Pub. 15 2018 Issue 3

Issue 3 • 2018 19 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S A dvertising rules can be confusing. The advertis - ing rules for banks are set out in several different regulations and overseen by several different reg - ulatory agencies. Generally, the CFPB has been given regulating power over some advertising to consumers, including the advertising requirements under Reg DD. The FDIC governs when the FDIC logo and statement must be used. Regulation DD defines an advertisement as a commercial message in any medium, including social media, that invites, offers, or generally announces the availability or terms of an existing or new account. 1 A deposit account is a time, demand, savings, or NOW account, including deposit accounts opened as a condition of obtaining a credit card, foreign currency accounts, IRAs and SEPs, PODs and “Totten trusts”, and an account that is held by or for a deposit broker, if interest in the account is held by or offered to a consumer. 2 An advertisement may not be misleading or misrepresent the deposit agreement. 3 It should not state that an account is “free”, “no cost”, or “fees waived” if it has any maintenance or activity fees. Maintenance or activity fees are 1) fees for not meeting a minimum balance or exceeding a number of trans - actions, 2) reasonably expected transaction and service fees, 3) flat monthly service fee, or 4) fees to deposit, withdraw, trans - fer funds, or per-check or per-transaction charges. A bank may, however, advertise that there are no deposit or withdraw - al fees, if it is clear that a monthly service fee, for example, may be charged. If an account is free for a specific amount of time, it may state that it is free for a specific time. 4 Annual Percentage Yield must be stated at least once as “An - nual Percentage Yield” and then may be referred to as APY. It also “triggers” additional terms (“trigger terms”) that must be included in the advertisement. 5 If there is a variable rate, the advertisement should state that the rate may change after the account is opened. The advertisement should state the period of time the APY will be offered or is accurate. For example, 12% APY accurate as of 8/10/2018. Any minimum balance re - quired to obtain the APY should be disclosed. If there are tiers, it should be included for each tier. There should be a statement that fees could reduce the earnings on the account. For time accounts, the term of the account should be disclosed and if there may be early withdrawal penalties and any required interest payouts. 6 If the advertisement states that the APY and other terms may vary depending on the initial deposit or term, it does not need to disclose every possible combination avail - able. The bank may instead disclose an example such as “For example, our 12-month certificate of deposit accounts current - ly pays 2.25% annual percentage yield.” 7 Certain advertising mediums are exempt from some of the trigger terms rules. Radio and television ads, billboards and other outdoor media, and telephone response machines are not required to disclose variable rates, time the APY is offered, minimum opening deposits, effect of fees, early withdrawal penalties for time accounts, or the minimum balance neces - sary to obtain a bonus and when it will be provided. For ad - vertisements made for tiered-rate accounts through telephone response machines, the advertisement must state the APYs n Deposit Advertising continued on page 20 The Dos and Don’ts of Deposit Advertising By Daniela Clark, Compliance Alliance