Marketing & Compliance: Oil & Water?

CBA 37th Annual Regulatory Compliance Conference - October 2015

Overview of Umpqua

Store Opening Case Study

https://vimeo.com/93382601

What is Advertising/Marketing?

• FDIC Advertisement of Membership - Official

advertising statement requirements

• “The term "advertisement," as used in this part, shall

mean a commercial message, in any medium, that is

designed to attract public attention or patronage to a

product or business.”

• Are we using various

mediums to attract

attention to the

Bank? Yes

Other Definitions

• Truth In Savings Act/Regulation DD - Advertisement means a commercial

message, appearing in any medium, that promotes directly or indirectly…

The availability or terms of, or a deposit in, a new account…

• Truth in Lending Act/Regulation Z - Advertisement means a commercial

message in any medium that promotes, directly or indirectly, a credit

transaction…

• Fair Credit Reporting Act/Regulation V Affiliate Marketing - The term

“solicitation” means the marketing of a product or service initiated by a

person to a particular consumer that is… Intended to encourage the

consumer to purchase or obtain such product or service…

• Telephone Consumer Protection Act - The term “telephone solicitation”

means the initiation of a telephone call or message for the purpose of

encouraging the purchase or rental of, or investment in, property, goods, or

services, which is transmitted to any person…

• CAN-SPAM - The term “commercial electronic mail message” means any

electronic mail message the primary purpose of which is the commercial

advertisement or promotion of a commercial product or service (including

content on an Internet website operated for a commercial purpose).

Brand Marketing Program Elements

• Marketing Policy

– Objectives

– Strategy

– Roles & Responsibilities

– Non-negotiables

• Procedures & Training

– Detailed Roles & Responsibilities

– Review Expectations

• Content owners, stakeholders, compliance

– Controls

– Retention Standards

• Compliance Tools/Job Aids

– Review Checklists

• Business Unit Responsibilities

• Compliance Responsibilities

• Monitoring

New Locations/New Markets

• Compliance Risk Management starts before

there is even a location

• Strategic Consultation – CRA Goals – Lending, Services, Investment

• CRA/Fair Lending Impact analysis – Mapping LMI Census Tracts

– Red Lining

• Local Laws & Regulations

– Partnership with Legal and Government Relations

• Regulatory Signage

Case Study Focus – General Brand Based Marketing Approach/Traditional Collateral

Bellingham, WA

November 2015

Fox Tower, Downtown Portland

March 2015

Brand Marketing Compliance –

Where Do We Start?

Fundamentals - What are we advertising?

• Any mention of Products/Services at all?

• Deposit Products?

– Truth in Savings (Regulation DD)

• APY and trigger terms

• Time Deposits, tiered , step and variable-rate accounts, Bonuses

• Overdraft Protection

• Misleading, Inaccurate, misrepresentation of deposit product

• Free/No Cost

– Member FDIC

• Retail Investment/Insurance Sales?

– Disclaimers - Not insured, not deposits, subject to risk

– Misleading, Inaccurate, misrepresentation

– Segregated from insured deposit material

– Anti-Tying (Regulation Y)

Advertising Compliance Fundamentals

• Loan Products?

– Truth in Lending (Regulation Z)

• Open-End

– Trigger terms (APR, HELOCs, dwelling-secured, etc.)

• Closed-End

– Trigger terms (APR, Down payment, terms, Home-secured/non-secured etc.)

– Misleading terms (“fixed” rate, comparisons, government endorsements, lender name, etc.)

• Credit Card solicitations and applications

– FCRA

• Prescreened Solicitations

– SAFE Act

• NMLSR

– Fair Lending

• Fair Housing Act

– Equal Housing Lender

• Equal Credit Opportunity Act (Regulation B)

– Content/Criteria, Not Exclusive, Doesn’t discourage

Advertising Compliance Fundamentals

• Medium – Radio, TV, Billboard

• Modifies product-specific requirements

– Telemarketing • Telephone Consumer Protection Act (TCPA)

– Email marketing • CAN-SPAM

• General – UDAAP

• Unfair, Deceptive, Abusive?

– Fair Lending/Banking • Inclusive

What’s Left?

Member FDIC

UDAAP

Fair Lending/Banking

Unfair, Deceptive, Abusive (UDAAP)

• Factual, Accurate and supported?

• Catch all – Real concern or general unease?

– Not always right or wrong – continuum of risk

• Focus on potential consumer harm and reputational risk – Go back to definitions/tests

– Understand risk appetite

UDAAP!

Technically UDAAP

• Unfair – 3 prong test

– Substantial injury, not avoidable, and, not outweighed

• Abusive – 4 prongs

– Materially interferes with understanding, or, takes advantage of: lack of understanding, inability to protect interest, or, reliance to act in best interest

• Deceptive – 3 prong test

– Misleads, reasonable interpretation, and, material

UDAAP in Practice

• Consumer Understanding? – Reasonable consumer?

– Material? • Affect a consumer’s choice or conduct?

• Costs, benefits, restrictions on use/availability?

• Puffery/Promises? – Objective v Subjective

• Grandma Check – Empathy

– Ethical

– Clear

– Fair

• Provide Focused Training and Tools - Checklists

UDAAP in Practice

• Consumer Understanding? – Reasonable consumer?

– Material? • Affect a consumer’s choice or conduct?

• Costs, benefits, restrictions on use/availability?

• Puffery/Promises? – Objective v Subjective

• Grandma Check – Empathy

– Ethical

– Clear

– Fair

• Provide Focused Training and Tools - Checklists

Fair Lending/Fair Banking

• Promoting the Bank impacts lending

• Fair lending principals can apply to all services (Fair

Banking)

• Risk and Opportunity

• Inclusive

– Pictures, images, representations (race, sex, ability, etc.)

• Does the content portray the bank as inclusive with regards to

protected classes?

– Geographic distribution

• Inclusive of the full community (i.e., not avoiding segments/tracts)

• Channels (TV/Radio stations, Newspapers, etc.) more or less likely

to reach protected classes?

• Equal Housing Opportunity Logo/Legend

Other Areas of Risk

• Reputational Risk?

– Not technical violations, Fair Banking or

UDAAP issues (consumer harm)

– Pushing Boundaries/Risk appetite?

– Brand Identity

Case Study Focus – Handshake Marketing/Buzz

Financial District, San Francisco

August 2013

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Handshake Marketing Compliance

• Program Elements Still Apply – Objectives

– Roles & Responsibilities

– Procedures & Training

– Oversight

• UDAAP and Reputation Risk can exist

• Member FDIC – Exception - Advertisements which are of the type or

character that make it impractical to include the official advertising statement, including, but not limited to, promotional items such as calendars, matchbooks, pens, pencils, and key chains

Handshake Marketing Compliance

• Give-aways/Prizes – Reg DD – Bonus

• Bonus means a premium, gift, award, or other consideration worth more than $10 (whether in the form of cash, credit, merchandise, or any equivalent) given or offered to a consumer during a year in exchange for opening, maintaining, renewing, or increasing an account balance.

• Avoid triggering Disclosure and Advertisement requirements

– Prohibition on Lotteries • …"participants“ advance money or credit to another in exchange for the

possibility or expectation that one or more but not all of the participants (the "winners") will receive by reason of their advances more than the amounts they have advanced, the identity of the winners being determined by any means which includes (A) a random selection; (B) a game, race, or contest; or (C) any record or tabulation of the result of one or more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner.

• No bank lottery, no advertisement of lottery, no lottery on premises – give away ok!

– Taxes • Prizes/Give-aways are income – not gifts

• Consult your Accounting Department on IRS filings

Case Study Focus – Local Spotlight

https://www.youtube.com/watch?v=bBs4k4MKqSA

Small Biz Spotlight Compliance

• RESPA

– Avoid real estate settlement services businesses to Avoid RESPA Section 8 Risk

• Reputational Risk

– Vetting process?

– Not just who you choose, but who you don’t choose

• Give-aways risks can apply

Case Study Focus – Taking it to Social Media

Social Media Compliance Concerns

• New media – same old rules – Same rules apply – no exceptions for social media

– Expectation to manage the risks regardless of medium

– FFIEC Social Media: Consumer Compliance Risk Management Guidance

• What’s different? – Two way communication – public interactions

• Response expectations – Interactive/conversation

– Complaints

– Disputes

• Reputation Issues – Bank posts (or lack of posts!) and customer posts

• Privacy concerns

– Real-time

– Ease of entry/familiarity

Other Risks to Remember: - Copyright - Right of Publicity - Give-aways (again) - Terms of Use

- Bank use - Rights granted?

Social Media Program Elements

• Social Media Policy & Program – Objectives

– Strategy

– Roles & Responsibilities – Designated official users

– Non-negotiables

– Review Expectations • Content owners, stakeholders, compliance, legal

• Marketing vs rapid response

– Procedures

– Controls

– Retention Standards

Program Elements - Training

• Training – All employees

• Official use – who is allowed to post on behalf of the bank

• Impermissible activities

• Consequences

– Official Posters/Users • Objective and strategy

• Compliance training (technical requirements, UDAAP, Fair Lending)

• Procedures and controls

• Complaint handling

• Job Aides (e.g., Checklists)

Program Elements – Responses

• User Posts/Comments - General Response Strategy

– Response guidelines

• Monitoring for activity

• Roles & responsibilities

• Standards, canned responses

• review expectations

– Bank-sponsored vs non-bank

– Set expectations for users of Bank-sponsored media

• Appropriate behavior

• Privacy concerns

• How to engage for formal communications

– Editing/Removing User Posts

• Disparaging bank/others

• Privacy issues

• Irrelevant

Program Elements - Complaints

• Complaint Handling – Bank-hosted vs non-bank

• Bank-hosted – Expectation of customer and regulators is for engagement/response (i.e., treat as complaint)

• Non-Bank Hosted – FFIEC Guidance makes clear not mandatory expectation, but define for your bank

– Response Expectations • Plug into existing complaint program – what’s different?

• Limitations on public responses - Behind the scenes strategies

• Escalation

• Disputes – Reg E Error Notice, Reg Z Billing Error, Credit Reporting,

RESPA

Program Elements - Monitoring

• Monitoring – Authorized Users

• Managing communication in real-time – Response pipeline

• Detective controls for risk management – Compliance Risk (Reg DD, Reg Z, RESPA, etc.)

– Reputation Risk

– Fraud Risk (e.g., phishing, spoofing, etc.)

– Compliance Monitoring • Compliance oversight

– Compliance Risk (Reg DD, Reg Z, RESPA, etc.)

– Complaints

– Negative comments w/ regulatory implications

– Audit • Independent Audit function

Social Media Monitoring Analysis

Social Media Posts by Sentiment Posts

Negative #

Neutral #

Positive #

Negative Social Media Sentiment Categories Posts

Incidental Mention - Post mentions Bank, but negative

comment(s) not directed at Bank #

NASDAQ - Post addresses Bank Stock #

Corporate Concern - Post addresses Bank corporate

practices (not consumer related) #

Non-Specific Consumer Concern - Unspecified

consumer dissatisfaction #

Non-Regulatory Consumer Concern - Specific non-

regulatory concern (e.g., service related) #

Regulatory Consumer Concern - Specific regulatory

concern #

0

500

1000

1500

2000

Nov2014

Dec2014

Jan2015

Feb2015

Mar2015

Apr2015

Social Media Posts by Sentiment Recent Months

Negative Neutral Positive

Negative X%

Positive X%

Neutral X%

Social Media Posts by Sentiment Apr 2015

Social Media Monitoring Analysis

Sample of Negative Consumer Comments:

• Sample (representative) negative posts…

• …

Sample of Positive Consumer Comments:

• Sample (representative) negative posts…

• …

74

Rapid Response Team monitors Umpqua sponsored social media sites and responds to costumer concerns as they are posted.

Sample of Social Media Monitoring

75

Recap: Program Focus/Attention

• Clear objectives, strategy and risk appetite from the Board and Management – Marketing has their direction, Compliance (and other risk areas) know how to help

• Traditional compliance program elements still apply –Be methodical in identifying/excluding applicable risks (Don’t get complacent). Strategy may be Brand-Based, but traditional collateral still exists – Bank website

– Product brochures

• Need formal program to focus attention appropriately

Recap: Program Focus/Attention - Tools

Communication Review Decision Matrix Example

UDAAP Review Worksheet Example

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