TIS Advertising Compliance Presented by John Zasada. John Zasada. CliftonLarsonAllen LLP

Transcription

1 TIS Advertising Compliance Presented by John Zasada John Zasada CliftonLarsonAllen LLP

2 Agenda Advertising compliance importance Managing advertising compliance UDAAP Terminology APY disclosure Trigger Terms Bonus Triggered Disclosures Courtesy pay programs NCUA Insurance Advertising 2

3 Top Compliance Violations Regulation Z RESPA TIS HMDA Flood 3

4 Regulatory Changes Thousands of pages ATR/QM TRID HMDA 4

5 Context Top regulatory compliance risk? Not advertising compliance BUT 5

6 Managing Advertising Compliance Wait and see Clean past exam New world CFPB Unfair, Deceptive or Abusive Acts or Practices 6

7 Survey Question #1 Does your credit union periodically test advertisements for compliance? YES NO 7

8 What s the big deal? Closer scrutiny Advertising is indicative of overall compliance An examiner can look at your advertisements and website and in a few minutes get a good idea of how firm a grasp you have on regulatory compliance 8

9 Compliance Integration Elevation of business line over the compliance function Get compliance involved Compliance over the long haul Risk/reward 9

10 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 10

11 Website Compliance Study 99 percent of credit union websites contained advertisements violating consumer protection laws TIS and TIL 11

12 TIS Advertising Definition Commercial messages in visual, oral, or print media that invite, offer, or otherwise announce generally to members and potential members the availability of member accounts Examples Telephone messages, messages in newspapers, online messages 12

13 Not TIS Advertisements Rate sheets in newspapers Calls by members about accounts In person discussions about an account Information about an existing account or transaction Required disclosures Account agreement 13

14 Problem? Member asks teller about his share draft account and whether the APY is variable. Teller states that the APY is 1%. Is that considered an advertisement and therefore triggers the teller to have to provide further disclosures? 14

15 Solution? No problem Falls within exception 15

16 UDAAP Ads must not be misleading or inaccurate Be careful! Review on top of TIS technical requirements 16

17 Survey Question #2 Does your credit union consider UDAAP during the advertisement development process? YES NO 17

18 What is Misleading? Stating the cu will honor all checks that are overdrawn when in fact the cu retains discretion in doing so Stating an overdraft service is a loan even though it is not subject to Regulation Z Stating members can keep a negative balance on overdrawn accounts when the account agreement requires otherwise Only promoting an overdraft service as covering checks when in fact it also covers ATM and debit cards 18

19 Free Accounts NCUA Rules & Regulations - don t call it free if it isn t Cannot be free and have maintenance and activity fees Do not use term profit to refer to dividends 19

20 Maintenance and Activity Fees Minimum balance requirements Service fees Transaction fees Monthly service fee Withdrawal fees 20

21 Not Maintenance or Activity Fees You can still call an account free even if you charge: Check printing fees Fees for copies of checks ATM fees Dormant account fees Balance inquiry fees 21

22 Problem? We offer free checking accounts (as long as you maintain a minimum balance of $500 each month) 22

23 Solution: We offer low-cost checking accounts (as long as you maintain a minimum balance of $500 each month) 23

24 Problem? Ask a member service representative how you can get free checking Note that we do charge a small fee for copies of checks 24

25 Solution No problem! 25

26 Related Issues Similar terminology not acceptable You can call specific services free if they are indeed free but do not call whole account free As long as you state the length of time, free for limited time acceptable Age related share accounts 26

27 Problem? Our share draft account have free deposits and withdrawals! $10 dollar monthly service fee still applies 27

28 Solution No problem Specific account free can be promoted as free as long as members are not mislead to believe that the whole account is free and no other fee applies 28

29 Survey Question #3 Does your credit union advertise any of its share-related accounts as free? YES NO 29

30 Terminology Dividends vs. interest Certificates vs. CDs State law can differ 30

31 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 Two decimal places 31

32 Problem? Regular Shares 1.01% APY 32

33 Solution: Regular Shares 1.01% APY APY = Annual Percentage Yield 33

34 Tiered and Stepped Up Rates Tiered-rate State APY for each tier and each minimum balance requirement Stepped-rate State the dividend rate for each effective time period 34

35 How Many APYs? Common question Representative examples are enough We offer several share certificates with a variety of terms and APYs. For instance, as of 1/15/16 we have a 3% APY 2 year certificate with a minimum balance of $3,000. Early withdrawal penalty applies. 35

36 TIS Trigger Term APY or Annual Percentage Yield Not: Great rates Ask us about our certificates $500 minimum balance on all certificates 1 year certificates available Our great rates will not last long 36

37 Problem? Now is the time to join the credit union and take advantage of our amazing rates on share and share certificate accounts. 37

38 Solution No further disclosures required 38

39 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. 39

40 Variable and Time Offered Variable rate rate may change after the account is opened Time offered period of time, specific date it is accurate, accurate as of last dividend declaration date 40

41 Minimum Balance Usually do not need to disclose both Minimum balance required to earn the advertised APY The minimum deposit required to open the account, if it is greater than the minimum balance necessary to earn the advertised annual percentage yield 41

42 Fees Statement that fees could reduce the earnings on the account only applies if you have fees Remember our discussion of free If no fees, no need to include statement that fees could reduce earnings 42

43 Additional Certificate Disclosures Trigger terms for certificate loans require two pieces of additional information: Term of the account Early withdrawal penalty 43

44 What is a Bonus? Premium, gift, award, or other consideration worth more than $10 given or offered to a member during a year in exchange for opening, maintaining, or renewing an account, or increasing an account balance. Does not include: Fee waiver Fee reduction Dividend 44

45 Bonus Triggered Information Annual Percentage Yield Time requirements Minimum balance to obtain bonus Minimum balance to open account (if greater) When bonus will be provided 45

46 Problem? Share Certificates 3.25% APY APY = Annual Percentage Yield 46

47 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 03/01/15 APY = Annual Percentage Yield 47

48 Problem? 2.5% APYs on our share accounts! Give us a call or stop in! 48

49 Solution 2.5% APYs on our share accounts! Give us a call or stop in! APY is Annual Percentage Yield Rate accurate as of 2/7/2016 Minimum balance to earn APY is $100 Fees could reduce earnings on the account 49

50 TIS Links The Commentary to 12 CFR states you can use a link to more detailed disclosures but the link must clearly refer to the location Be cautious! 50

51 Problem: 3.50% APY Certificate Click here 51

52 Solution: 3.50% APY Certificate Click here for Truth in Savings Disclosures 52

53 Exemptions TV Radio Billboards Recorded telephone messages Only need: Minimum balance to earn APY Term of certificate 53

54 Indoor Signs State Annual Percentage Yield or APY Advise members to contact an employee for further information about fees and terms 54

55 Newsletters Sent to existing members be careful Rate of return triggers: Annual percentage Yield or APY Advise members to contact an employee for further information about fees and terms 55

56 Courtesy Pay Programs Advertisements for overdraft programs require: The fee or fees for the payment of each overdraft; The categories of transactions for which a fee for paying an overdraft may be imposed; The time period by which the member must repay or cover any overdraft; and The circumstances under which the credit union will not pay an overdraft. 56

57 Problem: Fee Schedule: Cashiers Checks $2.00 Money Orders $1.00 Copy of Quarterly Statement $3.00 Print out of account $3.00 Courtesy Pay Fee $

58 Solution: Fee Schedule: Cashiers Checks $2.00 Money Order $1.00 Copy of Quarterly Statement $3.00 Print out of account $3.00 Courtesy Pay Fee $28.00 Courtesy Pay Disclosures: Payment by the credit union is a discretionary courtesy and not a right of the member or an obligation of the credit union. This privilege for consumer share draft accounts will be limited to a maximum amount of $300 overdraft (negative) balance. Transaction types that are eligible for courtesy pay include and are limited to: ACH transactions, Drafts and On-Us Checks at the Teller Counter. You must bring your account balance to a positive balance within every thirty (30) day period for a minimum period of 24 hours. The credit union, in its discretion, can cancel this protection and cease paying overdrafts at any time without prior notice of reason or cause. 58

59 Non-Deposit Investment Not Federally insured Products Not obligations of the credit union Not guaranteed by the credit union Involve investment risks, including the possible loss of principal, and (if applicable) Are offered by an employee who serves the functions of accepting member s deposits and selling non-deposit investment products 59

60 Record Retention Keep advertisements for 2 years Hard copies not required Most keep ads electronically 60

61 NCUA Advertising Statement What is an advertisement? commercial message, in any medium, that is designed to attract public attention or patronage to a product or business. 61

62 Statement placement On all advertisements Annual reports and statements of condition Must be placed in a prominent position on the cover page of the first page if no cover page Main internet page 62

63 Statement This credit union is federally insured by the National Credit Union Administration. or Federally insured by NCUA or Reproduction of the official sign 63

64 Official Sign 64

65 Clearly legible Often cited violation Statement must be clearly legible Size and print of it must be clearly legible Must be no smaller than the smallest font size used in other portions of the ad 65

66 Exceptions Be aware Comes up a lot Keep the list handy 66

67 Exceptions Part I Credit union supplies Signs or plates in the office or attached to building Directory listings Ads which do not include the cu name Group ads of cu services that include insured and noninsured credit unions Radio ads less than 15 seconds in duration 67

68 Exceptions Part 2 TV ads less than 15 seconds in duration Where doing so is impractical pens, key chains, calendars, etc. Ads containing to the effect that they are NCUA insured Ads unrelated to member accounts (loans, insurance, etc.) 68

69 Official Sign Besides using in place of advertising statement Required on your internet page where you accept deposits or open accounts Internet banking log-in screen Make is legible 69

70 Relatively New Changes to Advertising Statement Radio and TV Ads are exempt if less than 15 seconds, no NCUA statement required Old rule was 30 seconds Must now also appear on annual report and statements of condition required to be published On all print and website promotions, the official statement must be the same font size as the minimum font used in the promotion 70

71 Problem: 71

72 Solution: This credit union is federally insured by the National Credit Union Administration. Federally insured by NCUA and/or 72

73 Problem: Welcome to XYZ Credit Union s Home Banking Portal Please enter your Account ID and password Federally Insured by NCUA 73

74 Solution: Welcome to XYZ Credit Union s Home Banking Portal Please enter your Account ID and password 74

75 Thank You John Zasada CliftonLarsonAllen, LLP