The growth and expansion of FinTech service providers nationally and internationally over the last five years is reshaping the financial landscape. This evolution includes differentiation in how financial products are delivered and who is providing those financial products. Critical to the success of these FinTech providers is advertising their products and services and ultimately monetizing their business model. Understanding the evolving legal and consumer protection landscape will help FinTech companies identify and manage their legal risks and to more effectively work with employees and vendors developing and implementing advertising campaigns. The advertising of financial services, whether by Web, e-mail, mobile app, social media platform, television, radio or print, however, is not free from risk, and FinTech providers must tread carefully around the following five issues:

1. Does your company advertise on social media? In today's competitive marketplace, FinTech companies are relying heavily on social media and other digital methods to communicate with consumers and to structure innovative and edgy marketing campaigns. Marketing departments and advertising and public relations agencies are staffed with hip Web-and-mobile-savvy professionals who wish to execute highly elaborate marketing campaigns that often include a mix of user-generated content, text messaging, Twitter messaging, Facebook applications, blogging, viral marketing and other social networking elements. However, these same tech-savvy marketing professionals are often unaware of the complex legal overlay of the digital world and the potential significant financial repercussions for their company's failure to comply. Advertising, marketing and promotions, both via digital and traditional channels, are governed in the United States by a patchwork of federal, state and local laws and regulations. Additionally, each social media platform has its own terms of use that determine issues of ownership and control of the content and activities on that platform. Some websites and other social media platforms prohibit any commercial use other than as a paid advertiser. Before engaging in a promotional campaign on a third-party website, it is a good idea to review and follow the rules of the applicable venue. Also, just because a user of a social media platform posts something online does not mean an advertiser can reuse it to promote their products or brand on another platform. Failure to understand and follow these requirements can potentially lead to expensive litigation or government enforcement actions and negative publicity that can harm a brand. Further, the advancement of technology makes things possible that may not be well received by consumers, even if they are currently legal.

  • Endorsements and Testimonials: The FTC has released guidelines concerning the use of endorsements and testimonials in advertising. The guidelines require disclosures regarding any material connection the company has to an endorser, such as celebrities, bloggers, YouTube influencers, experts and consumers. FinTech companies that are involved in hiring others to encourage the sharing of messages about their financial products/services in traditional and nontraditional media (e.g., Twitter, blogs) will be responsible for the message and for making reasonable efforts to ensure that those it activates to spread the word about the products/services disclose any material connections to the advertiser, such as an entry into a contest or sweepstakes, employment, payment of money or being the recipient of samples or other things of value.

2. What types of claims do you make in your advertising? Any advertising message is deceptive if it contains a statement or omits material information that is likely to mislead a reasonable consumer and is material or important to a consumer's decision to buy or use the product or service. A statement may also be deceptive if the advertiser does not have a reasonable basis to support its claim. These traditional advertising law concepts apply regardless of the specific medium where the ad will appear. The Bureau of Consumer Financial Protection (CFPB) is charged with the power to prohibit "unfair, deceptive or abusive acts or practices" with respect to consumer financial products and services. Advertisers should make sure their disclosures are clear and conspicuous on all devices and platforms that consumers may use to view their ads. That means that if an ad would be deceptive or unfair (or would otherwise violate a CFPB or Federal Trade Commission (FTC) rule) without a disclosure—but the disclosure can't be made clearly and conspicuously on a particular device or platform—then that ad shouldn't run on that device or platform.

  • "Up To" Claims: Companies advertising financial services products frequently promote claims of APRs "as low as" X% and loan amounts of "as much as" $Y. When substantiating "up to" claims, the FTC generally requires that an appreciable number of consumers qualify for the best "up to" terms, but "up to" can have different meanings depending on the context in which the claim appears and the product category to which it is being applied. Before making "up to" claims when promoting loan terms, legal counsel should closely review the claim and consider whether it could be misunderstood as providing a nonexistent or misleading cap where there could be potential consumer harm caused by such a misunderstanding.

3. Do you advertise using e-mail or send text messages to consumers? CAN-SPAM governs the sending of commercial e-mails, which requires, in part, that the e-mail identifies the sender, the subject line accurately reflects the contents of the message, the sender provides the recipient the ability to opt out of receiving future commercial e-mail from the sender, and that the sender maintains and scrubs against a "suppression list" of prior opt-outs. CAN-SPAM violations have resulted in expensive settlements with the FTC, and consumers can bring e-mail marketing claims if deception is alleged. The TCPA, telecom carrier rules and the Mobile Marketing Association's Best Practices Guidelines govern the sending of text messages and e-mails to mobile domain addresses. Companies must satisfy notice and express advance written consent requirements before sending a commercial text message. TCPA violations have spawned many class action lawsuits, resulting in tens of millions of dollars in settlements paid by advertisers that failed to fully comply.

4. What industry-specific financial services laws and regulations apply to your ad campaigns? Depending on the specific type of financial services being marketed, various federal and state laws and regulations may apply. For example:

  • Informal Posts May Be "Advertising": The FDIC broadly defines the term "advertisement" as "a commercial message, in any medium, that is designed to attract public attention or patronage to a product or business." Regulation Z, discussed below, defines an advertisement as "a commercial message in any medium that promotes, directly or indirectly, a credit transaction." 1026.2(a)(2). Regulation DD defines "advertisement" to include any "commercial message, appearing in any medium, that promotes directly or indirectly the availability or terms of . . . a new or existing account." In each case, the definition is broad and could include informal communications in the form of tweets, blogs and comments.
  • Required Advertising Statements: If a FinTech company is engaging in advertising over social media, there may be a variety of technical requirements that must be followed. For example, the FDIC requires an official advertising statement and/or the FDIC logo be used. 12 CFR § 328.3. Another example requires banks advertising loans for dwellings to include the "equal housing lender logotype" and/or indicate that the bank makes such loans without regard to race, color, religion, national origin, sex, handicap, or familial status. 12 CFR § 328.3. Similarly, the National Credit Union Administration requires an official advertising statement from its members on their website and in advertising. 12 CFR § 740.5.
  • Advertising Consumer Credit: The Truth in Lending Act (Regulation Z) ensures the meaningful disclosure of consumer credit and lease terms, including those in advertisements, so that consumers can easily compare terms and shop wisely for credit. If you or your employees are engaging in communications regarding credit or lease terms over social media, then the requirements of Regulation Z apply. Also, a record of any communication of this kind must be retained for two years.
  • Advertising All Credit: The Equal Credit Opportunity Act (Regulation B) forbids discrimination in connection with credit on certain prohibited bases, including race, gender, national origin and age, among other bases. The prohibitions extend to credit advertising that may discourage persons from applying for credit on a prohibited basis, and regulators have taken the position that nondiverse models in ads for credit may violate these rules.
  • Advertising Deposit Accounts: The Truth in Savings Act (Regulation DD) contains certain requirements for any commercial message in any medium that promotes, directly or indirectly, deposit accounts. If a communication of this type is sent over social media or otherwise, it may not be misleading or inaccurate. Regulation DD also prohibits any description of an account as "free" or "no cost" (or containing a similar term) if any maintenance or activity fee may be imposed on the account. If the advertisement states a rate of return, it must be expressed as an annual percentage yield and certain other disclosures must be made. There are some exemptions for advertisements that are made electronically, but some disclosures are still required. Finally, if a communication of this type is sent, a record of the message must be retained for two years.
  • Licensing: Certain states require the licensing of persons soliciting mortgage and other loans, and platforms and lead generators advertising credit products to be made by others may be deemed to qualify as soliciting and therefore subject to licensing under these laws.

5. Does your company engage in behavioral advertising? Online behavioral advertising (OBA) is the term used to describe this process of companies tracking consumers' online activities to profile and target them for interest-based advertising. Many companies advertise using OBA but may not be directly involved in collecting and using the OBA data because they employ vendors and ad servers to do this. However, an advertiser, even if engaging in OBA on a nonaffiliated site (e.g., retargeting a user who has left your site with an ad on another site), is subject to self-regulatory rules and best practices guidance promulgated by the FTC. Before engaging in any OBA, companies (both advertisers and publishers) should review the cross-industry behavioral advertising self-regulatory guidance, which provides a self-regulatory framework for advertisers, agencies, publishers and technology companies for engaging in OBA. The Digital Advertising Alliance (DAA) also provides an iconic form of notice that alerts consumers to OBA and provides a method of opt-out. While the DAA licenses the icon itself for $5,000 a year, it has three approved service providers that provide compliance and analytics services, which can provide the license as part of its services. To identify and minimize risks, companies should take steps to (i) understand what tracking is taking place through their marketing campaigns, as well as their websites and applications; (ii) include the requisite insurance and indemnity provisions in their agreements with vendors assisting the company with OBA; and (iii) include appropriate disclosures in the company's privacy policy, on its home page and on OBA ads to address what OBA activities may be occurring.

Conclusion

The last decade has seen technology change the ways brands can interact with consumers in ways hardly imagined before. The results can be beneficial to both the company and consumers, but consumers also face real risks and burdens as a result. Companies need to weigh the benefits and risks of proposed advertising and sales schemes and campaigns and be aware of the changing regulatory landscape that is evolving as technology advances. Further, the most important asset a brand has is its consumer goodwill. New marketing and sales approaches that consumers appreciate build goodwill, but those that are perceived as misleading, unfair or too intrusive can harm the brand.