6.3 Deceptive Trade Practices Act (DTPA) & State Fair Lending Compliance

Federal TILA, RESPA, ECOA, and the Fair Housing Act still apply to a Texas origination. This section is the Texas overlay: the Deceptive Trade Practices–Consumer Protection Act, SML's fraudulent and improper dealings rule, advertising identification, and the NMLS unique ID that lets a consumer verify who is calling. OpenExamPrep materials describe those Texas and federal rules for study; they are independent exam-prep resources and are not a Consumer Financial Protection Bureau publication, endorsement, or official interpretation.

DTPA as a consumer-remedy overlay

Business & Commerce Code § 17.46(a) declares false, misleading, or deceptive acts or practices in the conduct of any trade or commerce unlawful. Subsection (b) then enumerates specific acts that are deceptive as a matter of law when they occur in trade or commerce. Origination and advertising questions cluster around a handful of those laundry-list items:

• § 17.46(b)(5) — representing that goods or services have sponsorship, approval, characteristics, uses, or benefits they do not have, or that a person has a sponsorship, approval, status, affiliation, or connection the person does not (a fake 'preferred HUD lender' badge, or implying SML 'certified' a rate);
• § 17.46(b)(7) — representing that services are of a particular standard or quality if they are of another;
• § 17.46(b)(9) — advertising goods or services with intent not to sell them as advertised (the bait rate that was never available);
• § 17.46(b)(10) — advertising with intent not to supply reasonably expectable demand unless a quantity limit is disclosed;
• § 17.46(b)(24) — failing to disclose known information concerning goods or services if the failure was intended to induce a transaction the consumer would not have entered had the information been disclosed.

§ 17.50(a) lets a consumer sue when a laundry-list act that the consumer relied on, a warranty breach, an unconscionable action or course of action, or a Chapter 541 Insurance Code violation is a producing cause of economic damages or mental-anguish damages. § 17.50(b)(1) is the damages engine, and it is not a single invented 'automatic treble' number. Each prevailing consumer may obtain the economic damages found by the trier of fact. If the conduct was committed knowingly, the consumer may also recover mental anguish and the trier of fact may award not more than three times the amount of economic damages. If the conduct was committed intentionally, the consumer may recover mental anguish and the trier of fact may award not more than three times the amount of damages for mental anguish and economic damages. § 17.50(d) awards a prevailing consumer court costs and reasonable and necessary attorneys' fees. Additional damages in subsection (b) do not count attorneys' fees, costs, or prejudgment interest (§ 17.50(e)). A groundless, bad-faith, or harassment DTPA action can shift fees to the defendant (§ 17.50(c)).

§ 17.505(a) is the pre-suit gate: as a prerequisite to filing a suit seeking damages under § 17.50(b)(1), the consumer must give written notice at least 60 days before filing, stating in reasonable detail the specific complaint and the amount of economic damages, mental-anguish damages, and expenses including attorneys' fees. During that 60 days the defendant may request a reasonable inspection of goods. Limitations-period emergencies and counterclaims have special rules. Missing notice is generally handled by abatement, not by pretending DTPA does not exist. The 60-day letter is not an SML complaint and does not excuse a § 55.200 applicant notice.

Treat DTPA as a private overlay. SML can still discipline for § 157.024 advertising and improper-dealings violations, and a consumer can still call 1-877-276-5550 or file at sml.texas.gov. Winning or losing a DTPA suit does not rewrite the NMLS ID rules.

7 TAC § 55.202: fraudulent, misleading, or improper dealings

§ 55.202(a) lists conduct that is fraudulent and dishonest dealings for Finance Code § 157.024(a)(3), deceptive practices for § 180.153(2), a scheme to defraud for § 180.153(1), and a false or deceptive statement for § 180.153(11). The list includes knowingly misrepresenting the originator's relationship to a party; understating a cost, fee, interest rate, or other expense; inflating a source of funds; misrepresenting lien position; participating in material false information used to decide whether to make or acquire a loan; receiving RESPA-prohibited compensation for services not performed or with no reasonable relationship to value (12 C.F.R. § 1024.14); recommending or encouraging default on existing debt before a refinance closes; altering an SML-issued document; and a residual 'other practice' the Commissioner identifies by published interpretation.

Trigger leads — § 55.202(a)(9). Using a trigger lead in a misleading or deceptive manner is on that fraudulent-dealings list. Among other things, it is misleading or deceptive to fail to state in the initial communication with the consumer:

1. the originator's name and the mortgage company or mortgage banker on whose behalf the originator is acting;
2. a brief explanation of how the originator or sponsor obtained the consumer's contact information (that is, an explanation of trigger leads);
3. that the originator and sponsor are not affiliated with the creditor to which the consumer made the credit application that produced the lead; and
4. that the purpose of the communication is to solicit new business for the sponsoring company or banker.

It is also listed as misleading to contact a consumer who has opted out of prescreened offers of credit under the FCRA (15 U.S.C. § 1681b(e)), or to fail in that initial communication to make a firm offer of credit as provided by 15 U.S.C. §§ 1681a(l) and 1681b(c). § 55.202(b)(3) separately treats as improper dealings a phone solicitation of a consumer on the FTC National Do Not Call Registry, unless the Telemarketing Sales Rule allows the call.

§ 55.202(b) (improper and unfair dealings) includes negligent licensed activity; violating a local, Texas, or federal constitution, statute, or rule that governs the same or a closely related activity—including ECOA and Regulation B, the federal SAFE Act and Regulation H, Regulation N (MAP Rule), GLBA privacy, FCRA, RESPA/Regulation X, TILA and Regulation Z, the FTC Safeguards Rule, Finance Code Chapter 159 wrap loans, and Texas Constitution Article XVI § 50; issuing a non-compliant or negligent conditional letter under § 55.201; calling a charge a 'discount point' unless the loan closes and the sponsor is the lender or can show by clear and convincing evidence that it paid the lender to buy down the rate; failing to answer reasonable questions about services and costs accurately and timely; and originating while unsponsored or inactive.

Advertising: name, NMLS ID, website, and APR

SML's origination FAQ and 7 TAC § 56.203 (companies) / § 57.203 (bankers) are the advertising pair. An advertisement is a commercial message in any medium that promotes, directly or indirectly, a residential mortgage loan transaction or solicits origination business, including flyers, business cards, handouts, and social media posts. Nominal-value swag that shows only a name and maybe a website, realtor-only rate sheets not meant for consumers, and certain office signs are excluded.

Required content (§ 56.203(c)), except as provided: the mortgage company's name and NMLS ID; the company's website address if it has a website; and, if a sponsored originator is advertising, that originator's name and NMLS ID. A company may advertise directly without going through an originator; then the originator-name requirement does not apply (§ 56.203(d)). On social media, the IDs may sit on the home or profile page so a viewer can see them without scrolling years of posts (§ 56.203(e)). Team names and logos are advertising-only; they cannot appear on applicant documents or the loan file, and the legal or assumed company name plus NMLS ID must appear with the team name in substantially equivalent prominence with a linking phrase such as 'of' or 'powered by' (§ 56.203(f)).

Rates: § 56.203(b) requires advertisements of rates, terms, or conditions to comply with Regulation N (12 C.F.R. § 1014.1 et seq.) and Regulation Z (12 C.F.R. § 1026.24). SML's FAQ flags the common violation: if the advertisement recites a rate of finance charge, it must be expressed as an APR calculated under Regulation Z. False, misleading, or deceptive ads are prohibited. Advertise only products actually available, and disclose special or unusual conditions. Keep copies of ads in the medium in which they were made (§ 56.204 / § 57.204). Finance Code § 157.024(a)(2) separately lets the Commissioner discipline an originator for a misleading advertisement, one likely to deceive, one that creates a misleading impression, one that fails to identify the person as a licensed originator, or one that violates federal or state law.

Fair lending: federal duties plus the Texas overlay

Texas originators still obey ECOA and the Fair Housing Act. The state overlay is not a substitute fair-lending code that repeals those statutes. § 55.202(b)(2)(A) makes an ECOA/Regulation B violation improper dealings for SML purposes. § 157.024(a)(11) independently allows discipline if the originator discriminated against a prospective borrower on the basis of race, color, religion, sex, national origin, ancestry, familial status, or disability. Steering a minority applicant only to a high-cost Chapter 343 product, refusing to take an application because of familial status, or using a trigger-lead script that is offered only in some neighborhoods is both a federal fair-lending problem and an SML dealings problem. The NMLS unique identifier on ads and correspondence is how Texas expects the public to verify the person making the offer; it is identification, not a fair-lending exemption.

Complaints about origination, advertising, or unlicensed activity go to SML at 1-877-276-5550, smlinfo@sml.texas.gov, or the complaint form on sml.texas.gov. DTPA notice letters go to the defendant. Keep the two tracks distinct when a question asks 'first call' versus 'pre-suit notice.'