October 26th, 2020
Since our compliance assistance team provides very popular credit union compliance marketing services, they’ve had their fair share of marketing questions come their way over the past decade. The Aux Compliance experts were kind enough to round up three common marketing compliance questions for you today. Let’s dive in.
And don’t forget – we offer not just marketing compliance, but full-service outsourcing and a la carte services. Whether you are an executive overseeing compliance, a compliance manager going solo, or lead a compliance team, we can help. We cater our services to fit your unique credit union needs – nothing cookie cutter here (although we do love cookies.)
Do Radio and Print Ads Fall Under the Same Rules?
Have you ever wondered how radio and TV advertisements differ from print ads? Regulation Z dictates much of the disclosure language you are required to include in loan ads, whether they appear on social media, on a postcard, or on the radio.
Open-end credit. For example, a credit card print ad is required to contain actually available terms. This means that if an ad advertises specific credit card terms, they must be offered by the credit union to qualified applicants. In addition, the ad is required to disclose any minimum, fixed, transaction, activity, or similar charge that is a finance charge; any periodic rate that may be applied expressed as an annual percentage rate; and any membership or participation fee that could be imposed.
As open-end credit, home equity plans must contain additional disclosures such as any fees imposed for opening the plan; any periodic rate used to compute the finance charge, expressed as an annual percentage rate; the maximum annual percentage rate that may be imposed in a variable-rate plan; and balloon payment information, if applicable.
When it comes to advertising on the radio or on TV, you may comply with the requirements by stating the periodic rate as an annual percentage rate and if applicable, whether it is variable; for home equity plans, by also disclosing any periodic rate used to compute the finance charge as an annual percentage rate; and for all plans, by listing a toll-free telephone number along with a reference that such number may be used by consumers to obtain the additional cost information.
Closed-end credit. Another example where Regulation Z rules apply are closed-end loans. If your ad mentions any of the following triggering terms: amount or percentage of a down payment; the number of payments or period of repayment; the amount of any payment; or the amount of any finance charge, it must also feature the amount or percentage of the down payment; the terms of repayment, which reflect the repayment obligations over the full term of the loan, including any balloon payment; and the “annual percentage rate,” using that term, and if the rate may be increased after consummation, that fact.
In radio and TV ads, these requirements can be met one of two ways:
- by stating clearly and conspicuously each of the additional disclosures required; or
- by stating clearly and conspicuously the “annual percentage rate,” using that term, and, if the rate may be increased after consummation, that fact, and by listing a toll-free telephone number, along with a reference that the number may be used to obtain additional cost information.
What Stock Photos Should I Use?
The United States is one of the most diverse countries in the world, yet it is common for us to see targeted ads that do not accurately reflect the nation’s population. It is important to remember that diversity extends to more than race: it also includes age, national origin, ethnicity, marital status, sex, religion, gender, disability, and sexual orientation. Studies have shown that people tend to purchase and use products and services that they can relate to, which is the reason targeted advertising has become so popular in recent years.
With targeted advertising, however, comes a responsibility to make marketing materials not only appealing, but also fair. Credit unions can advertise products and services effectively while ensuring that their audience is treated equally by following the rules provided in regulations. Regulation B prohibits discrimination against applicants during any part of a credit transaction including, but not limited to credit applications, standards of creditworthiness, and adverse actions. The Fair Housing Act makes it illegal to discriminate in the sale or rental of housing, or in other housing-related activities. The NCUA also has a nondiscrimination rule which prohibits the denial or discouragement of an application for a real estate-related transaction based on a prohibited basis.
You may be wondering why this is relevant to you and may be asking, “Why does this apply to me? I’m a marketing specialist, not a loan officer!” These rules apply to marketing as well as all other aspects of credit union transactions: for example, if you choose to send a mailer to a wealthy, predominantly White neighborhood in your city and offer low mortgage rates while excluding other parts of the city because they are known for housing minorities, because you believe you will not get business from residents of the excluded neighborhood(s) or they would not qualify for your credit union’s loans, you would be in violation of fair lending regulations. Pages 18 and 19 of the Federal Financial Institutions Examination Council (FFIEC)’s Interagency Fair Lending Examination Procedures provide indicators of potential disparate treatment in Marketing of residential products.
Does this Postcard Follow the Rules?
Postcard marketing is one of the most commonly used ways to reach an audience. But as you can probably imagine, special rules apply to credit unions advertising in this manner. Let’s take a look at what Regulation P, Privacy of Consumer Financial Information, has to say. Section 1016.10 states that you may not, directly or through any affiliate, disclose any nonpublic personal information about a consumer to a nonaffiliated third party unless: you have provided that consumer an initial notice; you have provided to the consumer an opt-out notice; you have given the consumer a reasonable opportunity to opt out, before disclosing information to the nonaffiliated third party, and the consumer does not opt out.
According to Regulation P, nonpublic personal information includes the fact that an individual is or has been one of your members or has obtained a financial product or service from you, and a nonaffiliated third party is any person except an affiliate or a person employed jointly by the credit union and a non-affiliated business. Thus, a postal worker, a neighbor who accidentally receives your member’s mail one day, a roommate, or a family member in the same household who sees the postcard ad, is a nonaffiliated third party.
What can you do in order to protect your credit union and reach your members with a postcard? Because of the open nature of the mailing, be as generic as possible – do not provide membership, loan, or account status via postcard. Another option you have is to include postcard marketing companies you may be using in the credit union’s Privacy Notice. Using the model form found in the regulation provides a safe harbor.