Regulators took enforcement actions against over 25 companies in 2015 for deceptive advertising of consumer financial products. The top lessons from these actions were: 1) advertisements must accurately explain the nature of the product; 2) all terms and conditions must be clearly disclosed; 3) advertisements must represent offers that are actually available; 4) companies are responsible for oversight of vendors' advertising; and 5) advertisements cannot obscure their true source.
Grant Proposal of the Association for Consumer EffectivenessJoel Drotts
This is the current grant proposal under submission to several large corporate and private foundations and donors, by the Association for Consumer Effectiveness. The Association has become the premier consumer perspective and consumer protection organization, in the field and industry of Data Brokers. Data Brokers are the large data hungry companies that trample consumer privacy on a greater scale every day in America. The Association has been charged with the duty and mission to help prevent this from occurring even further, and if possible reverse the damage already caused to the privacy of the American Consumer Public.
Gen Y consumers will earn 46% of the income in the United States by 2025, but they’re often misunderstood or ignored by financial services providers. This is especially true when it comes to online and mobile behavior and attitudes toward traditional banking.
Understanding this problem and designing to overcome it is critical to our work at Comrade, so we’re pleased to have partnered with Javelin Strategy & Research to publish “The Three Costliest Myths about Gen Y". This report applies consumer data to dispel the myths circulating in financial services today about Gen Y consumers. Beyond exposing pervasive misconceptions, it also explains how to optimize digital and physical touchpoints to attract tomorrow’s most profitable bank customers.
Balancing Fraud & Customer Experience in a Mobile WorldComrade
Consumers’ reliance on mobile continues to skyrocket in shopping, paying for bills, managing finances and socializing. This poses a great challenge for retailers, financial institutions and technology vendors. Digital account opening is fraught with pitfalls as the identity validation process relies on manual entry of personal information. Similarly account management uses knowledge-based authentication but can add friction to the user experience. How should retailers, banks and merchants integrate fraud protection measures into the user experience with the least amount of friction to the user?
I joined joined Al Pascual from Javelin Strategy & Research in a complimentary webinar to share lessons learned from working with leading companies that have struggled with the issue of fraud and customer experience.
We explored the following:
- Who are leaders in integrating fraud prevention into the user experience?
- Who owns the fraud prevention process in the organization?
- How to overcome legacy design issues that can underwhelm the customer experience and inhibit security measures?
- How to prevent fraud in a low-friction environment, while communicating a security-forward brand experience?
Grant Proposal of the Association for Consumer EffectivenessJoel Drotts
This is the current grant proposal under submission to several large corporate and private foundations and donors, by the Association for Consumer Effectiveness. The Association has become the premier consumer perspective and consumer protection organization, in the field and industry of Data Brokers. Data Brokers are the large data hungry companies that trample consumer privacy on a greater scale every day in America. The Association has been charged with the duty and mission to help prevent this from occurring even further, and if possible reverse the damage already caused to the privacy of the American Consumer Public.
Gen Y consumers will earn 46% of the income in the United States by 2025, but they’re often misunderstood or ignored by financial services providers. This is especially true when it comes to online and mobile behavior and attitudes toward traditional banking.
Understanding this problem and designing to overcome it is critical to our work at Comrade, so we’re pleased to have partnered with Javelin Strategy & Research to publish “The Three Costliest Myths about Gen Y". This report applies consumer data to dispel the myths circulating in financial services today about Gen Y consumers. Beyond exposing pervasive misconceptions, it also explains how to optimize digital and physical touchpoints to attract tomorrow’s most profitable bank customers.
Balancing Fraud & Customer Experience in a Mobile WorldComrade
Consumers’ reliance on mobile continues to skyrocket in shopping, paying for bills, managing finances and socializing. This poses a great challenge for retailers, financial institutions and technology vendors. Digital account opening is fraught with pitfalls as the identity validation process relies on manual entry of personal information. Similarly account management uses knowledge-based authentication but can add friction to the user experience. How should retailers, banks and merchants integrate fraud protection measures into the user experience with the least amount of friction to the user?
I joined joined Al Pascual from Javelin Strategy & Research in a complimentary webinar to share lessons learned from working with leading companies that have struggled with the issue of fraud and customer experience.
We explored the following:
- Who are leaders in integrating fraud prevention into the user experience?
- Who owns the fraud prevention process in the organization?
- How to overcome legacy design issues that can underwhelm the customer experience and inhibit security measures?
- How to prevent fraud in a low-friction environment, while communicating a security-forward brand experience?
Banking & Innovation: How Financial Services Can Embrace the Customer RevolutionComrade
Financial services companies are increasingly seeing opportunities to be at the forefront of innovation. Historically, banks have been slow to translate consumer demands into technologies like paperless statements and mobile check imaging. However, they were quick to implement online banking and, today, customers who bank online are typically more satisfied as well as more cost-effective to maintain. Banks have also responded to the shift in consumer demand for mobile banking on tablets and smartphones. The next challenge facing financial services is how to address the rise of consumer trends evolving mainly outside of the industry. We’re pleased to have partnered with Matchi to publish “Banking & Innovation: How Financial Services Can Embrace the Customer Revolution." This paper focuses on three phenomena that will ultimately impact every bank:
- Crowdsourcing
- Wearable Technology
- The Sharing Economy
We explore the state of each these trends, and how they relate to financial services.
Insurance Distribution Conference, 17th Jan 2008Mahavir Chopra
The Presentation was rolled in at the Insurance Distribution Conference at ITC Grand Maratha Sheraton. The presentation provides a detailed note and road map to the beginning of a multi-layered online Insurance distribution channel in India.
The health care reform law calls for the creation of state-based insurance Exchanges. This Legislative Brief provides an overview of state progress toward creating the Exchanges and the role of entities typically involved with the insurance placement process (such as brokers and agents) under the Exchanges. It also discusses the emergence of private health insurance Exchanges.
CGAP Brief: The Emerging Global Landscape of Mobile MicroinsurancePeter Zetterli
This CGAP Brief provides an early look at the rapidly evolving global landscape for mobile microinsurance, which has generated dramatic takeup in several countries and points to significant promise in new digital distribution models for insurance to poor and low-income populations in developing countries.
Ninety Consulting: The Omnichannel InsurerDan White
Some insurers are already pursuing omnichannel, but other sectors, e.g. retail, are seen as more advanced and could yield lessons for insurers. In Part 1 of this two-part paper, we look at some of the initiatives and issues that are emerging as insurers try to move to an omnichannel approach. In Part 2, released separately, we look at examples and lessons from other sectors and try to answer the question ‘What can insurers learn about omnichannel from other industry sectors?’ We will conclude by making some keynote recommendations and predictions about the changing nature of omnichannel and its impact on the insurance sector.
Presentation: Distribution Channels for Life Insurance, A Global PerspectiveIntelligo Consulting
Presentation at the 2nd Annual Life Insurance Forum, Amsterdam, 9-10 April 2014
- Bancassurance as a major distribution channel for life insurance
- Consumer research: distribution of protection-related life insurance in Europe
- The global market for creditor / creditor life insurance
Online Personal Financial Management - A Closer Look at Manilla and MintCorporate Insight
In recent years, numerous personal financial management (PFM) tools have emerged online. These tools give consumers a detailed view of their finances, allowing them to effectively budget and manage their money. Many of the PFMs offer both easy-to-use online interfaces and mobile apps to manage finances on-the-go.
This slide deck analyzes two of the major players in the PFM space: Manilla and Mint. While different in terms of functionality and purpose, both PFMs offer user-friendly websites and apps that are popular with consumers and continue to grow.
Next Generation Mobile Banking and Return on Investmentmistervandam
Fiserv white paper on how the advancement of mobile banking - particularly next generation features and functionality - are driving return on investment for financial institutions
The ‘A Deep Dive into the BNPL Ecosystem’ report analyzes the rapidly evolving BNPL sector across the world and the factors fueling BNPL payments. Read this report to learn about the drivers, partnerships, business models, regulatory landscape, and future trends impacting the BNPL ecosystem.
Banking & Innovation: How Financial Services Can Embrace the Customer RevolutionComrade
Financial services companies are increasingly seeing opportunities to be at the forefront of innovation. Historically, banks have been slow to translate consumer demands into technologies like paperless statements and mobile check imaging. However, they were quick to implement online banking and, today, customers who bank online are typically more satisfied as well as more cost-effective to maintain. Banks have also responded to the shift in consumer demand for mobile banking on tablets and smartphones. The next challenge facing financial services is how to address the rise of consumer trends evolving mainly outside of the industry. We’re pleased to have partnered with Matchi to publish “Banking & Innovation: How Financial Services Can Embrace the Customer Revolution." This paper focuses on three phenomena that will ultimately impact every bank:
- Crowdsourcing
- Wearable Technology
- The Sharing Economy
We explore the state of each these trends, and how they relate to financial services.
Insurance Distribution Conference, 17th Jan 2008Mahavir Chopra
The Presentation was rolled in at the Insurance Distribution Conference at ITC Grand Maratha Sheraton. The presentation provides a detailed note and road map to the beginning of a multi-layered online Insurance distribution channel in India.
The health care reform law calls for the creation of state-based insurance Exchanges. This Legislative Brief provides an overview of state progress toward creating the Exchanges and the role of entities typically involved with the insurance placement process (such as brokers and agents) under the Exchanges. It also discusses the emergence of private health insurance Exchanges.
CGAP Brief: The Emerging Global Landscape of Mobile MicroinsurancePeter Zetterli
This CGAP Brief provides an early look at the rapidly evolving global landscape for mobile microinsurance, which has generated dramatic takeup in several countries and points to significant promise in new digital distribution models for insurance to poor and low-income populations in developing countries.
Ninety Consulting: The Omnichannel InsurerDan White
Some insurers are already pursuing omnichannel, but other sectors, e.g. retail, are seen as more advanced and could yield lessons for insurers. In Part 1 of this two-part paper, we look at some of the initiatives and issues that are emerging as insurers try to move to an omnichannel approach. In Part 2, released separately, we look at examples and lessons from other sectors and try to answer the question ‘What can insurers learn about omnichannel from other industry sectors?’ We will conclude by making some keynote recommendations and predictions about the changing nature of omnichannel and its impact on the insurance sector.
Presentation: Distribution Channels for Life Insurance, A Global PerspectiveIntelligo Consulting
Presentation at the 2nd Annual Life Insurance Forum, Amsterdam, 9-10 April 2014
- Bancassurance as a major distribution channel for life insurance
- Consumer research: distribution of protection-related life insurance in Europe
- The global market for creditor / creditor life insurance
Online Personal Financial Management - A Closer Look at Manilla and MintCorporate Insight
In recent years, numerous personal financial management (PFM) tools have emerged online. These tools give consumers a detailed view of their finances, allowing them to effectively budget and manage their money. Many of the PFMs offer both easy-to-use online interfaces and mobile apps to manage finances on-the-go.
This slide deck analyzes two of the major players in the PFM space: Manilla and Mint. While different in terms of functionality and purpose, both PFMs offer user-friendly websites and apps that are popular with consumers and continue to grow.
Next Generation Mobile Banking and Return on Investmentmistervandam
Fiserv white paper on how the advancement of mobile banking - particularly next generation features and functionality - are driving return on investment for financial institutions
The ‘A Deep Dive into the BNPL Ecosystem’ report analyzes the rapidly evolving BNPL sector across the world and the factors fueling BNPL payments. Read this report to learn about the drivers, partnerships, business models, regulatory landscape, and future trends impacting the BNPL ecosystem.
This is the January 2016 issue of the Digital Marketing Report, published by the Joss Group (www.thejossgroup.com). The subscription cost is $399 US for 12 issues (one a month). The newsletter is for senior digital marketing professionals and the creative professionals who work with them.
The Consumer Financial Protection Bureau (CFPB) recently celebrated its second birthday. During its first two years of existence, the CFPB has shown itself to be an aggressive consumer-protection agency. It is particularly noteworthy because its broad jurisdictional mandate could impact virtually any business that makes a loan to any consumer. Consumer lenders need to be alert to the sweeping implications this agency will have for their future business activities.
7 FAQs about the CFPB's Consumer Complaint DatabaseTRUPOINT Partners
Get answers to the 7 most common questions about the CFPB's public Consumer Complaint Database. Learn how to reduce compliance risk and improve your complaint management!
In 2014, the Consumer Financial Protection Bureau (CFPB) began taking actions to address the rising number of defaults, vehicle repossessions and questionable lending practices surrounding the auto finance industry. As a consequence, major lenders are being highly scrutinizedŠcompelling them to take a proactive approach to CFPB compliance and better utilize their people, processes and technologies.
Integrated Marketing Communication - Liability for Misleading Advertisements ...Akanksha Gohil
Liability for Misleading Advertisements – Key
Features of Consumer Protection Bill Recently Passed
1.Law passed
2. Its liablities
3. Reaction of the population
4. Future strategies
5. Critical analysis
6. conclusion
Below is a list of consumer reporting companies updated for 2019.1 Consumer reporting companies collect information and provide reports to other companies about you. These companies use these reports to inform decisions about providing you with credit, employment, residential rental housing, insurance, and in other decision making situations. The list below includes the three nationwide consumer reporting companies and several other reporting companies that focus on certain market areas and consumer segments. The list gives you tips so you can determine which of these companies may be important to you. It also makes it easier for you to take advantage of your legal rights to (1) obtain the information in your consumer reports, and (2) dispute suspected inaccuracies in your reports with companies as needed.
Joint ad trade letter to ag becerra re ccpa 1.31.2019Greg Sterling
We strongly support the objectives of the California Consumer Privacy Act (CCPA), but we have notable concerns around the likely negative impact on California consumers and businesses from some of the specific language in the law. We provide this initial comment to provide you with information about the significant importance of a data-driven and ad-supported online ecosystem, industry efforts to protect privacy, and in section III of the letter draw your attention to several areas that can be addressed and improved through the rulemaking process. We will provide more detailed comments over the coming weeks.
Embracing the Consumer Duty Imperative: A Comprehensive GuideRNayak3
With the Financial Conduct Authority introducing changes to its Consumer Duty regulations, this paper elucidates the implications and consequences of non-compliance.
Affiliates Under Fire: Next Steps, Best PracticesAffiliate Summit
Recent FTC cases showed it will act against anyone imitating news sites or making false ad claims online. This session will help you review compliance and avoid federal/state law enforcement actions.
Experience level: Intermediate
Target audience: Affiliates/Publishers
Niche/vertical: Compliance
Tom Cohn, Partner, LeClair Ryan
Mastering FDCPA Compliance: A Comprehensive Guide for California Debt Collect...Cedar Financial
Navigate the intricacies of the Fair Debt Collection Practices Act (FDCPA) with confidence! This comprehensive guide is tailored for California debt collection agencies, providing key insights, compliance tips, and best practices to ensure ethical and legal debt collection. Stay ahead in the industry while safeguarding your agency's reputation. Download now for essential knowledge on FDCPA compliance in California.
#FDCPA #DebtCollection #CaliforniaLaw #CedarFinancial
1. 1
Seller Beware: Lessons Learned from 2015
Deceptive Advertising Enforcement in the Consumer
Finance Space
Consumer Financial Services Alert
By Ori Lev and Anjali Garg
I. Introduction
Federal regulators took a close look at advertisements for consumer financial products and
services in 2015, bringing over 25 enforcement actions totaling over $975 million in penalties
and consumer redress. In the majority of these actions, regulators evaluated: (1) how
advertisements characterize the product being offered, including the nature of the product
and the terms and conditions applicable to the advertised features; (2) how well those that
offer consumer financial products and services oversee their vendors that advertise directly
to consumers, including telemarketers and retailers at the point of sale; and (3) whether
advertisements obscure their true source.
In this client alert, we outline the legal standard that regulators use when evaluating whether
advertisements are deceptive, and offer our top five lessons learned from 2015 enforcement
actions against those that advertise consumer financial products and services.
II. Legal Standard for Deceptive Advertising
It is apparent from recent enforcement activity that regulators’ concerns with advertising
extends beyond the traditional print, television, and radio mediums, and includes information
contained on websites, sales practices at the point of sale, and customer service scripts.
Determining whether an advertisement is “deceptive” is inherently subjective; however,
regulators consistently rely on the standard articulated under the Federal Trade Commission
(“FTC”) Act in 1983. An act or practice is deceptive if it entails a material representation,
omission, or practice that is likely to mislead consumers acting reasonably under the
circumstances.1
In assessing whether an act or practice is “likely to mislead,” the FTC, the Consumer
Financial Protection Bureau (“CFPB” or the “Bureau”), and the courts look to the net
impression of the information presented to the consumer. As part of this assessment,
regulators have taken the position that any material term or condition of a product, or any
fact that must be disclosed to make the net impression not misleading, must be stated clearly
and conspicuously. Under the Truth in Lending Act (“TILA”), regulators will also examine
whether required disclosures in advertisements are stated clearly and conspicuously. TILA
1
See FTC Policy Statement on Deception (Oct. 14, 1983), appended to Cliffdale Assocs., Inc., 103 F.T.C. 110, 174
(1984).
January 13, 2016
Practice Groups:
Consumer Financial
Services
Global Government
Solutions
Government
Enforcement
For more news and
developments related
to consumer financial
products and services,
please visit our
Consumer Financial
Services Watch blog
and subscribe to
receive updates.
2. Seller Beware: Lessons Learned from 2015 Deceptive Advertising Enforcement
in the Consumer Finance Space
2
also requires that advertisements include certain disclosures when certain trigger terms are
used in an advertisement.2
Regulators consider a misrepresentation, omission, or practice “material” if it “is likely to
affect a consumer’s choice of or conduct regarding a product.” Certain information is
presumed material — including, for example, the price or cost of a product or service. Under
the deception standard, regulators do not have to prove that consumers were actually
harmed as long as the act or practice was likely to mislead consumers.
2015 enforcement actions and guidance issued by the FTC, CFPB, and banking regulators
provide key insights into the evolution of deceptive advertising standards.
III. Top Five Lessons from 2015 Enforcement Actions
a. Explain the Product
In 2015, regulators took issue with how institutions characterized various consumer financial
products in their advertisements, and whether the advertisements clearly explained the true
nature of the product. In a June 2015 CFPB study on reverse mortgage advertisements, for
example, the Bureau found that some consumers did not understand from certain television
and print advertisements that a reverse mortgage is a loan that would need to be repaid in
the future.3
The CFPB noted that most reverse mortgage ads did not include an interest rate,
or only displayed an interest rate in very fine print, thereby confusing consumers. The
CFPB’s message: if it looks like a loan and functions like a loan (and is a loan), it should be
advertised as a loan.
Two enforcement actions further demonstrate the Bureau’s position. In August 2015, the
CFPB filed a complaint against a company that advertised what the CFPB considers to be a
loan product as a “pension buyout” and “pension advance” and actively denied that the
product was a loan.4
In addition to a deception claim, the CFPB alleged that by denying the
product was a loan, the defendant obscured the true nature of the transaction and took
unreasonable advantage of consumers, thus rendering the practice unfair and abusive. The
CFPB also brought an action in February 2015 against a company that the Bureau claims
deceptively advertised what appeared to be a general use credit card with a low annual
percentage rate and membership fee. The Bureau alleged that consumers actually received
a paper membership card that only enabled consumers to purchase products on closed-end
credit from the respondent.5
In light of these recent actions, institutions should consider whether their advertisements
accurately describe the products they are offering or if the advertisements create confusion
regarding the nature of the product. Call monitoring and consumer focus groups/studies may
provide insight on how consumers interpret the institutions’ marketing materials.
2
12 C.F.R. § 1026.24.
3
Consumer Fin. Prot. Bureau, A Closer Look at Reverse Mortgage Advertisements and Consumer Risks (June 2015),
available at http://files.consumerfinance.gov/f/201506_cfpb_a-closer-look-at-reverse-mortgage-advertising.pdf.
4
Complaint, Consumer Fin. Prot. Bureau v. Pension Funding et al, No. 8:15-cv-1329 (C.D. Cal. Aug. 20, 2015).
5
Stipulated Final Judgment and Order, Consumer Fin. Prot. Bureau v. Union Workers Credit Services, Inc., No. 3:14-cv-
04410 (N.D. Tex. Feb. 3, 2015).
3. Seller Beware: Lessons Learned from 2015 Deceptive Advertising Enforcement
in the Consumer Finance Space
3
b. Clearly and Conspicuously Disclose Terms and Conditions
In addition to clearly identifying the product being offered, institutions should clearly and
conspicuously disclose product terms and conditions. Regulators continue to scrutinize how
such terms and conditions are disclosed. In 2015, regulators held parties accountable for
various disclosure display issues, including font size, font color as compared to the
background color of the advertisement, how long disclosures appeared on television ads, the
cadence and speed of oral disclosures, the appearance of an asterisk or other symbol
directing consumers to disclosures, and whether required TILA disclosures appeared in a
“block of text” that a consumer would overlook.
In March 2015, the FTC engaged in an automobile sales and leasing sweep, holding dealers
responsible for alleged violations of the Consumer Leasing Act, TILA, and the prohibition on
deceptive acts and practices for advertisements that displayed low monthly payments and
low down payments for automobiles.6
The FTC determined that required disclosures on
television, print, web, and social media advertisements were not clear and conspicuous. In
some cases, the advertisements actually contained disclosures, and sometimes the
disclosures were in close proximity to the relevant terms. The FTC alleged, however, that the
disclosures were in extremely fine print and difficult to read as compared to the prominent
claims of low monthly payments or low down payments.
In a CFPB complaint filed against a payment processor, the Bureau alleged that the
company intentionally omitted information about fees associated with a biweekly mortgage
payment plan. The company’s mailers allegedly did not mention the fees, and its sales
scripts allegedly actively discouraged customer service representatives from disclosing
information about certain fees, including instructions, in some cases, to mention the fees only
if consumers “persist to ask about fees.”7
In a May 2015 CFPB action against a company
advertising mortgage products, the Bureau took issue with how the company characterized
interest rates and alleged that the company failed to disclose that the rates were adjustable.8
In developing a robust advertising compliance management system, institutions should
consider all consumer touchpoints as risk areas for deceptive advertising, and monitor for
compliance accordingly.
c. Honor the Advertisements
Once the terms and features of the products have been advertised, institutions must honor
what has been offered. In a number of 2015 enforcement actions, regulators examined (1)
whether the advertised features and terms were actually available to consumers, and (2)
whether the advertised features were substantiated.9
Regulators will compare advertisements to the actual products and services that consumers
receive in evaluating a deception claim. In the FTC’s March 2015 sweep of auto dealers, the
6
Press Release, FTC, Multiple Law Enforcement Partners Announce Crackdown on Deception, Fraud in Auto Sales,
Financing and Leasing (Mar. 26, 2015), available at https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-
law-enforcement-partners-announce-crackdown.
7
Complaint, Consumer Fin. Prot. Bureau v. Nationwide Biweekly Administration, et al, No. 3:15-cv-02106 (N.D. Cal. May
11, 2015).
8
In the Matter of RMK Financial Corp., No. 2015-CFPB-0007 (Apr. 9, 2015).
9
See also, Fed. Trade Comm’n, FTC Policy Statement Regarding Advertising Substantiation (Mar. 11, 1983), available at
https://www.ftc.gov/public-statements/1983/03/ftc-policy-statement-regarding-advertising-substantiation.
4. Seller Beware: Lessons Learned from 2015 Deceptive Advertising Enforcement
in the Consumer Finance Space
4
FTC claimed deception in certain advertisements that displayed rates that most consumers
could not qualify for, with the qualification requirements appearing in miniscule text at the
bottom of the ads. The FTC also noted that many of the advertisements contained other
terms that were not available or not generally available to consumers. In the FTC’s
crackdown on automobile sales and leasing ads, the FTC also alleged that ads containing
cars with features such as sunroofs and spoilers that cost more than the displayed rates and
terms were deceptive.
In an April 2015 consent order with a bank, the CFPB alleged deception where the
advertisements indicated that the bank would not charge consumers overdraft fees in
connection with ATM and one-time debit card transactions unless the consumer opted in, but
charged those fees anyway.10
In a May 2015 action, the CFPB alleged that a payment
processor advertised a special offer where consumers could obtain deferred interest or
money back on a future purchase, and then failed to honor the advertised promotional
benefits.11
In a July 2015 CFPB action against a payment processor and mortgage servicer,
the CFPB claimed that the interest rate savings for a biweekly mortgage payment program
displayed in website and direct mail advertisements were “unsubstantiated by the facts and
therefore are deceptive.”12
Institutions should properly vet advertisements to ensure that the advertised rates and terms
are actually available to consumers and that the company’s business practices align with
advertised offers.
d. Ensure Proper Vendor Oversight
Providers of consumer financial products and services continue to be held responsible for
deceptive sales tactics of retailers and vendors marketing the providers’ products. In 2015,
regulators took action against a number of financial institutions arising out of failed oversight
of retailers and other vendors or inadequate training and monitoring of those who market the
products.
In a June 2015 Office of the Comptroller of the Currency (“OCC”) action against a bank, the
OCC held the bank responsible for the conduct of a telemarketer, alleging that the bank’s
vendor misled consumers into purchasing a more expensive identity protection product
during telemarketing calls.13
In a July 2015 joint CFPB and OCC consent order regarding a
bank’s credit card add-on products, the regulators took issue with how in-store retail
associates marketed and explained the bank’s products.14
The regulators alleged that the
bank failed to ensure that the retailers provided the proper terms and conditions to
consumers when enrolling them for a store credit card and associated add-on products.
Finally, in an August 2015 CFPB action against a company that administered health care
financing products, the Bureau held the company responsible for failing to properly train and
10
In the Matter of Regions Bank, No. 2015-CFPB-0009 (Apr. 28, 2015).
11
Complaint, Consumer Fin. Prot. Bureau v. PayPal and Bill Me Later, No. 1:15-cv-01426 (D. Md. May 19, 2015).
12
In the Matter of Paymap, No. 2015-CFPB-0017 (July 28, 2015); In the Matter of LoanCare, No. 2015-CFPB-0018 (July
28, 2015).
13
In the Matter of Wells Fargo Bank, N.A., No. AA-EC-2015-13 (June 3, 2015).
14
In the Matter of Citibank, N.A., et al, No. 2015-CFPB-0015 (July 21, 2015); In the Matter of Citibank, N.A., et al, No. AA-
EC-2015-52 (July 21, 2015).
5. Seller Beware: Lessons Learned from 2015 Deceptive Advertising Enforcement
in the Consumer Finance Space
5
monitor health care providers on how to sell the company’s loan products, because the
health care providers failed to explain the costs of a deferred-interest product.15
Institutions can ultimately be held responsible for the actions of vendors and service
providers that market on their behalf.16
Institutions should therefore ensure that they have a
proper vendor monitoring system in place that could include call monitoring, training, mystery
shopping, and review of consumer-facing materials, such as sales scripts and brochures.
e. Disclose the Source
In 2015, regulators actively pursued deception claims against institutions that did not
properly disclose the source of the advertisements. The advertisements implied an affiliation
with government agencies, unions, universities, and, in one case, a veterans organization. In
most of these actions, the regulators alleged that the advertisements were formatted in a
way that obscured the “true source” of the ad and were, therefore, deceptive.
In a February 2015 sweep, the CFPB brought three actions against mortgage advertisers,
alleging that the companies’ advertisements suggested the companies were or were
affiliated with a government entity in violation of the Mortgage Acts and Practices —
Advertising Rule17
and the prohibition on deceptive acts and practices.18
The CFPB
scrutinized the logos and verbiage contained on envelopes, whether the name of the actual
lender was obscured, and whether the lenders’ websites implied a government affiliation. In
an April 2015 CFPB action, the Bureau brought similar claims against another lender and
cited recorded phone calls indicating that borrowers thought they were calling a government
agency as further evidence of the allegedly misleading nature of the company’s
advertisements.19
In a CFPB action against a lender in February 2015, the Bureau alleged that a lender’s
marketing materials made it appear that they were sent by a veterans organization that
endorsed the lender, and that those materials and phone scripts that also contained an
endorsement failed to disclose the financial relationship between the two parties.20
As part of
the prospective relief, the respondent must ensure adherence to the FTC’s Guide
Concerning the Use of Endorsements and Testimonials in Advertisements (“Endorsement
Guide”).
In May 2015, the CFPB brought a deception claim against a payment processor alleging that
the company’s advertisements misrepresented the company’s affiliation with the consumer’s
mortgage lender, where the respondent’s direct mail ads contained the name of the
consumer’s mortgage lender or servicer and where customer service representatives were
directed to obscure the processor’s (lack of) relationship with the consumer’s lender or
servicer.21
15
In the Matter of Springstone Financial, No. 2015-CFPB-0021 (Aug. 19, 2015).
16
See, e.g., Consumer Fin. Prot. Bureau, Bulletin 2012-03: Service Providers (Apr. 13, 2012), available at
http://files.consumerfinance.gov/f/201204_cfpb_bulletin_service-providers.pdf.
17
12 C.F.R. § 1014.3(n).
18
Complaint, Consumer Fin. Prot. Bureau v. All Financial Services, No. 1:15-cv-00420 (D. Md. Feb. 12, 2015), In the
Matter of American Preferred Lending, No. 2015-CFPB-0005 (Feb. 12, 2105); In the Matter of Flagship Financial Group,
No. 2015-CFPB-0006 (Feb. 12, 2015).
19
In the Matter of RMK Financial Corp., No. 2015-CFPB-0007 (Apr. 9, 2015).
20
In the Matter of NewDay Financial, No. 2015-CFPB-0004 (Feb. 10, 2015).
21
Complaint, Consumer Fin. Prot. Bureau v. Nationwide Biweekly Admin., No. 3:15-cv-02106 (N.D. Cal. May 11, 2015).
6. Seller Beware: Lessons Learned from 2015 Deceptive Advertising Enforcement
in the Consumer Finance Space
6
Regulators also brought actions against organizations whose advertisements implied an
affiliation with consumers’ educational institutions. In an October 2015 CFPB complaint, the
Bureau alleged deception where direct mail advertisements contained an official-looking seal
and the name of the student’s university.22
In December 2015, the Federal Reserve and the
Federal Deposit Insurance Corporation entered into a consent order with a bank affiliate
whose student loan disbursement product direct mail advertisements and website included a
university’s logo and school name more prominently than the affiliate’s name and logo.23
In December 2015, the FTC issued an “Enforcement Policy Statement on Deceptively
Formatted Advertisements,” reiterating the agency’s position that advertisements should be
identified as such to consumers.24
While this guidance focuses on natively formatted
advertisements, particularly in the digital context, the document provides a useful guide on
how the FTC evaluates whether advertisements mislead consumers by obscuring the
advertiser through creative formatting.
Institutions should review the FTC’s most recent guidance on deceptively formatted
advertisements as well as the Endorsement Guide to ensure that the advertisement format,
including logos, labels, and packaging, and any endorsements do not disguise the advertiser
or otherwise obscure the true source of the advertisement.
IV. Conclusion
What constitutes deceptive advertising continues to be shaped by enforcement actions and
guidance issued by regulators. In the evolving age of digital advertising and outsourcing,
institutions should consider evaluating their compliance management systems to integrate
lessons learned from recent enforcement actions to enhance vendor oversight and ensure a
robust advertisement review process.
Authors:
Ori Lev
ori.lev@klgates.com
+1.202.778.9058
Anjali Garg
anjali.garg@klgates.com
+1.202.778.9442
22
Complaint, Consumer Fin. Prot. Bureau v. Global Financial Support et al, No. 3:15-cv-02440 (S.D. Cal. Oct. 29, 2015).
23
In the Matter of WEX Bank, No. FDIC-15-0117b and FDIC-15-0119k (Dec. 21, 2015); In the Matter of Higher One, No.
FDIC-15-0129b and FDIC-15-0130k (Dec. 18, 2015); In the Matter of Higher One, No. 15-026-E-I and 15-026-CMP-I
(Dec. 23, 2015).
24
Fed. Trade Comm’n, Enforcement Policy Statement on Deceptively Formatted Advertisements (Dec. 22, 2015),
available at https://www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf.
7. Consumer Financial Services Practice Contact List
7
K&L Gates’ Consumer Financial Services practice provides a comprehensive range of transactional,
regulatory compliance, enforcement and litigation services to the lending and settlement service
industry. Our focus includes first- and subordinate-lien, open- and closed-end residential mortgage
loans, as well as multi-family and commercial mortgage loans. We also advise clients on direct and
indirect automobile, and manufactured housing finance relationships. In addition, we handle
unsecured consumer and commercial lending. In all areas, our practice includes traditional and e-
commerce applications of current law governing the fields of mortgage banking and consumer
finance.
For more information, please contact one of the professionals listed below.
LAWYERS
Boston
R. Bruce Allensworth bruce.allensworth@klgates.com +1.617.261.3119
Gregory N. Blase gregory.blase@klgates.com +1.617.951.9059
Brian M. Forbes brian.forbes@klgates.com +1.617.261.3152
Irene C. Freidel irene.freidel@klgates.com +1.617.951.9154
Andrew Glass andrew.glass@klgates.com +1.617.261.3107
Sean P. Mahoney sean.mahoney@klgates.com +1.617.261.3202
Stanley V. Ragalevsky stan.ragalevsky@klgates.com +1.617.951.9203
Robert W. Sparkes, III robert.sparkes@klgates.com +1.617.951.9134
Ryan M. Tosi ryan.tosi@klgates.com +1.617.261.3257
Phoebe Winder phoebe.winder@klgates.com +1.617.261.3196
Charlotte
John H. Culver III john.culver@klgates.com +1.704.331.7453
Amy Pritchard Williams amy.williams@klgates.com +1.704.331.7429
Dallas
David A. Tallman david.tallman@klgates.com +1.214.939.4946
Miami
Paul F. Hancock paul.hancock@klgates.com +1.305.539.3378
New York
Elwood F. Collins elwood.collins@klgates.com +1.212.536.4005
Pittsburgh
Melissa J. Tea melissa.tea@klgates.com +1.412.355.8385
San Francisco
Jonathan Jaffe jonathan.jaffe@klgates.com +1.415.249.1023
Seattle
Holly K. Towle holly.towle@klgates.com +1.206.370.8334
Sydney
Andrea P. Beatty andrea.beatty@klgates.com +61.2.9513.2333
Washington, D.C.
Costas A. Avrakotos costas.avrakotos@klgates.com +1.202.778.9075
David L. Beam david.beam@klgates.com +1.202.778.9026
Emily Booth-Dornfeld emily.booth@klgates.com +1.202.778.9112
Melanie Brody melanie.brody@klgates.com +1.202.778.9203
Holly Spencer Bunting holly.bunting@klgates.com +1.202.778.9853
Soyong Cho soyong.cho@klgates.com +1.202.778.9181
Krista Cooley krista.cooley@klgates.com +1.202.778.9257
Daniel F. C. Crowley dan.crowley@klgates.com +1.202.778.9447
Eric J. Edwardson eric.edwardson@klgates.com +1.202.778.9387