Credit union marketers recognize that electronic outlets like websites, blogs, and social media provide huge, and often free, marketing and advertising opportunities. Credit union compliance officers recognize that using the internet for marketing and advertising can pose huge compliance risks because all the rules for advertising disclosures that apply to print ads also apply to ads online. And because the rules for advertising differ greatly depending on the products and/or services being advertised, it can be easy to post an ad on Facebook or send a Tweet that isn’t compliant.
With more members interacting with your credit union digitally than ever before, it is critical to be skilled in the rules of social media marketing. The Aux Compliance Team have created this timely whitepaper for you to brush up on your knowledge.
There are four main rules/regulations that address advertising compliance:
- Truth-in-Lending for loans
- Truth-in-Savings for share accounts
- Notice requirements regarding share insurance coverage and Equal Housing
- Unfair, Deceptive, and Abusive Acts and Practices (UDAAP) for all ads
While there are generally no exceptions for electronic messaging, marketers who know the rules can create engaging ads without running afoul of the examiners. Below is a sample of the paper. If you would like to receive the whole resource (complimentary as part of our Aux University, of course!), simply click here.
The advertising rules and trigger terms for lending products vary depending on whether the loan being advertised is open-end (revolving credit) or closed-end (installment loan). For open-end loans like credit cards, including an APR in the ad triggers additional disclosures, such as transaction or activity charges, participation fees, and a statement that the rate may change if it’s variable. Additionally, if the rate advertised is a discounted variable rate, the initial rate, the time period it will remain in effect, and the current indexed rate also have to be disclosed. If the open-end loan is a Home Equity Line of Credit (HELOC), the required disclosures get even more complex.
While APR is a trigger term for open-end loans, it is not a trigger term for closed-end loans. The most commonly used trigger term for closed-end loans is the number of payments or period of repayment (e.g., 60-month car loans or 30-year mortgages). When an ad for a closed-end loan includes this information, you trigger the disclosure of the APR and a payment example.
How are you going to fit all that information in a Tweet that is limited to 280 characters? Lucky for you, you don’t have to. There is a “one-click” exception for electronic advertisements that allows triggered disclosures to be included on a separate page via a direct link in the advertisement (see below).
The primary trigger term when advertising share accounts is the rate. If you advertise a rate, it must be advertised as Annual Percentage Yield (APY). You can use “APY” in the advertisement, but you must spell out Annual Percentage Yield at least once in the ad. It doesn’t have to precede the first usage of “APY” in the ad, but can be included in the disclosures. If you do include the APY, there are additional disclosures that must be made. These include, to the extent applicable: for variable rate accounts, a statement that the rate may change; time the rate is available for share certificate accounts or statement that APY is accurate as of the last dividend declaration date for other share accounts; minimum balance to open the account and/or earn the stated APY; a statement that fees could reduce earnings; and for share certificates, the term and a statement that a penalty may or will be imposed for early withdrawal. Additionally, if a bonus is stated in an ad, that ad must also contain the APY, time requirements to earn the bonus, minimum balance required to obtain the bonus, and when the bonus will be paid.
Will all these disclosures fit on a website banner or Facebook ad? Probably not in a format that can be easily read. Luckily, as with Regulation Z, Truth-in-Savings includes a “one-click” exemption for electronic advertisements. Triggered disclosures may be included on a separate page via a direct link in the advertisement.
And don’t forget: Our brand promises are to treat each client as a partner, never use bank-speak, and to always honor the credit union difference. We are Aux, DOING THE HARD WORK FOR YOU. Interested in seeing how our compliance services might fit within your compliance team? Contact us via the form below!