Credit union marketers, regulators are watching you

first_imgRegulators have today’s credit card advertisements under an intense magnifying glass. As evidence of the increased attention on credit cards, the Consumer Financial Protection Bureau (CFPB) recently issued a bulletin on the marketing of credit card promotional APR offers.Credit unions, of course, are not left out of this increased scrutiny. In fact, they are held to the same regulations governing big banks when advertising their products and services. Therefore, credit union marketers must apply as much scrutiny and due diligence to their creative messages as do their larger financial institution counterparts.There are a number of common missteps credit unions can avoid when marketing credit cards to existing and potential cardholders. As a starting point, marketers should make themselves aware of the recent CFPB guidance. As well, credit union professionals must keep in mind some basics of credit card marketing compliance.CFPB GuidanceThe CFPB’s bulletin informed credit card issuers of the risks of engaging in deceptive and/or abusive acts and practices in connection with promotional APR offers on things like convenience checks, promotional interest rate purchases and balance transfers. Specifically, the CFPB has observed solicitations that do not “clearly and prominently” convey what it perceives as a likely scenario for consumers who accept promotional APR offers. That scenario occurs when consumers accept the offer and continue to make purchases. If consumers do not pay the entire statement balance, including the amount subject to the promotional APR, by the due date, they could not understand that loss of the grace period is possible.So how does a credit union ensure their messages are “clear and prominent?”A credit union should conspicuously include information regarding the loss of the grace period in the marketing materials. As well, marketers should keep the overall or “net” impression of the advertisement in mind. This may mean restricting the use of technical language so that the full terms, risks and potential costs are clearly explained. Communication should not allow cardholders to believe the only cost of obtaining the promotional APR is the disclosed transaction fee. Nor should issuers indicate the cardholder will only incur interest charges at the promotional rate.The Basics of Credit Card Marketing ComplianceIntroductory or Promotional Rate/Fee OffersCredit card promotional offers are always a hot topic when I present on marketing compliance. Credit unions are naturally eager to promote the amazing introductory or promotional APR they are offering. Yet, many credit unions find it difficult to balance promoting the offer with regulatory compliance, specifically providing the required disclosures triggered by the offer.As the CFPB has noted in the above mentioned bulletin, a credit union may be at risk of being deceptive in their marketing with these types of solicitations.In addition to the above considerations, it’s important to ensure your credit union is properly informing the cardholder or potential cardholder of the proper disclosures. First, if the offer is an introductory offer (APR or fee), marketing materials must state “introductory” or “intro” in immediate proximity to every listing of the introductory rate or fee. “Immediate proximity” is defined as in the same phrase as the listing of the introductory rate or fee.Second, if an advertisement states an introductory or promotional rate/fee, it must also clearly and conspicuously disclose when that rate or fee will end and what the post-introductory or post-promotional rate/fee will be after promotional period. For the purposes of promotional rates, a clear and conspicuous disclosure means the additional required information is disclosed with equal prominence and in close proximity to the promotional rate.Fixed vs. Non-Variable vs. VariableAn advertisement should never refer to an APR as fixed or use a similar term (non-variable). There are exceptions to this rule, however. Marketers can use the terms if 1) the advertisement specifies a time period the APR will be fixed and the APR will not increase during that period or 2) the APR will not increase while the account is open.A credit union should not state an account is non-variable simply because it is not based on the Prime Rate plus a Margin. If a credit card APR is not fixed and not based on the Prime Rate plus a Margin, the advertisement should be not include “fixed,” “variable” or “non-variable” language. If the credit card is based on a variable periodic rate, this fact must be disclosed in the advertisement.Risk-Based PricingIf a credit union extends offers of credit as a result of risk-based pricing, the phrase “as low as” should be stated prior to any APR in conjunction with the credit card offer. Risk-based pricing occurs when a credit union offers different cardholders different interest rates or terms, based on the estimated risk that the cardholder will fail to pay back his or her loan. Each credit union uses its own process to determine that risk, yet most rely on a consumer’s credit score, employment status, income and other outstanding debts.At first blush, and especially for marketers new to the financial space, compliance constraints can seem to be exactly that – constraining. However, by pairing creative genius with regulatory know-how, credit unions all over the U.S. are managing to deliver both compelling – and compliant – offers to win the loyalty of today’s consumer. 17SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblr,Jennifer Anderson-Kapke In working with individual credit unions on a variety of federal regulatory compliance matters, Jennifer provides strategic compliance direction while assisting credit unions with the day-to-day implementation and understanding of … Web: Detailslast_img

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