Truth in Savings Advertising Requirements Impacting Social ... · Truth in Savings Advertising Requirements Impacting Social Media John Zasada Principal 218 790 1086 . 2 ©2012 CliftonLarsonAllen

©2012 CliftonLarsonAllen LLP 1 1 1 1

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Truth in Savings Advertising Requirements Impacting Social

Media

John Zasada Principal 218 790 1086

©2012 CliftonLarsonAllen LLP 2

Credit Union Compliance Practice

•Review advertisements, websites and social media for compliance before CU release

•Ongoing Regulatory Compliance Assistance Service

•Fair lending testing

•Targeted compliance testing


Agenda

•Context

•Risks

•TIS Requirements

•UDAAP

•Managing TIS advertising on social media

•Social media compliance management best practices


What is Social Media?

• Interactive online

• Facebook, Twitter, LinkedIn, etc.

• Greater connection

• Not e-mail


Social Media

• Purpose can be different than other forms of advertising

• Increase risk

• Product disclosures and advertisements

• More work


Context

• Top regulatory compliance risk?

• Not TIS advertising on social media

• BUT…


What to Comply With?

• Truth-In-Lending Act (Regulation Z)

• Truth-In-Savings Act (Part 707 of NCUA Rules and Regulations)

• Non-Deposit Investment Guidelines

• NCUA Privacy Regulation

• USA Patriot Act

• Equal Credit Opportunity Act (Regulation B)

• Home Mortgage Disclosure Act (Regulation C)

• Reserve Requirements (Regulation D)

• Expedited Funds Availability Act (Regulation CC)

• Real Estate Settlement Practices Act (Regulation X)

• Fair Credit Reporting Act

• Fair Housing Act

• Electronic Funds Transfer Act (Regulation E)

• Overdraft Protection Requirements

• UDAAP


What is an TIS Advertisement?

• A commercial message, appearing in any medium, that promotes directly or indirectly the availability or terms of, or a deposit in, a new account

• Provisions covering misleading/inaccurate statements and using term “free” apply to existing accounts as well

• Interpret broadly

• Examples


Not TIS Advertisements

• Telephone conversations initiated by a member about an account

• In person discussion

• Particular transaction in a current account

• Required disclosures

• Initial agreement


Misleading or Inaccurate

• Social media content must not be misleading or inaccurate

• Think UDAAP

• Inaccurate can mean out-of-date

• Monitor


Misleading or Inaccurate?

• “2% APR HELOCs available! Visit our website for more information!”



• “Our courtesy pay program is the same as a loan!”



• “We will honor your checks – no matter what!”



• “It’s easy – you can maintain your negative balance indefinitely!”



• “Our overdraft service is designed to simply prevent all bounced checks!”


Free

• Cannot use term “free” or “no cost” or “fees waived” if “maintenance or activity fees” are possible

• Examples

– Minimum balance fee

– Fee for excessive transactions

– Monthly transaction and service fee

– Fee for deposit/withdraw/transfer


Can still be Free

• Maintenance or activity fees are not:

– Balance inquiry fees

– Dormant account fees

– ATM fees

– Preauthorized transfer fees

– Stop payment fees

– Check printing fees


Violation?

• ”Free Checking as long as you keep a minimum balance of $200!”


Violation?

We offer free checking accounts

As long as you maintain a minimum balance of $500 each month


Solution:

We offer low-cost checking accounts (as long as you maintain a minimum balance of $500 each

month)


Violation?

“Free withdrawals”


Violation?

“Free for the first year”


Violation?

“Free share accounts for those over 65 years old”


TIS Rate Disclosure

• Truth in Savings permits the abbreviation "APY" as long as the term "annual percentage yield" is stated at least once in the advertisement

• Dividend rate


Violation?

Regular Shares 1.01% APY


Solution:

Regular Shares 1.01% APY

APY = Annual Percentage Yield


Violation?

• Share Accounts – 4% APR


Solution

• Share Accounts – 4% Annual Percentage Yield


Violation?

• 6% Dividend Rate on Share Certificate Accounts


Solution

• 6% Annual Percentage Yield on Share Certificate Accounts


APY is a Trigger Term

• “4.75% Annual Percentage Yield”

• “3% APY”


Trigger Term?

“High rates of return”


Trigger Term?

“2% over your current rate”


Trigger Term?

“5 year share certificates – click here”


Trigger Term?

“Ask us about our great bonus rates for share draft accounts!”


TIS Triggered Terms

• APY triggers:

– Variable rate information

– Time offered

– Minimum balance to earn the advertised annual percentage yield.

– Minimum opening deposit

– A statement that fees could reduce the earnings on the account

– For term share accounts: ◊ The term of the account.

◊ A statement that a penalty will or may be imposed for early withdrawal.


Problem:

Share Certificates 3.25% APY



Solution:

Share Certificates 3.25% APY

Minimum Balance to Open & Earn APY - $5,000

Minimum Term – 18 Months

Penalty for Early Withdrawal

This Rate Accurate as of 03/01/14



Bonus as Trigger Term

• Gift or award worth more than $10

• Bonus triggers: – "annual percentage yield" – time requirements – minimum balance required to obtain the bonus – minimum balance required to open the account – when the bonus will be provided


TIS Links Revisited

The Commentary to 12 CFR 707.8 states you can use a link to more detailed disclosures but the link must “clearly refer” to the location


Problem:

3.50% APY Certificate

Click here


Solution:

3.50% APY Certificate

Click here for Truth in

Savings Disclosures


UDAAP

• Subjective

• Complying with other regulations not enough

• Use those unfamiliar with the product or service

• Focus on complaints

• 3rd parties


UDAAP Violation?

• ATM transactions free

• No foreign ATM fees

• Read the fine print


Action Steps

• Risks

– Fees

– Compensation

– Organization and accessibility of information

• Policy

• Test

• Ask the unfamiliar

• Rewards programs

• Scrub


Social Media Compliance Approaches

• Wait and see

• Clean past exam

• New world – CFPB

– Unfair, Deceptive or Abusive Acts or Practices


What’s the big deal?

• Closer scrutiny

• Advertising is indicative of overall compliance

• An examiner can look at your social media

advertisements and in a few minutes get a good idea of how firm a grasp you have

on regulatory compliance


Compliance Integration

• Elevation of business line over the compliance function

• Get compliance involved

• Compliance over the long haul

• Risk/reward


Identify and Train

• Who can post?

• What can they post?

• Train on compliance requirements


Social Media Guidance

• FFIEC Guidance

• Policy and procedures

• Applicable regulations

• UDAAP


Social Media Compliance Program

• Everyone is different

• Depends how you use social media

• More aggressive social media program/campaign require more intensive compliance involvement

• Hard for any credit union not to be impacted by social media


Social Media Compliance Program

• Components:

– Policy and procedures

– 3rd parties

– Training

– Oversight

– Testing

– Senior management/board involvement


Social Media Compliance Areas

• Besides TIS, UDAAP

– Fair lending

– TIL

– RESPA

– NCUA Insurance

– Nondeposit investment products

– BSA

– Privacy


Records Retention

• Incorporate into your overall records retention schedule

• TIS

• Also Regulations B, Z,

Documents

Truth in Savings Advertising Requirements Impacting Social ... · Truth in Savings Advertising Requirements Impacting Social Media John Zasada Principal 218 790 1086 . 2 ©2012 CliftonLarsonAllen