Compliance Challenge: Seeing Gorillas

By Chuck Lewis

Several decades ago, two cognitive psychologists, Daniel Simons and Christopher Chabris, conducted a series of tests involving an “invisible gorilla.”

The point of the tests was to study “inattentional blindness” where a person can easily miss a detail or details when not looking for that detail. In these tests, a person dressed in a gorilla suit walked through a room of people passing a basketball. Observers had been instructed to count the number of basketball passes people in white gym shorts conducted. The tests indicated that a large of number of people taking the test never noticed the gorilla, as they were so focused on counting the passed basketballs.

The point of that story? Compliance people and marketing people will, and do, observe an advertisement in completely different focal points.

While marketing people are attempting to persuade a buying public to come in a use a financial institution’s various products and services, compliance people are attempting to confirm this solicitation for business does not contain any unfair, deceptive, unclear, discriminatory or just flat out-of-compliance features.

This confirmation must also include the “inattentional blindness” test. From a compliance perspective—could or does the advertisement indicate a certain group or type of individual is not wanted by the bank or would not qualify as a customer? This is where different focal points are needed.

Two different points of view

Nothing in this article is an attempt to convey that anyone involved in bank marketing is prejudicial or biased in any way; the intent is to convey how easily an observation by one group observes the gorilla, while another group never sees the giant ape at all.

One very common example involves printed advertisements for mortgage loans. During a recent study conducted by a group of bank compliance officers, the officers, who were located at financial institutions all over the country, were asked to write down details from any mortgage loan advertisement they had witnessed during a specified 30-day period.

After the time period was complete, the compliance officers noted how many of the advertisements pictured a couple, regardless of race or color, but a couple versus a single person. Of the over 90 advertisements noted, three contained one person in the advertisement—that is, only three out of 90.

Were all of these financial institutions attempting to ensure that only couples come in and apply for real estate financing? Of course not; but how many single persons saw the gorilla?

Recently, a financial institution in the Midwest was criticized for having a HELOC advertisement that denoted people playing sand volleyball, hiking through the mountains and stepping up into a new RV. The examiner’s point of contention was that the majority of people applying for a HELOC loan used that loan to consolidate existing debt or to handle an unforeseen financial emergency, not to go camping or to enjoy life a little further. Guess who saw the gorilla in that ad campaign!

From the view of a reasonable consumer

The Consumer Financial Protection Bureau has included a section on UDAAP (the Unfair, Deceptive, and Abusive Acts/Practices) in its Consumer Compliance Examination Manual. One part of that section states the following:

“The representation, omission, act, or practice must be considered from the perspective of the reasonable consumer. In determining whether an act or practice is misleading, one also must consider whether the consumer’s interpretation of or reaction to the representation . . . is reasonable under the circumstances. In other words, whether an act or practice is deceptive depends on how a reasonable member of the target audience would interpret the representation. When representations or marketing practices target a specific audience, such as older Americans, young people, or financially distressed consumers, the communication must be reviewed from the point of view of a reasonable member of that group.”

This verbiage clearly indicates that compliance examiners will be reviewing advertisements from the point of view of the audience.

Compliance officers, therefore, must be forever looking for any “strutting gorillas” as they review advertisements for their institution.

With consumer compliance requirements continually changing and evolving, the key to a successful “you’re-in-compliance” examination requires the compliance and the marketing staffs working as a team in the hunt for possible gorilla sightings.

 

Chuck Lewis, CRCM, is vice president, compliance services, at the Missouri Bankers Association. Email: clewis@mobankers.com .

 

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