Credit Card Advertising: Dotting the I s and Crossing the T s

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1 Credit Card Advertising: Dotting the I s and Crossing the T s Presented by: Steve Van Beek, Esq., NCCO Howard & Howard Attorneys PLLC svb@h2law.com

2 What makes this so frustrating? Numerous Advertising Requirements Scattered throughout regulations Disclosure Requirements are Dynamic Depend on content of the advertisement Depend on where ad appears (TV, print, online) Product Specific Disclosures Unfair, deceptive or abusive 2

3 Overview Regulation Z Requirements Trigger Terms Additional Disclosures TV, Radio, Online & Social Media Ads Limitation on Using the Term Fixed Introductory & Promotional Rates Including Balance Transfer Offers 3

4 What is an Advertisement? Regulation Z 12 CFR (a)(2): (2) Advertisement means a commercial message in any medium that promotes, directly or indirectly, a credit transaction. Commercial message any medium Promotes credit directly or indirectly 4

5 What is an Advertisement? Examples: Print advertisements, Billboards; TV, radio, Pandora, video, YouTube; Electronic ads including Internet; Marketing flyers, letters, campaigns; and Signs including exterior & interior. 5

6 What is an Advertisement? Examples: On-hold messages; Member newsletters & blog posts; and Brochures and inserts. Exclusions: Very limited situations - DOCUMENT 6

7 Every Ad is Unique (this is bad) Our disclosure requirements vary depending on the language we use There is no silver bullet What are the product terms? Have we used any trigger terms? If so, what are the additional disclosures we need to provide? 7

8 Reg Z Basics Are we using a trigger term? If so, we need additional disclosures What terms are trigger terms? Varies by loan product For credit cards, most often the APR Trigger terms also include negative terms No annual fee or No balance transfer fee 8

9 Credit Card Trigger Terms Are we using a trigger term? In most cases, the APR is the trigger term Example: 9

10 Credit Card Additional Disclosures What additional disclosures? Any minimum, fixed, transaction, activity or similar charge that is a finance charge under that could be imposed. Any periodic rate that may be applied expressed as an annual percentage rate as determined under (b). If the plan provides for a variable periodic rate, that fact shall be disclosed. Any membership or participation fee that could be imposed. [Note: Not our par value share]. 10

11 Credit Card Additional Disclosures In Plain English? Transaction fees for a credit card? Balance transfer fee Foreign transaction fee Cash advance fee APR If credit card is variable, must mention 11

12 Radio & TV Advertisements Optional Alternative Disclosures When a trigger term is used: Disclose the APR; If APR is variable, disclose this fact; Toll-free number that members (and potential members) can call for additional information: Call for details about credit cost and terms. 12

13 FFIEC Social Media Guidance Are there any exemptions for social media? No. The laws and regulations discussed in this Guidance do not contain exceptions regarding the use of social media. Thus, the existing rules/disclosures apply to social media (and online) advertising. 13

14 Online Advertisements One-Click Rule Electronic advertisements, including social media and websites Applies to both open-end and closed-end loan advertisements Additional disclosures are included on a separate page via a direct link 14

15 Online Advertisements One-Click Rule 15

16 Clear & Conspicuous Internet disclosures cannot be obscured by graphics, shading, or have invisible links TV disclosures cannot be in small print. Consumers must be able to see and read the information. Radio disclosures cannot be spoken rapidly or at a low volume must be reasonable 16

17 Be Careful With Fixed Change from the Credit Card Act of 2009 Three types of credit card APRs: Variable Fixed Non-variable If you use the term fixed without a time period, it is FIXED forever. You have no ability to increase the APR in the future. None. 17

18 Be Careful With Fixed If you are using Fixed consider the long-term impact of doing so. What happens if rates move up in the future? Cannot raise APR on existing balances Applies to every type of APR But, also cannot raise APR on new transactions either. If you moved to non-variable be sure everyone is on the same page. Double-Check. 18

19 Intro or Promo Rates What is a Promotional Rate? Any APR applicable to one or more balances or transactions for a specified period of time that is lower than the APR that will be in effect at the end of that period Ex: 4.99% APR for 6 Months! What is an Introductory Rate? A promotional rate at account opening 19

20 Intro or Promo Rates Special Rule for Introductory Rates If the APR is an Introductory Rate, the term introductory or intro must be in immediate proximity to each listing of the Introductory Rate in a written or electronic advertisement. Must be in the same phrase 4.99% Introductory APR 20

21 Intro or Promo Rates For Promotional Rates (incl. Intro Rates) Must disclose (clear and conspicuous): When the promo rate will end; and The APR that will apply at the end of the promotional period* *If the Introductory Rate is on a risk-based credit card product disclose range of rates 21

22 Intro or Promo Rates For written or electronic advertisements: Disclosures must be in a prominent location closely prominent* to the first listing of the promotional rate Must be in same paragraph *A disclosure in a footnote is not allowed 22

23 Intro or Promo Rates For written or electronic advertisements: Disclosures for promotional rates must be clear and conspicuous which means the disclosures must be: Equally Prominent Which Means: Same Type Size 12 pt font = 12 pt font 23

24 Intro or Promo Checklist Do we have an intro or promo rate? Is the period at least six months? If Intro is that term used in each listing? Have we disclosed the end date and go-to rate? If Intro have we included a range of rates? For written/online ads, are our disclosures in the same paragraph as the first listing? For written/online ads, are our disclosures clear and conspicuous (same font size)? 24

25 Convenience Check Offers (b)(3) Similar promotional rate requirements, but must also use a Tabular Format on front page of checks 25

26 Advertising Compliance Tips Know the different trigger terms Understand the additional disclosures Set up a formal ad review process Create internal checklist by product Where will the ad be used? Any exceptions? Utilize the one-click rule Do not assume others got it right! 26

27 Key Takeaways Advertisements are much more visible now than ever before (good & bad) Website; Facebook; YouTube Members; Potential Members Regulators; Attorneys; Banking Groups There is not a perfect universal disclosure Set up a formal review process Ultimately, all about risk management 27

28 Questions? Thank You! me to sign-up for our free Regulatory E-Alerts Steve Van Beek, Esq., NCCO Howard & Howard Attorneys PLLC

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