By Cara Williams
Since the summer of 2020, the Consumer Financial Protection Bureau has fined nine mortgage companies for deceptive advertising practices, with a focus on advertising focused on service members and veterans. While these particular consent orders were concentrated in the nonbank mortgage sector, similarly problematic issues are most certainly occurring in other lending segments across the financial services industry.
The reasons why some are still struggling with compliance are not too difficult to understand: turnover within organizations, competing priorities, a lack of sound controls, new staffers who are unfamiliar with existing regulations, and a never-ending list of new ones, including unfair, deceptive or abusive acts or practices and the Mortgage Acts and Practices Advertising Rule. There’s also often a gap between the intent of any new regulation and how marketing teams interpret it.
The risks of not crossing every “t” and dotting every “i” are significant, as evidenced by these recent consent orders. Doing things the wrong way also can mean costly penalties, time-consuming regulatory remediation, and loss of customer trust—which can translate into higher complaint volumes and even lawsuits. Let’s explore some long-lingering myths about how banks advertise their lending products—and, more importantly, what your financial institution should be doing:
MYTH 1: Legal and compliance teams don’t need to review my ad, since I’m the expert in marketing.
FACT: This is the biggest myth that persists in financial services marketing and advertising. Every word you use to communicate has specific and nuanced meanings, and your legal and compliance teams have a responsibility to protect your company and consumers alike. No external ads or marketing materials should be released until you get signoff from your legal or compliance team. It’s not any more complicated than that.
MYTH 2: Our marketing team knows what legal and compliance have told us. We get it, but we need leeway to make our ads eye-catching and even a bit sexy so we can get business in the door. One little word change doesn’t really make a difference.
FACT: You would be surprised at exactly what a bank must validate before it advertises anything as “free.” That word “free”—and countless more—are triggers, often requiring specific disclosures on how they apply to what you are advertising right at that moment.
Ideally, your marketing and advertising teams should collaborate almost daily with your legal and compliance teams. Of course there will be some friction between the advertising folks and the legal and compliance folks. The important thing is to build processes and procedures that enable effective and efficient review of all advertising and marketing materials, and that begins with concepts.
When you involve up front those responsible with compliance, they can help rethink an approach in ways that ensure the final ad meets regulatory requirements. Also, try taking an early “no” to mean “not yet” and be open to ideas on what could translate into an easy reframing.
But go back to compliance at the end with an ad that fails, and their “no” will be just that.
When I was at a bank that now has more than $30 billion in assets, my compliance team worked diligently to become a strategic partner to the marketing team. It took some time, but our peers came to see that we never aimed to derail their vision. As our relationship evolved, so did our interactions. In fact, we created a desktop resource that allowed marketers to easily look up the latest laws or match sales terms with the necessary disclosures, delivering a self-service tool that also empowered them to create responsibly and expedite the review process.
Rest assured, the goal of your bank’s lawyers and compliance officers is not to thwart creativity, but to ensure that amazing ad concepts give consumers precise, clear information about the company’s products and services, allowing them to make smart financial decisions. Believe me: Compliance teams want powerful, compelling and even award-winning advertising that brings more revenue in the door, because when you have that, everyone benefits.
MYTH 3: Our market competitor ran an ad just like that. If they got away with it, then it’s OK and the legal and compliance team is overreacting.
FACT: This is the corporate version of your mother asking you, “If everyone was jumping off a cliff, would you do it, too?”
The only truth here is that your competitor ran an ad. You don’t really know if that financial institution “got away with it.” In fact, you might learn not too far down the road that your competitor actually got caught red-handed with a compliance violation. After all, the underlying premise of advertising is to spread the word, and regulators are paying close attention.
Frankly, you should be analyzing what your competitors are doing, but I’m not talking about their advertising. Take a good look at every consent order or other regulatory action you hear about and compare it to what’s happening in your shop. Are you doing things the right way? Are you identifying and avoiding the possible risks in your process? In other words, consider that the teacher has given you every answer to the test, and you don’t want to fail down the road.
MYTH 4: The bank’s advertising agency developed that campaign—not our internal team—so we’re not going to get in any trouble.
FACT: Time and time again, oversight organizations stress that any third-party vendor—whether it’s an ad agency or a cross-sell phone queue—is a seamless extension of your financial institution. If they get it wrong, so do you. You don’t outsource the compliance responsibility along with the work.
MYTH 5: All of that applies to my bank or mortgage company—not to me as a loan officer. I’ll post a special offer on my social channels just for my customers.
FACT: Your very title of “loan officer” means you’re an officer of your financial institution, and the same exact requirements apply to you. Without question, the growing influence of social media makes consumer outreach easy, but the brevity and ease of these same platforms also make it more difficult to keep your team members from going rogue.
The same compliance standards apply to all of your advertising, including any unsanctioned materials. Every employee needs to understand this responsibility. (By the way, don’t forget about old-fashioned tactics, such as a quick sales flyer that a teller might create and post in a branch. Whether that ad hoc flyer meets your advertising brand standards is the least of your worries, because you’re most likely out of regulatory compliance.)
MYTH 6: Getting an internal review takes so much time that we’re losing competitive advantage.
FACT: Doing it right takes a fraction of the time needed to fix things—particularly if you’re cited for a regulatory infraction—and maintains your institution’s reputation. Yes, a legal or compliance review is another step in your marketing process, but it’s a short blip in the lifetime of a successful business. In my previous role, I was intentional about building interactions with the marketing team that served everyone’s needs as efficiently as possible.
If a federal agency comes at you with a consent order or a matter requiring attention, you’re going to spend significantly more time finding the root issue, solving for your misstep, gaining regulatory signoff and getting back to work. You also cannot rebuild consumer confidence overnight, even with the most attractive offers in your marketplace. After all, if your customers know you have been under scrutiny before, do you think they are going to trust them this time around?
Cara Williams is regulatory compliance and risk management principal at Spinnaker Consulting Group.
