How to Avoid Legal Pitfalls in Financial Advertising
If you work in the financial industry, you know how important it is to attract and retain customers with effective and engaging advertising. However, you also know how challenging it can be to navigate the complex and ever-changing rules and regulations that govern financial advertising.
Financial advertising is subject to various federal and state laws, as well as industry-specific rules and standards, that aim to protect consumers from unfair, deceptive, or abusive practices. These laws and rules also promote fair competition and transparency in the financial marketplace.
As a financial institution, you have a responsibility to comply with these laws and rules, and to ensure that your advertising is truthful, accurate, and compliant. Failure to do so can result in hefty fines, lawsuits, reputational damage, and loss of customer trust. Not what you or your C-Suite are hoping to see.
So how can you avoid legal pitfalls in financial advertising?
Here are some of the general rules that apply to financial advertising, but keep in mind that there may be more specific or different rules depending on the state, the type of product or service, and the target audience. Working with Florence Rose Group, we help you skip the lengthy step of consulting legal experts and regulators, and ensure your team is properly informed for any upcoming advertising campaigns.
The Federal Trade Commission Act
This act established the Federal Trade Commission (FTC) as the main body to regulate unfair, deceptive, or abusive acts or practices (UDAAP) in the financial industry. According to the FTC Act, financial advertisements and marketing must be truthful and non-deceptive, and advertisers must be able to back up their claims with evidence.
The FTC also enforces other laws that apply to financial advertising, such as the Truth in Lending Act, the Truth in Savings Act, the Equal Credit Opportunity Act, and the Fair Credit Reporting Act.
Some of the best practices to follow when advertising under the FTC Act are:
Use clear and conspicuous language that is easy to understand by the average consumer
Avoid making exaggerated or unsubstantiated claims that could mislead or confuse consumers
Provide all the material information that consumers need to make informed decisions, such as fees, rates, terms, conditions, risks, and benefits
Disclose any limitations or restrictions that apply to your offers or promotions, such as eligibility requirements, expiration dates, or availability
Correct any errors or inaccuracies in your advertisements as soon as possible
The Florence Rose Group can help you navigate this. Learn more here: https://www.florencerosegroup.com/finance
The Truth in Savings Act
This act requires depository institutions to disclose accurate and uniform information about deposit accounts, such as interest rates, fees, balance requirements, and compounding methods. TISA also regulates how depository institutions can advertise deposit accounts, such as using clear and conspicuous disclosures, avoiding misleading or inaccurate statements, and providing additional information when using triggering terms, such as “free” or “no fees”.
Some of the best practices to follow when advertising under TISA are:
Use consistent terminology and format when disclosing information about deposit accounts
Avoid using terms like “guaranteed”, “insured”, or “risk-free” unless you can explain what they mean and how they apply to your accounts
Provide a toll-free number or a website where consumers can obtain more information about your accounts
Include the annual percentage yield (APY) when advertising interest rates for deposit accounts
Disclose any minimum balance requirements or penalties for early withdrawal for deposit accounts
The Florence Rose Group can help you navigate this. Learn more here: https://www.florencerosegroup.com/finance
The Equal Credit Opportunity Act and Fair Housing Act
These acts prohibit discrimination in credit transactions based on race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or exercise of consumer rights. ECOA and FHA also require financial institutions to include equal credit opportunity or equal housing opportunity slogans and logos on their advertisements, as applicable by regulator.
Some of the best practices to follow when advertising under ECOA and FHA are:
Treat all consumers fairly and equally when offering credit products or services
Avoid making statements or implying preferences that could discourage consumers from applying for credit based on prohibited factors
Provide consumers with a notice of action within 30 days of receiving their credit application
Inform consumers of their right to request the reasons for any adverse action taken on their credit application
Include the appropriate slogan or logo on your advertisements for credit products or services related to housing
The Florence Rose Group can help you navigate this. Learn more here: https://www.florencerosegroup.com/finance
The Telephone Consumer Protection Act and Junk Fax Prevention Act
These acts regulate how financial institutions can use telephone calls, text messages, faxes, and prerecorded messages to advertise their products or services. TCPA and JFPA require financial institutions to obtain prior express consent from consumers before contacting them for marketing purposes, to honor do-not-call requests and opt-out requests, to provide identification and contact information on their communications, and to limit the time and frequency of their communications.
Some of the best practices to follow when advertising under TCPA and JFPA are:
Obtain written consent from consumers before sending them any marketing communications via phone, text message, fax, or prerecorded message.
Maintain a list of consumers who have opted out of receiving marketing communications from you and do not contact them again.
Provide a clear and easy way for consumers to opt out of receiving future marketing communications from you on every communication.
Identify yourself and your company name on every communication and provide a valid phone number or address where consumers can reach you.
Avoid contacting consumers before 8 a.m. or after 9 p.m. local time, or on Sundays or holidays, unless they have given you permission to do so.
The Florence Rose Group can help you navigate this. Learn more here: https://www.florencerosegroup.com/finance
The FINRA Advertising Regulation
This regulation applies to broker-dealers and other members of the Financial Industry Regulatory Authority (FINRA), which is a self-regulatory organization that oversees securities firms. The FINRA Advertising Regulation sets forth standards and guidelines for fair and balanced communications with the public about securities products and services. The regulation requires FINRA members to file certain types of communications with FINRA for review and approval, to comply with content standards and disclosure requirements, to maintain records of their communications, and to supervise their communications.
Some of the best practices to follow when advertising under the FINRA Advertising Regulation are:
File your communications with FINRA in advance if they fall under the categories that require pre-approval, such as retail communications concerning registered investment companies, direct participation programs, or collateralized mortgage obligations.
Ensure that your communications are fair, balanced, and not misleading, and that they provide a sound basis for evaluating the securities products or services you offer.
Disclose any risks, fees, commissions, conflicts of interest, or limitations that apply to your securities products or services.
Use performance data that is accurate, current, and consistent with FINRA rules and guidance.
Supervise and train your personnel who are involved in creating or distributing your communications.
The Florence Rose Group can help you navigate this. Learn more here: https://www.florencerosegroup.com/finance
Conclusion
Financial advertising is a powerful tool to promote your products or services, but it also comes with legal responsibilities and risks. By following the rules and regulations that apply to your industry and type of advertising, you can avoid legal pitfalls and build trust and loyalty with your customers.
Florence Rose Group is a team of experts in financial marketing and communication who can help you craft compelling marketing strategies that resonate with your target audience and comply with the relevant laws and rules.