commission received two non-germane comments.

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(9)

Payment and Gifts to Respondents
Not applicable.

(10) & (11)

Assurances of Confidentiality/Matters of a Sensitive Nature

Not applicable. To the extent that information covered by a recordkeeping
requirement is collected by the FTC for law enforcement purposes, the confidentiality
provisions of Section 21 of the FTC Act, 15 U.S.C. § 57b-2, would apply.
(12)

Estimated Annual Hours and Labor Cost Burden
Estimated total annual hours burden: 1,500 hours (for the FTC).

Commission staff estimates that the Rule’s recordkeeping requirements will affect
approximately 1,000 persons 3 who would not otherwise retain such records in the ordinary
course of business. As noted, this estimate includes lead generators and rate aggregators that
may provide commercial communications regarding mortgage credit product terms. 4 Although
the Commission cannot estimate with precision the time required to gather and file the required
records, it is reasonable to assume that covered persons will each spend approximately 3 hours
per year to do these tasks, for a total of 3,000 hours (1,000 persons × 3 hours). Since the FTC
generally shares enforcement authority with the CFPB for Regulation N, the FTC’s allotted PRA
burden is 1,500 annual hours. 5

3

No general source provides precise numbers of the various categories of covered persons. Commission
staff, therefore, has used the following sources and inputs to arrive at this estimated total: 1,000 lead
generators and rate aggregators, based on staff’s administrative experience.
4
The Commission does not know what percentage of these persons are, in fact, engaged in covered
conduct under the Rule, i.e., providing commercial communications about mortgage credit product terms.
For purposes of these estimates, the Commission has assumed all of them are covered by the
recordkeeping provisions and are not retaining these records in the ordinary course of business.
5
This estimate reflects the same burden compared to prior FTC estimates, because many entities can be
indirectly covered by state recordkeeping requirements for mortgage advertisements and/or retain ads to
demonstrate compliance with state law, as discussed above. See 84 FR 51,160. The FTC notes that the
CFPB’s recent information collection filing with OMB for Regulation N also reflects the view that, in
large part, most entities either retain records in the ordinary course of business or to demonstrate
compliance with other laws. See generally Bureau of Consumer Financial Protection, Agency
Information Collection Activities: Submission for OMB Review; Comment Review, 83 FR 61376 (Nov.
29, 2018), available at https://www.govinfo.gov/content/pkg/FR-2018-11-29/pdf/2018-25973.pdf.
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Estimated labor costs: $24,375.
Commission staff derived labor costs by applying appropriate hourly cost figures to the
burden hours described above. Staff further assumes that office support file clerks will handle
the Rule’s record retention requirements at an hourly rate of $16.25. 6 Based upon the above
estimates and assumptions, the total annual labor cost to retain and file documents, for the FTC’s
allotted burden, is $24,375 (1,500 hours × $16.25 per hour).
(13)

Estimate of Capital or Other Non-Labor Costs

Absent information to the contrary, staff anticipates that existing storage media and
equipment that covered persons use in the ordinary course of business will satisfactorily
accommodate incremental recordkeeping under the Rule. Accordingly, staff does not anticipate
that the Rule will require any new capital or other non-labor expenditures.
(14)

Estimate of Cost to Federal Government

Commission staff estimates that a representative year’s cost to the FTC of
administering the recordkeeping requirements of the proposed rule during a prospective 3-year
clearance period will be approximately $44,016. This estimate is based on the assumption that
one-third of an attorney work year will be expended in that effort. Clerical and other support
services are included in this estimate.
(15)

Program Changes or Adjustments

This estimated burden stays the same as the most recent FTC estimate from 2016. The
estimated annual labor costs went up slightly based on slightly higher estimated wage rates.
(16)

Plans for Tabulation and Publication
Not applicable.

6

This estimate is based on mean hourly wages for office support file clerks provided by the Bureau of
Labor Statistics. See U.S. Bureau of Labor Statistics, Occupational Employment and Wages—May 2018,
table 1 (“National employment and wage data from the Occupational Employment Statistics survey by
occupation”), released March 29, 2019, available at http://www.bls.gov/news.release/pdf/ocwage.pdf.

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(17)

Display of Expiration Date for OMB Approval
Not applicable.

(18)

Exceptions to Certification
Not applicable.

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