Although credit unions are subject to many specific compliance requirements, when advertising products and services, all of these requirements stem from one general principle: Advertisements must be accurate and not deceptive or misleading in any respect, and they may not misrepresent the products and services that credit unions actually offer to their members.
There are four primary federal regulators that govern a credit union's advertising:
- The Bureau of Consumer Financial Protection
- The Federal Reserve Board
- The Federal Trade Commission
- The National Credit Union Administration.
The Bureau of Consumer Financial Protection
The BCFP is an independent federal agency that holds primary responsibility for regulating consumer protection with regard to financial products and services in the United States.
The BCFP was created in 2011 following the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act. It was designed to consolidate responsibilities from a number of other federal regulatory bodies, including the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Department of Housing and Urban Development. The bureau is an independent unit located inside and funded by the United States Federal Reserve, with interim affiliation with the U.S. Treasury Department. It writes and enforces rules for financial institutions, examines both bank and non-bank financial institutions, monitors and reports on markets, as well as collects and tracks consumer complaints.
Many regulations that were formerly governed by the Federal Reserve Board transitioned to the BCFP, including Regulations B, C, E, F, M, N, P, V, X, Z and DD.
The Federal Reserve Board
The Federal Reserve Board (Fed) governs the Federal Reserve System and grants membership to that system to credit unions. By law, National Credit Unions are automatically members of the Federal Reserve System. Other institutions, such as State‑chartered credit unions, must apply for membership. The Fed's primary responsibility is to issue regulations that govern all member institutions. Further, the Fed is also the primary regulator for interpreting and issuing regulations regarding the principal Consumer Protection Laws.
The Fed's consumer protection regulations are binding on all financial institutions, as are its regulations concerning reserve requirements (Regulation D).
The Federal Trade Commission (FTC)
The FTC is the primary regulator under the Fair Credit Reporting Act, various privacy laws, the Lanham Act, and other laws requiring truth in advertising.
The Federal Trade Commission Act prohibits unfair methods of competition and unfair or deceptive acts or practices in commerce. It also grants the FTC power to challenge advertising the agency considers unfair or deceptive.
An advertisement is deceptive under the Federal Trade Commission if it meets the following criteria:
- It contains a statement that is likely to mislead consumers.
- Consumers are interpreting the statement reasonably under the circumstances.
- The statement is material (i.e., it is likely to affect a consumer’s decision with respect to the product).
The National Credit Union Administration (NCUA)
The NCUA is the primary regulatory for Federal Credit Unions. The NCUA also provides certain rules and regulations that affect State (federally-insured) Credit Unions. The credit union should be aware of all applicable regulations as well as guidelines (Letters and other Guidance from NCUA).
What is considered an advertisement?
An advertisement is any commercial message that directly or indirectly promotes a product. The obvious media for advertisements include television, radio, newspapers, and billboards. The following also can be media for advertisements (the list is not all-inclusive):
- Internet "home banking" advertising
- Twitter, Facebook, Linked-in and other social media
- Brochures, pamphlets, and fliers
- Outdoor displays - posters, banners, and window signs
- Lobby boards
- Statement stuffers
- Statement messages
- Telephone response machines
- Rate sheets
- Direct mail
- Oral quotes
- Point-of-sale materials
This list includes statement messages and stuffers. However, if such statements refer to existing accounts, they are not advertisements. If a credit union includes information regarding another type or category of account in the statement messages and stuffers, such information would be considered an advertisement and subject to the credit unions advertising policy.
Rate sheets will not be considered an advertisement if the credit union has no control over the publication of the information and does not pay a fee for its publication. For Example: A local newspaper published rates offered by area institutions to allow readers to review and compare the information.
How do advertising laws affect the credit union?
Advertising laws and rules are geared to protect the consumer. All too often advertisements are misleading and inaccurate. Many times, this is done intentionally to generate inquiry by consumers who, in turn, are taken advantage of.
For credit unions, advertising laws and rules affect what the credit union can (or cannot) say in advertisements. In some cases, these laws even require additional disclosure. Regulatory agencies enforce advertising rules to protect the consumer and protect the integrity of the industry.
Depending on the product or service being advertised, multiple laws or rules can apply. If broken, these laws and rules call for penalty in the form of reprimands and regulatory actions taken by regulators, to potentially hefty fines and legal judgments from the courts.
What actions should credit unions take to ensure compliance when advertising its products and services?
First, determine what is being advertised. For example, deposit advertisements require a different set of disclosures than do loan products. The same is true for lease and investment advertisements. It is important for the credit union to understand what is required for each type of product or service.
The Credit Union’s policy will also apply to any agents or representatives it retained to help promote its products. Any person or entity who works on behalf of the Credit Union is subject to the same rules as the credit union itself.Go to main navigation