Hot Topics in Advertising & Marketing: COVID-19, Financial Services, and More
An ACC Legal Quick Hit
Financial Services Network Wednesday, May 27, 2020
R. Andrew Arculin, Partner
Panelists Jonathan L. Pompan, Partner
Gerald S. (Gerry) Sachs, Partner
Welcome
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2020 / 2
Today's Discussion
COVID-19: Regulatory impact on financial services industry advertising Regulatory outlook at the FTC, CFPB, banking agencies, and states Lead generation, influencer, and other emerging marketing methods Emerging trends in government investigations, competitor challenges, litigation
defense, and more Practical compliance tips and strategies, including the use of RegTech/AI, the role of compliance staff and lawyers, and real-world examples
2020 / 3
Today's Panelists
R. Andrew Arculin
Partner 202.344.4588 [email protected]
Jonathan L. Pompan
Partner 202.344.4383 [email protected]
Gerald S. (Gerry) Sachs
Partner 202.344.4269 [email protected]
2020 / 4
COVID-19: Regulatory impact on financial services industry advertising
2020 / 5
Regulators Urging Financial Services Sector to Help
Treasury identifies "Financial Services" as Essential Critical Infrastructure Workforce.
Federal Regulators providing providers tools to assist households, businesses, and the economy more broadly. Enhanced credit resources - Agencies facilitating the flow of credit to households and businesses, including changes to regulatory and monetary policy. Regulatory relief - Agencies are providing regulatory relief to support efforts to provide financial services to those impacted by the crisis.
2020 / 6
Financial Services Regulators
Virtually every agency has issued some form of the following: Guidance for companies to provide customer assistance Regulatory relief to assist customers Notice that the agency is still enforcing the law
Areas of focus: Consumer Financial Protection Bureau:
Federal Trade Commission:
Mortgage, Student Lending, Credit Reporting, No Action Letters
COVID-19 treatments and coronavirus prevention, small business loan, pitches, robocalls, and market collusion
Prudential Banking Regulators: State Attorneys General Offices:
Payment accommodations, credit reporting, delinquency, examination guidance, disclosures, operational issues
Payment accommodations, foreclosure prevention
2020 / 7
Regulators urging financial services sector to help consumers: Are there pitfalls?
How will providing temporary relief or modifications to your product and services interact with regulatory requirements? Do your products and services match your terms and conditions or terms of service? Different services or product than what was advertised Delayed or deferred payment options what are the requirements / mandatory or optional Cancellation and/or refund what are the requirements / mandatory or optional Compliance Management Systems Temporary policies Customer compliant response and monitoring
Focus Area: Services and products that directly impact consumers suffering from COVID-19, protected classes, business-to-business, and CARES Act Payment Protection funding.
2020 / 8
Regulators Urging Patience and Assistance
Key Takeaways Businesses must be able to continue serving the financial needs of their customers during this crisis, not just for the customers, but for communities and the overall economy. Regulators expect businesses to work with customers impacted by COVID-19 and to make prudent accommodations where possible. All actions should be taken with appropriate management oversight and consistent with industry practices and applicable law, including consumer financial protection laws. Document the reasons and basis for making any changes. Consider reviewing, again, whether the product still meets all required regulatory scrutiny. If you are an examined business (supervised nonbanks and service providers), stay in regular communication with your regulators/examiners.
2020 / 9
Regulatory outlook at the FTC, CFPB, banking agencies, and the states
2020 / 10
The Federal Trade Commission
Tips for consumers and businesses Small Business Lending Tips for owners and lenders--likely to be a focus going forward and immediately after the pandemic. Privacy and data security are still major concerns Children's Online Privacy Protection Act (COPPA) for online services, including Edtech or remote learning. Increased penalties in settlements
Warning letters with other agencies re: ads mentioning coronavirus and COVID-19 FTC / FCC related to businesses using robocalls to advertise fraudulent government assistance. FTC / U.S. Food and Drug Administration to businesses advertising coronavirus cures or relief.
2020 / 11
FTC Staff Report on Small Business Financing Forum
The 12-page report provides staff perspectives on key issues discussed at the FTC's May 2019 forum on small business financing, "Strictly Business," including online loans and alternative financing products (Forum).
The report includes several staff cautions to small business finance providers and their service providers to help them avoid the types of conduct the FTC has alleged to be unlawful.
The report emphasizes that the FTC has broad jurisdiction over commercial financing under the FTC Act and other laws that prohibit deceptive, unfair, and unlawful practices by small business financing providers and their marketers, servicers, and collectors.
Perhaps to underscore this point, the staff repeatedly refer to small business borrowers as "consumers" throughout the report, suggesting that they see no difference in the FTC's authority over consumer protection and small business protection.
Between the lines: Given the attention small business financing products are receiving, it would not be surprising if the FTC has open investigations involving small business financing products.
2020 / 12
The Federal Trade Commission
Enforcement: Business kind of as usual Advertising: FTC v. LendingClub Could be going to trial if SJ doesn't sort it out The intersection of UDAP and TILA and "hidden fees" FTC v. Progressive Leasing FTC will look at companies more than once, digital design of disclosures important, monitor service providers/vendors In the matter of LendEDU UDAP, Regulation E, and TILA FTC v. Lead Express, et al. (Harvest Moon Financial) Payday lending and tribal enterprise
Commissioner disagreements out in the public: Is it because of work from home? Chairman Simon's decision in a pharmaceutical merger notes that Commissioner Chopra's dissent Had a disregard for facts and law and dismissed the work of the dedicated and hardworking FTC staff Relies on false assertions, misapplication of law, and specious logic Embraces the adage to "never let the truth get in the way of a good story" Speculates versus relying on a rigorous investigation that is grounded in evidence
Cases to watch: Supreme Court Cert Petition regarding 7th Circuit decision that vitiates the FTC's ancillary equitable authority
2020 / 13
FTC v. Progressive Leasing
Rent-to-own payment plans in retail stores Alleged misleading marketing of payment plans, e.g., "same as cash," or "no
interest" Alleged company was aware of consumer confusion with > 15k complaints in
15-month period $175m settlement for refunds, prohibition on misrep. the cost, terms, or nature
of its plans, and must get consumers' express, informed consent before charging or billing them; monitoring of third party, such as retailers. Dissent - Commissioner Rebecca Kelly Slaughter contended that the proposed settlement does not adequately remediate harm or achieve appropriate deterrence. She advocated for (i) higher monetary relief, closer to the total amount Progressive charged consumers over the cash price--in excess of $1 billion; (ii) individual liability for Progressive's CEO because he participated directly in the allegedly illegal practices or had authority to control them and because Progressive's parent company, Aaron's, had been subject to prior FTC actions; and (iii) charging Progressive with a violation of the Restore Online Shoppers' Confidence Act (ROSCA). Takeaways: FTC will look at company more than once; importance of disclosure and digital design; responsibility for third parties, such as retailers (e.g., lead generators for financing)
2020 / 14
Consumer Financial Protection Bureau
Providing guidance and regulatory relief not just on the phone 2 No Action Letters issued in March (mortgage servicing loss mitigation software and small dollar lending)
Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic Awaiting Debt Collection Final Rule
Debt collection rule: Time barred debt allowable with disclosures (open for comment) Guidance on mortgage relief options Guidance to financial firms during the pandemic (billing error responsibilities and change in account
terms w/o notice) Housing Assistance website
2020 / 15
The CFPB: Still going
Enforcement focus: Oversight of vulnerable populations more likely to result in new lawsuits (elderly, servicemembers, students). Ongoing litigation will continue dependent on courts and opposing parties. Continuing investigations with no in-person contacts e.g., data requests (CIDs).
Recent cases: Cross-selling incentives and account opening issues. Advertised mortgages, but provided leads to student loan debt relief companies. Credit repair offers and services. Key takeaways: State what you mean, strengthen and review compliance, analyze customer complaints--don't just answer them.
2020 / 16
Federal Prudential Banking and State Regulators
Agencies will provide appropriate regulatory assistance to affected institutions subject to their supervision. Encouraging institutions to work constructively with borrowers and other customers in affected communities.
Prudent efforts that are consistent with safe and sound lending practices should not be subject to examiner criticism.
Expedite, as appropriate, requests to provide more convenient availability of services in affected communities. Work with affected financial institutions in scheduling examinations or inspections to minimize disruption and
burden. (Joint Press Release, Fed, FDIC, CFPB, CSBS, NCUA, OCC (March 9, 2020))
CA Department of Business Oversight Likely to continue regulating and take action if absolutely necessary. Settlements with point-of-sale lenders restitution, fees, and obtain a California Financing Law license.
NY No new enforcement actions in March 2020. Accommodation to consumers/borrowers in Circular 7. Reminder to funeral homes about consumer rights.
2020 / 17
Lead generation, influencer, and other emerging marketing methods
2020 / 18
Advertising, Lead Generation, Influencers, and Endorsement Guide
The FTC and CFPB are watching the use of lead generation If you use affiliate marketing, make sure you know what your advertisers are telling your customers to get them in the door Watch out for free offers, gifts, subscriptions, and competitions
FTC Advertising Disclosure Guidance for Online Influencers
Endorsement Guide Update on Horizon
2020 / 19
In the Matter of LendEDU, et al.
Website compares student loans and other financial products
Alleged misleading marketing that led consumers to believe website provided objective product information, when in fact they provided higher rankings and ratings to companies that paid for placement.
FTC's complaint alleged operators of LendEDU.com falsely claimed that the website provided "objective," "accurate," and "unbiased" information about consumer financial products, such as student loans, personal loans, and credit cards. Specifically, LendEDU misrepresented that the information on its website was not affected by compensation from advertisers. Also, alleged made-up consumer reviews.
$350k settlement and prohibition on making the alleged misreps.
Takeaways: Disclose material connection, and endorsements; disclosure and placement of influence of compensation on content or other material connections; disclosure and placement of any material connection between endorser and advertiser.
2020 / 19
Mortgage Foreclosure Relief
Federal Agency Guidance to suspend foreclosures and evictions for at least 60 days. Actions by Department of Housing and Urban Development (HUD) and Federal Housing Finance Agency (FHFA) for government program and GSE Loans. Federal programs implementing special forbearance programs for borrowers affected by COVID-19 crisis, with hardship forbearance up to 12 months.
Other actions to mitigate foreclosures and evictions by private market and various regulators. Private lenders and investors implementing similar measures by FHFA and HUD. Consumer Financial Protection Bureau (agency in charge of administering and enforcing federal mortgage servicing and loss mitigation rules) issued statement in support of foreclosure suspension and offered to work with affected borrowers through complaint portal. State and local governments instituting their own protective measures.
2020 / 21
Mortgage and Consumer Loan Origination
FHFA also announced accommodations for GSE underwriting requirements relating to employment verifications and appraisals. Ability to substitute email, paystubs, or bank records showing recent deposit for verbal employment verification. More flexible appraisal requirements to reduce need for appraisers to conduct inhome inspections.
Federal Reserve will purchase as much as $200 billion in mortgage-backed securities to bolster the secondary mortgage market and provide liquidity. Fed also announced the creation of the Term Asset-Backed Securities Loan Facility to back the flow of credit to households and businesses. Facility will support the issuance of asset-backed securities backed by student loans, auto loans, credit card loans, and Small Business Administrationguaranteed loans, which will offer some relief to those borrowers.
2020 / 22
Emerging trends in government investigations, competitor challenges, litigation defense, and more
2020 / 23
Self-Regulatory Associations: NAD
Competitor challenges related to the following have been handled in the past few months: Use of consumer testimonials where the experience has not been shown to be typical. Must disclose the generally expected performance in the depicted circumstances or limited applicability of the endorsing consumer's experience. Follow the FTC Endorsement Guides. Cost disclosures related to subscription billing must follow ROSCA and UDAAP Disclosure must be in close proximity to the offer. One party refused to participate in self-regulatory challenge, so referred to the FTC.
2020 / 24
Practical Tips During COVID-19 Crisis
Everything is online and digital now. Monitor all federal and state guidance related to how to handle in-person process items that are now occurring online. Review your advertisements and monitor vendors. Update terms and conditions for any product changes. Review compliance with all regulatory laws, especially those related to online issues. E-sign TILA, TISA, RESPA, EFTA, etc. GLBA / privacy and data security UDAAP / UDAP BSA / AML as relevant Work with customers and be as reasonable as possible. Analyze customer complaints and issues for trends. Document all issues, decision making, and outcomes.
2020 / 25
www.Venable.com/COVIDCFS www.Venable.com/covid-19
2020 / 26
Questions?
2020 / 27
Questions and Additional Information
Read more at www.Venable.com/cfs/publications
R. Andrew Arculin
Partner 202.344.4588 [email protected]
Jonathan L. Pompan
Partner 202.344.4383 [email protected]
Gerald S. (Gerry) Sachs
Partner 202.344.4269 [email protected]
For details and a complete index of upcoming events, visit www.Venable.com/cfs/events
2020 / 28
2020 Venable LLP. This document is published by the law firm Venable LLP. It is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations that Venable has accepted an engagement as counsel to address.