FTC Issues Letter to Mortgage Servicer Expressing Concern Regarding Noncompete Agreements

The FTC recently issued a letter warning a national mortgage servicer that its company-wide use of noncompete agreements may unfairly and unreasonably restrain competition in violation of federal antitrust laws.

The warning was prompted, in part, by public court filings from the servicer’s ongoing lawsuit to enforce a noncompete agreement against a former employee and its competitor.  Specifically, the FTC is concerned with the servicer’s blanketed use of noncompete agreements for all employees regardless of their role or responsibilities.  The FTC noted that the reasons behind the servicer’s use of the noncompete agreements (e.g., protecting confidential information, client goodwill, and specialized skills) could be addressed through narrow, less restrictive alternatives like non-disclosure and non-solicitation agreements.  As a result, the FTC in the letter strongly encouraged the servicer to review its employment contracts, discontinue any unjustified noncompete agreements, and notify affected employees accordingly.

The FTC stated that its letter was also prompted by feedback from participants in the mortgage industry.  This included one commenter reporting that “company after company … use noncompete contracts to hold officers[,] branch managers[,] and other employees hostage year after year” and “tie loan officers and managers up in lawsuits if they choose to leave ….”

The FTC has shown a clear uptick in labor market scrutiny since it launched a joint labor task force in early 2025 aimed at “rooting out and prosecuting deceptive, unfair and anticompetitive labor-market practices that harm American workers.”  Just last month, the FTC ordered a large pest-control company to stop enforcing noncompete agreements against more than 18,000 employees and the FTC sent warning letters (like the one issued to the mortgage servicer reported above) to 13 other companies in the pest-control industry. 

The FTC is expected to continue monitoring the labor market and to more aggressively pursue situations where it believes anticompetitive practices exist.  As a result, companies in the mortgage industry could face increased regulatory attention from the FTC.