Advertising Compliance February 14, 2013 Jody Dabrowski, CUCE Compliance Consultant 1
Overview Advertising Rules and Regulations CFPB, NCUA, FTC, FCC Advertising Avenues: Website, Email, TV, Radio, Print Products : Loans, Savings, Safe Deposit Boxes, Night Drop, Promotions & Drawings 2
Regulations Consumer Financial Protection Bureau UDAAP Regulation Z Truth in Lending National Credit Union Administration: 701.31 Fair housing rules 740 NCUA Official Advertising Sign/Statement 707 Truth in Savings 3
Consumer Financial Protection Bureau Dodd-Frank Act UDAAP = Unfair, Deceptive, or Abusive Acts or Practices Deceptive Defined as: The representation, omission, act or practice that misleads or is likely to mislead the consumer when the consumers interpretation is reasonable and the misleading representation is material. Examples: GM, Honda, Mazda: Inadequate disclosure of material lease terms Chase: Misrepresentation about loan terms 4
The FTC s Four Ps Is the statement prominent enough for the consumer to notice? Is the information presented in an easy to understand format that does not contradict other information in the package or at a time when the consumer s attention is not distracted elsewhere? Is the placement of the information in a location where consumers can be expected to look or hear? Is the information in close proximity to the claim it qualifies? 5
Reg Z Truth in Lending An advertisement subject to the Truth-in-Lending Act and Regulation Z is any commercial message that promotes consumer credit or a consumer lease. Advertisements may appear: in newspapers, magazines, leaflets, flyers, catalogs, direct mail literature, or other printed material; on radio, television, or a public address system; on an inside or outside sign or display, or a window display; in point-of-sale literature, price tags, signs and billboards. 6
Regulation Z Truth in Lending Clear and Conspicuous Requirement No font size requirement Legible and easily understood Actual Availability of Terms Never advertise credit terms not available If conditions exist, state in advertisement: ABC CREDIT UNION CAR LOAN SPECIAL / 6.75% APR* *APR available from May 15 through May 30, 2013 for loan terms not exceeding 42 months. Estimated monthly payments on 42-month loan at 6.75% APR = $26.80 per $1,000.00 borrowed. 7
Regulation Z Truth in Lending Annual Percentage Rate or APR YES use of either is acceptable Trigger Terms Additional disclosures if mentioned in ad Unsecured and Signature Avoid use of these terms Alternative Disclosure Rule for TV/Radio Ads State APR and Include Toll free number Special Disclosure Rule for Website Ads Fall under same rules as catalogs and multi-pages ad 8
Reg Z Truth in Lending 1026.16 - Open End Loans Open-end credit means consumer credit extended by a creditor under a plan in which: The creditor reasonably contemplates repeated transactions; The creditor may impose a finance charge; and The amount of credit is generally made available to the extent that any outstanding balance is repaid. 1026.24 Closed End Loans Closed-end credit means consumer credit other than open-end credit as defined in this section 9
Reg Z Trigger Terms : Closed End Trigger Terms: Amount or % of down payment in a credit sale Number of payments or term Amount of payments Amount of Finance Charge Additional Disclosure Needed if Trigger Term in ad: Amount or % of down payment APR - if variable rate, state the rate may vary Terms of repayment - repayment example for each type of credit offered, "XX" monthly payments of $XX per $1,000 borrowed" 10
Reg Z Trigger Terms: Open End Trigger Terms: Consumer & Credit Cards Statement of when finance charges begin to accrue. Annual Percentage Rate or Periodic Rate Method to determine the balance in which a finance charge may be imposed Explanation of how finance charge is determined. Other charges (annual fee, etc) Additional Disclosure Needed if Trigger Term in ad: Any fee considered a finance charge APR - if variable rate, state the rate may vary, if discounted rate is disclosed, state length of discount, current APR and the fact this rate may vary Membership or participation fees 11
Reg Z Trigger Terms: Real Estate Trigger Terms: Real Estate Any trigger term stated above for open end consumer and credit card loans Payment Terms (i.e. draw/repayment periods, length of plan, payment determination) For HELOC, trigger terms include negative as well as positive reference (i.e. No Annual Fee) Additional Disclosure Needed if Trigger Term in ad: Any fee considered a finance charge APR - if variable rate, state the rate may vary, if discounted rate is disclosed, state length of discount, current APR and the fact this rate may vary Membership or participation fees 12
701.31 & Equal Credit Opportunity When advertising loans for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling (or loans that are secured by a dwelling), the advertisement must prominently indicate, in a manner appropriate to the advertising medium and format, that the Credit Union makes such loans without regard to race, religion, or other discriminatory factors. To comply with this rule, the Credit Union must: Include the equal housing logo and slogan in all written and visual advertisements. Include a statement in oral advertisements that the Credit Union is an equal housing lender. Use either of the two methods described above when an oral advertisement is used in conjunction with a written one. Not include in any advertisement words, symbols, models, or other forms of communication that express, imply, or suggest a discriminatory preference or policy of exclusion. 13
Equal Housing Slogan & Logo Equal Housing Lender 14
Fair Housing Poster Must display the fair housing poster in Public lobby and Areas / Offices where such loans are made Websites that accept loan applications online may be considered a lobby for Fair Housing Compliance purposes and should contain the poster. See, NCUA 98-RA-04 Regulatory Alert. 15
Fair Housing Poster Name and address of Institutions Federal Regulatory agency: Federal Charter National Credit Union Administration Office of Consumer Protection Alexandria VA 22314-3428 Michigan State Charter HUD Region V 77 West Jackson Boulevard Chicago, IL 60604 16
740 Advertising Sign/Statement Each Federally Insured Credit Union must display the NCUA Advertising Sign: At all Teller Stations & offices that accept deposits On the Home Page of Website In All Advertisements for Share Accounts If logo is too small, can use official statement: This credit union is federally insured by the National Credit Union Administration or Federally Insured by the NCUA. On the First page of Posted Financial Statements On the First page of Annual Report 17
740 Advertising Sign/Statement 18
707 Truth in Savings Primary considerations: Do not use any misleading /inaccurate statements. Include specific rate information whenever rates are included in advertisements. Provide additional information in advertisements that contain or advertise information about rates or bonuses. Do not state that a deposit with the Credit Union is safer than a deposit with an insured bank. 19
707 Truth in Savings Annual Percentage Yield All deposit account advertising that states a rate of return must reflect the rate as an annual percentage yield, using that term. The Credit Union may also use the abbreviation APY, as long as the full term annual percentage yield appears at least once in the advertisement. 20
707 Truth in Savings Accuracy of Rate Information APY must be accurate within.05 Dividend Rate must be correct Violation could result in penalty up to $500,000 Use of Term Free or Phrase No Cost Do not use terms if account is subject to minimum balance, charges may be imposed for exceeding transaction limits, or maintenance or activity charges may apply Use of the Term profit Cannot be used when referring in any way to dividends earned 21
707 Truth in Savings Advertisements that promote the payment of Overdrafts Additional Disclosures: Fee for the payment of each overdraft Categories of transactions for which a fee may be imposed for paying an overdraft Time period the member has to repay any overdraft Circumstances under which an overdraft will not be paid 22
707 Truth in Savings Fee Schedule for Overdrafts Appendix C Official Staff Interpretations: Must state the amount and conditions under which a fee may be imposed For an overdraft item disclosing a fee for overdraft items would not be sufficient Stating that a fee applies to overdrafts created by check, in-person withdrawal, ATM withdrawal, or other electronic means is sufficient 23
707 Truth in Savings Use of Trigger Terms and Required Disclosures APY Dividend rate may change after account opening Time period APY advertised is offered Minimum balance required to obtain APY Minimum deposit required to open account Statement that fees could reduce earnings For Term Accounts (CD): subject to a penalty for early withdrawal 24
707 Truth in Savings Use of Trigger Terms and Required Disclosures Bonuses Definition: A premium, gift, award or similar considerations is a bonus if its value is more than $10 and it is given or offered to the member in exchange for:» Opening a deposit account» Maintaining a deposit account» Depositing funds into an existing deposit account Disclosure: Items listed on slide 24 plus time requirement to receive bonus and when the bonus will be paid or given to the member 25
CAN SPAM Act of 2003 Each commercial email message should: Not disguise the Credit Union s name or the purpose of the message; Always have affirmative or implied consent from the recipient to send the e-mail messages; and Include a clear and conspicuous way for members to opt out of receiving further e-mail solicitations using e-mail or by sending a written opt-out request to the credit union's physical postal address Members have given implied consent if : the credit union has had a business transaction with them within the previous three years, and the credit union provides a clear and conspicuous notice to opt out of future messages 26
CAN SPAM Act of 2003 If a member sends an opt-out request the credit union must not send another message later than 10 days after receiving the opt out. The member must be able to send a reply e-mail message or visit a single Internet Web page to opt out of receiving future e-mails. An opt-out list for electronic solicitations must be established, monitored, and maintained for a period of five years after the request is made. 27
Promotions & Drawings Raffles & Lottery: NOT ALLOWED IN MICHIGAN Prizes of any amount deposited into a share account: Coded as interest and included on form 1099-INT Prizes over $600 in value: Reported by the CU to the IRS on form 1099-MISC Prizes less than $600 and not placed in an account are not reported by the Credit Union 28
Promotions & Drawings Official Sweepstakes Rules: Alternative means of participation Clear entry deadline Consequences of tampering Date prize will be rewarded Description and value of prizes Eligibility and disqualification rules Frequency of entry How to enter the survey (means of participation) Information on obtaining winner list No purchase necessary Odds of winning Process for unclaimed prizes Sweepstakes begin and end dates Transferring of prizes Winner notification process Your lack of responsibility for circumstances beyond your control 29
Safe Deposit Boxes Legal relationship between credit union and member renting a box Must not misrepresent that relationship By advertising something other than lesser/lessee Insure the safety of your valuables 30
Night Depository Be careful not to represent these facilities in a way that would permit a member to claim that the credit union had guaranteed or insured the safety of night depository deposits. Credit unions should have an agreement for their night depository facilities which should contain a disclaimer for the credit union's liability for missing deposits. 31
Questions?? Jody.Dabrowski@mcul.org 517-574-0048 32