Friday, April 26, 2019

Is Your Institution's Marketing UDAAP Compliant?

Posted by OnCourse Staff December 31, 1969 7:00pm

Photo Credit: sumetho

By: Guest Blogger Asaad A. Faquir, Regulator Compliance Specialist at RSK Compliance Solutions, LLC


How many of you saw this headline recently?

“Discover to refund $200 Million to customers for deceptive telemarketing.”

If you missed it, the long and short of it was that Discover violated the principles of UDAAP and the FDIC, and CFPB brought the hammer down.  However, contained within the CNN article (one of many news outlets that had picked up the story), was this resonating quote from the Director of the Consumer Financial Protection Bureau, Richard Cordray:

"…[W]e are signaling as clearly as we can that other financial institutions should review their marketing practices to ensure that they are not deceiving or misleading consumers into purchasing financial products or services."

In other words, this heavy penalty is a more than just a mere warning shot: it’s a full on air raid siren to let other banks know what is coming.  And what is coming is an all out assault on how banks market their products.

Now many of you are thinking, “We’re safe, we are a small community bank and we don’t have crazy marketing.  We only tell the truth in our ads.”  While this is likely the 100% truth, the challenge…is how can you prove it?  Most community banks have an ad hoc marketing process, which usually operates in the following manner:

  1. Senior Management decides to push a particular product or service
  2. The most creative person on the bank’s staff (usually with a title that includes “and Marketing” somewhere on their business card) is told to put something together as cheaply as possible
  3.  Senior Management reviews it and says, “Great! Send it to print or post, or what have you, but get Compliance to look at it first!”
  4. The “and Marketing” staff then e-mails the draft to Compliance at 10am with a message similar to, “I need this by like Noon so we can get it printed (or in the newspaper run). [Insert Name of most influential Senior Manager] already signed off.”
  5. Compliance then reviews quickly for “trigger terms” using some sort of checklist and blesses the advertisement as “Compliant.”

If that is your “marketing” process, you are not alone…but what you have to realize now, though, is that this is no longer enough.  In a new UDAAP world, all four of the marketing Ps (i.e., Price, Product, Placement, and Promotion) are fair game for an “unfair” review.  What does that mean? That means the fees you charge, the products you offer, the location of your services, and the way you advertise must be addressed as one cohesive consumer friendly process which leaves no hint of deception or abusive actions. 

Now you can choose to heed Mr. Cordray’s warning, improve your marketing process and make UDAAP a way of life at your bank, or you can choose to do none of that and maintain that status quo. Just don’t say that you weren’t warned of the regulatory Honey Badger coming your way.   


Add a comment

  • Required fields are marked with *.

If you have trouble reading the code, click on the code itself to generate a new random code.


OnCourse Staff

The OnCourse writing staff work to keep you informed about the most pertinent financial industry news of the moment

OnCourse Staff's Posts Subscribe to RSS Feed

Training – An Investment and Risk Management Tool
Are You Gambling with Your BSA Program?
Does your 401(k) Plan need an Audit?
Same Day ACH Credits – Phase One
Is the IRS Status of your Defined Benefit plan in Jeopardy?
Is your Institution Monitoring Working Capital Lines of Credit?
Financial Reporting and Regulatory Update on the Horizon
Planning in a Consolidating Banking Industry
To opt-out or not to opt-out, that is the question – A reminder on March 31, 2015 Call Report, Schedule RC-R, item 3.a
Cybercriminals Broaden their Attacks in Social Networks
The Importance of Segregating a Bank’s Credit Function from its Lending Function
Requesting Current Financial Information
Countdown to Windows XP End of Life and Support: Are you still at Risk?
314(b) Distinct Advantages for Financial Institutions
Where is the Document?
Do You Know The Security Features of the New $100 Bill?
Segregation of Duties for Wire Transfer Processing
Community Banks Slowly Warm Up to Private Student Loans
Has your Bank updated the Adverse Action Notice?
How Does Your Bank Handle Customer Requested Maintenance Changes?
OCC Releases Booklet on "Common Sense" Community Banking
New SAR Filing Updates
The Importance of BSA Training
FFIEC Proposed Risk Management Guidance on Social Media: Beware and Prepare
Pandemic Preparedness: Are you testing your Pandemic Plan?
FFIEC issues revised “Supervision of Technology Service Providers” booklet
Is Your Institution's Marketing UDAAP Compliant?
Electronic Work Papers - Why P&G Made the Switch
Community Lenders Seize Market Share From Big Banks by Using Advanced Online Lending Technology
New FinCEN Guidance for CTR Aggregation for Businesses with Common Ownership (FIN – 2012 –G001)
Curry: Operational Risk Now OCC’s Top Concern
JOBS Act Client Alert - Rules 506 of Regulation D
Wall Street Receives Volcker Rule Clarity
De-stressing with stress testing
Banks Participate in Information Sharing to Battle Online Theft
IT security: Is your program still effective?
Mobile banking: How do we get there?
UBS further struggles with $2 Billion loss by Rogue Trader
Capital One Becomes Dodd-Frank Test as Nation’s Fifth Largest Bank
Community Banks to receive US Funding for Small Businesses
FDIC fields questions about overdraft guidance
Negligent Hiring – A mistake can cost more than just money!
From Embezzlement to Imprisonment: Former Citigroup employee faces charges with $19.2 million in bank fraud
Finding the Right Hire
Model behavior: Is your ALM model capturing your bank’s risks?
ALLL best practices: Pay attention to qualitative factors
Abandoned Property Law, and its new New York State of Mind
FDIC releases Provisions on Dodd-Frank to help Community Banks
Social Media in the Employment Arena – It Gets Funky!
Banks and Businesses get "swiped" over Fees
A little bit of this, and a little bit of that: Fed Unveils list of Banks Helped during Financial Crisis of 2008
To Test or Not to Test; That is the Question
2011 Failed Bank List Hits 25
Committee on Financial Services to Hold Hearing on the Effects of Dodd-Frank on Small Biz and Banks Today
2011 Failed Bank List up to 18
The Test Drive: Leasing or Buying a HR IT Platform
Double Digits: Bank Closings up to 11 in 2011
FCIC Releases Report on the Causes of the Financial Crisis
Another One Bites the Dust: Regulators Close 4 Banks
On Notice: FDIC Issues Rule for Temp Unlimited Deposit Insurance
2011 Failed Bank List Up to 3
Stick 'Em Up!
Time for a Tune-Up: The Necessity of a HR Audit
Visa Instituting Two-Tiered Debit Card Interchange Structure
The First Failed Banks of 2011
The Law on Your Side: Understanding HR Regulations in 2011
No Respite from RESPA