Every financial institution advertises. And, each one faces the same question: what disclosures are required on my advertisement? Often, there are internal discussion and meetings (fights?) at the bank or credit union – most likely involving those responsible for marketing and those responsible for compliance.
How can financial institutions understand and manage the compliance risks related to their advertising? I’ve been fortunate to work with institutions throughout the country – first as the lead compliance attorney at NAFCU and now in private practice. Based on this experience (I’ve spent a good deal of time “in the weeds” of the overlapping regulations), below are my 7 Advertising Compliance Tips for Financial Institutions.
1. Set Up a Formal Review Process.
If your institution does not already have one, establish a formal review process for all advertisements. This review process helps ensure the appropriate individuals are aware of the advertising campaign and have provided the necessary approvals. The number one way to prevent claims of “unfair, deceptive or abusive” marketing is to make sure each ad is properly reviewed.
2. Create Internal Checklists.
To help assist the formal review process, I recommend that financial institutions utilize checklists to ensure advertisements contain the necessary disclosures. The hardest part of advertising compliance is the fact that the required disclosures depend on the underlying content of the advertisement. A checklist can help your bank or credit union determine whether a “trigger term” is used and, if so, what additional disclosures must be included.
3. Analyze Ads Product-by-Product.
Unfortunately, the disclosure requirements vary from product to product. For example, the required disclosures for a home equity line of credit (HELOC) ad differ from the required disclosures for a closed-end home equity loan. When evaluating your advertisements, be sure to keep in mind which product is being promoted and which rules apply. If you are using Checklists, having them set up by product (rather than by regulation) is a great idea.
4. Ask Where the Advertisement Will Be Used.
5. Utilize the One-Click Rule.
6. Beware the Universal Disclosure.
7. Do Not Assume Others Got It Right!
Finally, be careful when using your competitors’ advertisements as your primary compliance guide. Most employees have either used or heard the phrase: “But they don’t have that disclosure, why do we need it?” By following the Tips above, you’ll understand which disclosures are required and also realize your competition’s advertisements may not be 100% compliant.