“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:
- Senior Management decides to push a particular product or service
- 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
- 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!”
- 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.”
- 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.
