Credit union marketers recognize that social media outlets such as Facebook, Twitter, YouTube, Instagram, LinkedIn, and blogs provide huge—and generally cost-effective—marketing and advertising opportunities.
Credit union compliance officers, meanwhile, know that using social media outlets for marketing and advertising can pose huge compliance risk, because the rules for print advertising disclosures also apply to social media ads.
And because the rules differ greatly depending on the products and/or services advertised, it’s easy to post a noncompliant Facebook ad or send a hazardous Tweet.
To avoid some common pitfalls, let’s review the four main rules and regulations address advertising compliance:
- Regulation Z for loans;
- Truth-in-Savings for share accounts;
- Notice requirements regarding National Credit Union Share Insurance Fund (NCUSIF) coverage and Equal Housing;
- Unfair, Deceptive, and Abusive Acts and Practices (UDAAP) for all ads.
Lending products’ advertising rules and trigger terms depend on whether the advertised loan is open-end or closed-end.
For open-end loans like credit cards, including the annual percentage rate (APR) in the ad triggers additional disclosures, such as transaction or activity charges, participation fees, and a statement that a variable rate might change.
Additionally, if the advertised rate is a discounted variable rate, you also must disclose the initial rate, the length of time it will be available, and the current indexed rate. For home equity lines of credit (HELOC), the required disclosures become more complex.
Notably, APR isn’t a trigger term for closed-end loans. The most commonly used trigger term for closed-end loans is the number of payments or repayment period, such as 60-month car loans or 30-year mortgages.
When an ad for a closed-end loan includes this information, you trigger the APR disclosure and a repayment example.
How are you going to fit all that information in a 140-character tweet? Fortunately, you don’t have to.
A “one-click” exception for electronic advertisements allows you to include triggered disclosures on a separate page via a direct link in the advertisement.
Rate is the primary trigger term when advertising share accounts.
If you advertise a rate, it must be calculated as annual percentage yield (APY). You can use “APY” in the advertisement, but you have to spell out the term at least once in the ad.
The full term doesn’t have to precede the first usage of APY, and can appear in the disclosures. If you include the APY, you must make additional disclosures.
For variable-rate accounts, these include, to the extent applicable:
- A statement that the rate may change;
- The duration the rate is available for share certificate accounts, or a statement that APY is accurate as of the last dividend declaration date for other share accounts;
- The minimum balance to open the account and/or earn the stated APY; and
- A statement that fees could reduce earnings.
For share certificates, these additional disclosures include the term and a statement that a penalty might or will be imposed for early withdrawal.
Additionally, if you state a bonus in the ad, the ad must also contain:
- The APY;
- Time requirements to earn the bonus;
- Minimum balance required to obtain the bonus; and
- When the bonus will be paid.
Will all of these disclosures fit on a Facebook ad? Probably not in a format a consumer can easily read. Fortunately, as with Regulation Z, Truth-in-Savings includes a “one-click” exemption for electronic advertisements.
Share insurance and Equal Housing notices
Whenever a credit union uses social media to advertise an insured member deposit or share account, the advertisement must contain the NCUA official advertising statement.
This can be done in one of three ways:
- The official sign;
- The statement, “This credit union is federally insured by the National Credit Union Administration”; or
- The short statement, “Federally insured by NCUA.”
Keep in mind that if you use the official sign, it must be easily readable. And any time an advertisement references mortgages, you must use the Equal Housing logo or the statement “Equal Housing Lender.”
There is no “one-click” exception for these notices; when required, they must appear on the advertisement.
The prohibition on unfair, deceptive, or abusive acts or practices encompasses social media advertising.
Consider this passage from the Federal Trade Commission’s booklet, "How to Make Effective Disclosures in Digital Advertising." [PDF]
According to this resource, “When it comes to online ads, the basic principles of advertising law apply:
- Advertising must be truthful and not misleading;
- Advertisers must have evidence to back up their claims (“substantiation”); and
- Advertisements cannot be unfair.
Social media advertisements must meet the same standards of fairness and accuracy that govern any other form of media ads. Disclosures for social media ads must be clear, conspicuous, and stated in plain language so members can easily understand the information.
Social media advertisements can’t be inaccurate or deceptive. Having a Facebook cover photo that says “Anyone can join ABC Community Credit Union,” for example, would be deceptive and inaccurate because the credit union’s charter limits membership to people who live, work, worship, or attend school in the areas included in its “community.”
Avoid Common Errors
Although social media advertising rules can be complicated, follow these guidelines to minimize risk:
• Loan products. Speak in general terms when possible. Stating “We have great car loan rates” might not pack the same punch as stating “We have great 60-month car loan rates,” but it eliminates the necessity for additional disclosures.
The same holds true for open-end loan products. If you don’t state a rate, you won’t have to include additional disclosures.
If you include a trigger term, remember that the additional disclosures can be one click away. Mortgage advertisements on social media must always include the Fair Housing logo or statement.
• Share account products. As with loans, the more general the advertisement, the less likely you’ll need to provide additional disclosures.
Avoid using specific rates and you avoid having to disclose the additional information. Again, additional disclosures can be one click away if you use a trigger term. You must include the NCUA share insurance sign or statement on any share account product advertising.
To avoid possible UDAAP issues, make sure the ads don’t say things that aren’t true, aren’t clearly understandable, and aren’t relevant.
One last note on “one-clicks:” If you use a Web banner that has an embedded link as a Facebook photo, the hyperlink won’t suffice. You must include the required link in the photo caption to be in compliance.
Finding a balance
Advertising regulations’ provisions are complex and detailed; this article merely highlights the most common errors in credit unions’ social media ads.
As with all marketing material, your compliance officer should review your social media ads to ensure they meet all requirements.
Remember, “marketing compliance” is not an oxymoron. You can work together to create social media messages that are both compliant and aesthetically pleasing.
KRISTEN TATLOCK is vice president of COMPASS 4 CUs, LLC (compass4cus.com), a credit union service organization wholly owned by Belvoir Federal Credit Union in Woodbridge, Va. In addition to leading the CUNA Social Media Webinar Series Sept. 30 session, "Social Media Advertising Requirements—Avoiding the Pitfalls," Tatlock will lead a session on electronic banking regulatory compliance at the CUNA Regulatory Compliance School, Sept. 14-19 in Chicago.