Academic journal article ABA Banking Journal

Blogs and Other New Media Can Land You in Compliance Hell

Academic journal article ABA Banking Journal

Blogs and Other New Media Can Land You in Compliance Hell

Article excerpt


Is that an iPod plugged into your customer's ears? Or a time bomb waiting to blow up your bank's compliance record?

It all depends on what your bank has been up to, and how well your marketing and compliance functions control how the bank's messages reach the public ... and how well the bank controls independent-minded employees with a technical bent.

Does your bank "blog"? "Tweet" on Twitter? Present "podcasts"? Market by mobile phone? Post a page on FaceBook or some other social networking site? Maybe, maybe not.

But your bank very likely communicates with customers by e-mail, e-newsletter, your own website, or ads on other sites.

Whether your bank is on the "tweeting" edge or perhaps a bit behind, your compliance staff certainly knows the many restrictions and requirements relating to traditional advertising communication channels. But even if your sales and marketing staff, and compliance staff, have to ask their kids or some younger employees about the latest ways to communicate, one thing you must realize: Banks can't forget to consider the compliance requirements that apply.

Some are familiar favorites. For example, Regulation Z (truth-in-lending) and Regulation DD (truth-in-savings and overdraft protection) advertising rules apply to advertising in any form. Some are new and unique to the medium used, such as the CAN-SPAM Act, which specifically affects e-mail messages.

But these methods are only the beginning. When using these newer forms of communication, banks should also be alert to:

* Traditional ad compliance rules

* Unfair and Deceptive Acts or Practices Act

* Telephone Consumer Protection Act

* Federal Communications Commission Fax Advertising Rule and Junk Fax Prevention Act

* E-SIGN Act

* State laws

* Securities and Exchange Commission anti-fraud provisions

Advertising and disclosure risks

Although not contemplated 40 years ago when the Truth in Lending Act was passed, an e-mailed message to customers offering a promotional loan rate or mention of a new loan program in an online newsletter or on the bank's website falls within the scope of the advertising compliance requirements of Regulation Z.

Laws like Truth in Lending and Truth in Savings have been adapted to fit changing trends. Any messages intended to promote the bank and/or its products and services, directly or indirectly, are advertisements subject to compliance disclosure rules. Advertising compliance requirements apply even if the message is delivered electronically.

Under both Regulation Z and DD, advertisements that include certain triggering terms must then include additional terms in the advertisement. These regs also contain provisions that prohibit misleading or inaccurate advertisements. Fair lending laws and regulations (such as Regulation B) apply to the early communications with potential loan applicants as well as the decision to grant credit and on what terms. Any message that tends to illegally discourage a person from applying for credit would violate the Equal Credit Opportunity Act and Regulation B.


Any time a bank puts forth a commercial message, in any medium, that is designed to attract public attention or patronage to a product or business (unless specifically exempt) the bank must include the official advertising statement of FDIC membership, "Member FDIC." "Equal Housing Lender" logos are also required whenever a message covers or could cover residential real estate lending.

UDAP fits all sizes

In addition to the provisions in Regulation DD and Z that prohibit misleading and inaccurate advertising, there is the broad scope coverage of Section 5(a) of the Federal Trade Commission Act, commonly known as the Unfair or Deceptive Acts or Practices prohibition.

The UDAP provision of the FTC Act applies to all engaged in commerce, including banks. …

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