“ “ A Consumer Oriented A Consumer Oriented Approach”Approach”

Deposit Advertising ComplianceDeposit Advertising Compliance

R. J. HowellsVice President

Certified Compliance Officer, CRPFarmington Savings bank

What is a “Consumer Oriented What is a “Consumer Oriented Approach”?Approach”?

Simply put –Simply put –

““When designing an advertisement that When designing an advertisement that promotes a product or service, ask promotes a product or service, ask yourself the following question; What will a yourself the following question; What will a consumer or customer infer from this consumer or customer infer from this advertisement?”advertisement?”

- -- - R. J. HowellsR. J. Howells

Therefore; “Make sure that all advertisements, in any form, contain true and accurate statements that cannot be misinterpreted by a perspective customer. Make sure that the stated terms are actually available, and that required disclosures are included.”

What is an Advertisement?What is an Advertisement?

““A commercial message, in virtually any A commercial message, in virtually any form that promotes either directly or form that promotes either directly or indirectly, the availability of a product, indirectly, the availability of a product, attract public attention or patronage to a attract public attention or patronage to a product or service.”product or service.”

Radio

Television

Print Advertisements

Internet Advertisements

- - The internet is considered a print medium

Billboards and Signs

- - Billboards and in branch Rate Boards are also considered advertising

Customer Provided Rate Sheets

- - Publications in which the institution has no control are not covered

All “Media” Is Covered!All “Media” Is Covered!

Regulatory Resources –Regulatory Resources – Regulation DD – Truth In Savings; TISARegulation DD – Truth In Savings; TISA

- -- - http://www.federalreserve.gov/regulations/title12/sec230/12cfr230 01.htmhttp://www.federalreserve.gov/regulations/title12/sec230/12cfr230 01.htm Fed’s Regulation DD Compliance Guide Fed’s Regulation DD Compliance Guide

- -- - http://www.federalreserve.gov/regulations/cg/regddcg.htmhttp://www.federalreserve.gov/regulations/cg/regddcg.htm

FDIC signs and logo page FDIC signs and logo page

- -- - http://www.fdic.gov/regulations/resources/signage/index.htmlhttp://www.fdic.gov/regulations/resources/signage/index.html

FDIC new official sign and advertising statement FDIC new official sign and advertising statement

- -- - http://a257.gakamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/http://a257.gakamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/

2006/pdf/E6-18802.pdf2006/pdf/E6-18802.pdf

Regulatory RequirementsRegulatory Requirements – –

12 CFR 230; Regulation DD – TISA

FDIC Part 328 Advertisement of Membership

FTC Rules – UDAP; Unfair or Deceptive Acts or Practices

CGS §42-110b; CUTPA; Connecticut Unfair Trade Practices Act

Advertisement of Terms – Advertisement of Terms – Must advertise the terms that are actually available

Advertisements cannot be misleading or deceptive – “Bait & Switch”

Cannot use the terms “Free” or “No-Cost” unless none exist

- - Minimum balance, excessive transactions, service fees, activity charges, etc.

- - Fees for ordering checks, NSF fees and dormancy fees are not activity charges

- - ATM or electronic service fees are not activity charges if account could be obtained without the service

- - A service may be advertised as free, even if the account is not so long as that is stated.

- - Advertising an account as “Free” as long as conditions are met, is acceptable as long as the conditions are stated.

Triggering Terms – Triggering Terms –

“A triggering term is the use of one particular term that in itself triggers a requirement for additional disclosures.”

If either the “APY” or a “bonus” are disclosed in an advertisement, additional disclosures must also be made in the advertisement

Some exemptions apply depending on the type of media

- - In an oral inquiry, the Interest Rate and APY alone are not trigger terms.

- - In broadcast media, outdoor media and telephone response machines, certain other disclosures are not required due to the limitations of space and time

- - Indoor signs are exempt from certain disclosures as long as a statement that the consumer should ask for more details is provided

Annual Percentage Yield – Annual Percentage Yield –

The APY may be stated without an Interest Rate, but the Interest Rate may not be stated without the APY!”

The abbreviation “APY” may be used in the advertisement as long as the term “Annual Percentage Yield” is used at least once in the advertisement

If both the Interest Rate and APY are stated, the Interest Rate cannot be more conspicuous than the “APY”

Both the Interest Rate and “APY” must be disclosed to two decimal places

When advertising a tiered rate (or stepped rate) account, the interest rate and “APY” for each tier must be included

When an “Interest Rate” is advertised, the “Annual When an “Interest Rate” is advertised, the “Annual Percentage Yield” must also appear, using that term. Percentage Yield” must also appear, using that term.   

Bonuses –

A “Bonus” is something, (cash, merchandise) given to a customer A “Bonus” is something, (cash, merchandise) given to a customer in connection with opening or maintaining an account, where the in connection with opening or maintaining an account, where the value is over $10, value is over $10, (yearly calculation)(yearly calculation)

The “Annual Percentage Yield”, using that term

The time requirement to obtain the bonus

The minimum balance required to obtain the bonus

The minimum balance required to open the account, if it is greater than the minimum balance required to obtain the bonus

When the bonus will be provided

If a “Bonus” is stated in an advertisement, the following additional disclosures are required;

Broadcast Media –Broadcast Media – Includes radio, TV, outdoor billboards, and telephone. “Internet” Includes radio, TV, outdoor billboards, and telephone. “Internet” disclosures ARE NOT considered broadcast media. If the APY or a disclosures ARE NOT considered broadcast media. If the APY or a Bonus is stated in broadcast media advertisements then the following Bonus is stated in broadcast media advertisements then the following additional disclosures are required;additional disclosures are required;

The minimum balance required to earn the APY

- - For tiered rate accounts the minimum for each tier must be shown

The term of the account for time products

If a bonus is stated, the APY and all related disclosures

- - Bonuses cannot be stated by themselves, (without the APY)

Print Media –Print Media –

Variable Rate – For variable rate accounts, a statement that the rate may change after the account is opened

The time period the Annual Percentage Yield will be offered, or a statement that the Annual Percentage Yield is Accurate as of a specified date

The minimum balance required to obtain the APY. For tiered rate accounts, the minimum for each tier must be disclosed

The minimum required to open the account, if it is greater than the minimum required to obtain the APY

A statement that fees could reduce earnings

Includes newspaper, magazine, internet, brochures, etc. If the APY or a Includes newspaper, magazine, internet, brochures, etc. If the APY or a Bonus is stated in print media advertisements then the following Bonus is stated in print media advertisements then the following additional disclosures are required;additional disclosures are required;

Print Media (Continued) – Print Media (Continued) –

If the APY or a Bonus is stated in print media advertisements for time If the APY or a Bonus is stated in print media advertisements for time accounts, then the following additional disclosures are required;accounts, then the following additional disclosures are required;

Time Requirements – The term of the account

Early Withdrawal Penalties – A statement that a penalty may or will be imposed for early withdrawal

Required Interest Payouts – For non-compounding time accounts with a stated maturity greater than one year that do not compound interest on an annual or more frequent basis, that require interest payouts at least annually, and that disclose an APY determined in accordance with section E of Appendix A of the regulation, a statement that interest cannot remain on deposit and that the payout of interest is mandatory.

A statement that the APY assumes interest remains on deposit until maturity and that a withdrawal will reduce earnings

Signage –Signage –

““On premises” sign advertising requirements – On premises” sign advertising requirements –

Rate boards, Computer Screens, counter displays.

Any form of advertising that cannot be obtained and kept by the consumer

Signs posted outside the institution are not “On premises”

Rates must be advertized as “APY”

The Interest Rate may also be disclosed, but not alone and using only that term

If the APY is disclosed, a statement that the consumer should ask for more information about fees and terms

For tiered rate accounts, the lower dollar amount to get the listed tier

For Time accounts, the term and substantial penalty statement

““On premises” signs are exempt from the Broadcast and Print Media On premises” signs are exempt from the Broadcast and Print Media requirements, but have their own requirements. An “On premises” requirements, but have their own requirements. An “On premises” sign is any indoor sign, whether or not it can be viewed from outside. *sign is any indoor sign, whether or not it can be viewed from outside. *

FDIC Advertisement of Membership –FDIC Advertisement of Membership – The official FDIC membership statement, “The official FDIC membership statement, “Member FDICMember FDIC” ” must appear on certain advertisements. must appear on certain advertisements.

• Must be included on all print advertisements where a deposit product is advertised.

• Is permissible on a loan advertisement but not required

• Should NOT appear on any advertisement for Non-Deposit investment products

• Must appear on your web-site on each page that can be viewed separately by a mouse “Click”. Should also be located where readily viewable.

• Not required on building premises signs that only identify your institution, however if a sign that contains only your name is posted at any location other than your own facilities, for example at a town fair, town green or a building construction site that may promote your products or services, the official “Member FDIC” statement is required

FDIC Advertisement of Membership –FDIC Advertisement of Membership – In addition, the official FDIC signs must be place “Wherever customer In addition, the official FDIC signs must be place “Wherever customer

deposits are excepted? This includes the following areas.deposits are excepted? This includes the following areas.

• At each teller station, or at least between each but not more than one space away from a teller station and or on top of designated roped line entrances

• At deposit preparation counters

• In each customer service representative desk where new accounts are opened

• At ATM machines where deposits are accepted

• Must not be posted in close proximity to any office, sign, brochure or other designated areas where non-deposit investment products are sold or inquired upon, (close proximity means a reasonable distance of not less than 6 feet)

Non-Insured Investment Products –Non-Insured Investment Products –

When advertising NDIP products, do NOT include the official FDIC membership statement. The following disclosures are required when advertising NDIP products;

• NOT FDIC INSURED

• MAY LOSE VALUE

• NO BANK QUARANTEE

When advertising both insured products and non-insured NDIP products, make sure proper disclosures are made for both types of products. In addition, make sure that the insured and un-insured products are properly segregated to ensure that consumers could not confuse the insurance applicability.