If you’re like me, the first few weeks of summer mean gardening, the first of many cannonballs into the pool, and drinks on the patio. This year, summertime should also encourage you to clean up your marketing.
Marketing practices always present ample opportunity for regulatory scrutiny, but with the Consumer Financial Protection Bureau recently announcing its plan to invoke regulatory authority over non-bank entities it previously ignored, now is the time to get your marketing practices in order . I don’t usually like to speak in absolute numbers, but the CFPB does always analyzes consumer-facing marketing materials during an audit.
Marketing often gives a regulator a first look at your compliance mindset and practices. If your consumer-facing ads and marketing tactics (such as your website and paid search ads) demonstrate your commitment to compliance, regulators may decide to move on to the next target, which may not play as well into a row as you do .
They’ve worked hard implementing your marketing policies and procedures, so consider taking the time to make sure they’re up to date and being followed. If you don’t have a formal marketing policy and accompanying procedures, there’s no time like this!
Since we all know that it’s best to tackle the most important issues first, let me remind you of the key marketing compliance issues that the CFPB typically addresses.
Formal Policies and Implementation Procedures. These documents are vital. They are your marketing compliance roadmap. Without it, you will find it difficult to demonstrate to a regulator that you are aware of marketing compliance issues and to take action to ensure your marketing is compliant with applicable laws. An informal process where the marketing person emails the marketing campaign to the compliance person for quick review before it is shared over the radio or social media is not enough when it comes to an audit.
Reviewing marketing materials before use. All marketing materials, with very few exceptions, should be reviewed and approved by your legal/compliance department before use. Your formal policy should include this requirement. Your procedures should detail how you accomplish this task and how you document review and approval within your organization. They should also include steps to ensure fulfillment is consistent with marketing. If you don’t have a policy or procedure, see above.
You should be able to demonstrate that you have reviewed and approved the marketing materials before using them. Sifting through email to find all those back-and-forth “yes, that looks good” marketing approvals takes an indecent amount of time and risks inadvertently revealing privileged information. The review/approval procedures don’t have to be fancy, but you should be able to quickly demonstrate that a particular ad was reviewed and approved, by whom, and on what date.
Clear and conspicuous disclosures. Both the Consumer Financial Protection Act and the Federal Trade Commission Act regulate marketing materials and prohibit fraudulent acts or practices. An act or practice is deceptive if: (1) there is a representation, practice or omission designed to mislead consumers; (2) Consumers interpret the message as is reasonable under the circumstances; and (3) the misleading effect is “material”, ie it influences consumer behavior or decisions regarding the product. The misleading standard includes stating something misleading, implying something misleading, or giving a misleading impression by not stating something.
Regulatory authorities generally look at an advertisement as a whole to determine how reasonably consumers are likely to respond to it. Typically, the regulator will verify that a qualifying disclosure is clear and conspicuous. According to regulators’ guidelines, a disclosure is clear and conspicuous when consumers notice, read, and understand it. Accordingly, regulators are assessing whether the use of footnotes or fine print in an ad that modify prominent claims in the ad adequately avoids an argument that the prominent claim is misleading. In certain circumstances, written disclosures in the fine print may not be sufficient to correct a misrepresentation.
In other words, fine print may or may not work. If you feel the need to include a detailed disclosure to explain the details of the claim you are making, I encourage you to: 1) consider revising the claim so that it requires less explanation; or 2) be very confident that the disclosure will be made in a manner that consumers will notice, read, and understand.
Reason. The Federal Trade Commission requires advertisers to provide “reasonable basis” for objective claims. What constitutes an appropriate basis may change depending on the context. The justification question typically arises in the context of scientific claims, but can also arise in other contexts, including creditworthiness.
The FTC guidelines state that an advertising claim must be substantiated at the time the claim is made because reasonable consumers might believe that the advertiser supports the claim in question when in fact it did not. Creating and documenting evidence of a claim after the claim has already been made is not sufficient justification. Note that the justification must also be updated regularly. If an allegation could be substantiated when it was made, but the tide changes and then the justification no longer exists, then the allegation must be withdrawn. For example, anyone who advertises a “zero down” campaign via a radio spot and then decides two months later to no longer pursue the “zero down” strategy should pull the spot. Keep this in mind when creating these types of ads.
Many other problems lurk in the area of marketing compliance. Customer reviews and testimonials are particularly hot, along with social media influencers, the possible narrowing of the “reasonable consumer” doctrine, and the reemergence of a focus on bait-and-switch ads.
It’s time to drop the cannonballs for a moment and get to work supporting these marketing practices. You’ll enjoy that drink a lot more on the patio after you’ve done it!