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Deception in Advertising

By Blair Rugh 29 Mar 2017

In addition to pay day lenders, student loan servicers and debt collectors, it appears that one of the burs under the saddle of the Consumer Financial Protection Bureau (CFPB) is what it believes to be deceptive advertising. Recently, the CFPB fined Experian $3 million for "deceptively" advertising the credit scores it made available to consumers. Previously, it had tattooed Transunion and Equifax under similar circumstances. The credit bureaus had developed what are referred to as "educational credit scores" which are similar but slightly different than the scores actually used by lenders. The educational credit scores are designed to provide consumers more information about how the credit is actually scored than what is provided to a lender. The CFPB found that the credit bureaus advertising of the scores as the scores used by lenders was deceptive.


The CFPB fined reverse mortgage lenders for stating in their advertisements that the consumer could not lose his or her home because of the loan without also stating in their advertisements what would seem obvious, that the consumer could lose his or her home if the consumer did not provide insurance and pay the real estate taxes. The failure to provide that information with equal prominence to the other information was deemed deceptive.


Apparently, the use of superlatives is still allowable. If you want to advertise your bank as the friendliest bank in town, even though you have two or three grouchy employees that is fine. If you want to advertise yourself as the most convenient bank in town, even though to some residents you may not be the most convenient, that is fine. Beauty is still in the eye of the beholder. But if you advertise that you offer the highest deposit rates in town, now you have stated a fact and it had better be accurate in every respect. If you sell hamburgers and you advertise that they are 100% prime beef, they had better be 100% prime beef and not 90% prime beef and 10% something else.


If you make a statement in your advertising about one of your products it should be an accurate statement under any circumstance. For example, you cannot advertise that your time deposits are penalty free for early withdrawals when Regulation D requires you to impose a penalty for a withdrawal within the first six days after the deposit is opened. I recommend that bankers review all of their advertising, particularly their websites and any social media that they utilize. Highlight every statement that is a fact and then verify that it is accurate under every circumstance. I think that you only need to be concerned about factual statements about your products and not about other aspects of your bank. For example if you state on your website that your business hours are 9 to 5 Monday through Friday, I don't think that you need to say they you are closed on national holidays and that you close at noon on Christmas eve.


My guess is that if an examiner cannot find something else in your bank to complain about, he or she will take a magnifying glass to your advertising. Fore warned is fore armed.


On a totally different subject, I was recently given a book by the writer who is the president of a community bank and a reader of this column. While the book is about neither banking nor compliance, in the book he details an exit interview from a compliance exam. In the exit interview, he tried to inject logic into their findings. I told him that if he insists on applying logic to today's compliance rules he would never make it as a banker. By the way the title of the book is "Walking with Herb" by Joe Bullock. If you are a banker, an avid golfer and have a reverence for Augusta National and the Masters, I think you will enjoy it.

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