Academic journal article ABA Banking Journal

Website Advertising -- Compliance Considerations

Academic journal article ABA Banking Journal

Website Advertising -- Compliance Considerations

Article excerpt

Bank web sites range from the relatively simple--those that merely provide information--to the very complex--those that enable the bank to conduct transactions with customers through the Internet.

But whether simple or complex, virtually all bank web sites include advertising. And, since web sites are a new thing for many banks, now is a good time to review the law affecting advertising of bank products.

As most bankers know, the Truth-in-Savings Act regulates most deposit product advertising and the Truth-in-Lending Act regulates most lending product advertisements.

What some bankers might forget, however, is that bank product advertisements are subject to other compliance considerations as well. This paper will review several other, less-prominent rules and guidelines: the FDIC official advertising statement, an Interagency Statement dealing with advertising of nondeposit products, the ECOA prohibition against advertisements that discourage applications, and the federal agencies' Fair Housing Act advertising requirements. The paper closes with some suggestions on how to check your web site for compliance.

FDIC official advertising statement

The FDIC requires that insured banks include the "official advertising statement" in all of their advertisements (but with many exceptions as described below) [12 CFR 328.3(a)].

The official advertising statement reads "Member of the Federal Deposit Insurance Corporation" [12 CFR 328.3(b)]. The regulation permits certain minor variations of the statement, such as using the "FDIC" abbreviation or including the institution's name in the statement [12 CFR 328.3(b)].

You can also use the FDIC symbol as the official advertising statement [12 CFR 328.3(b)]. The "symbol" is the portion of the official FDIC "sign" that includes the letters and the FDIC's seal [12 CFR 328.1(a)]. The official advertising statement can be written in a language other than English so long as the translation has prior written approval from the agency [12 CFR 328.3(e)].

The FDIC regulation has a lengthy list of exceptions. Some are for documents that are not really advertisements, such as statements of condition, bank supplies, etc. Others are for advertisements of bank products that are not deposit accounts, such as loans or loan services or a safekeeping box business or services. Still others are for advertisements in which it is not practical to include the statement, such as TV or radio ads of less than 30 seconds or promotional items like pens or key chains. See 12 CFR 328.3(c) for the complete list.

Advertising nondeposit products

In February of 1994, the federal banking agencies (other than the NCUA) issued an "Interagency Statement on Retail Sales of Nondeposit Investment Products." A central theme of this statement is that institutions must make clear to their customers that any nondeposit products the institutions are selling or are involved in selling are not FDIC insured, are not guaranteed by the institutions, and are subject to investment risks, including possible loss of the principal amount invested. The statement says that all advertisements of nondeposit products should include those three messages. Furthermore, if an advertisement contains information about both insured deposits and uninsured products, it must clearly segregate the information about the nondeposit investment products from the information about deposits.

In 1995, the agencies interpreted the statement to allow a logotype disclosure in certain visual media, such as television broadcasts, ATM screens, billboards, signs, posters, and in written advertisements and promotional materials (e.g., brochures). The interpretation did not mention web sites, but they might fit within the "written advertisements" category. The logotype disclosure should include the phrases "Not FDIC-Insured," "No Bank Guarantee," and "May Lose Value." The logo-format disclosures must be boxed, set in boldface type, and displayed in a conspicuous manner. …

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