QUESTION
We are a bank that was recently cited for violations of affiliate
marketing procedures. We did not have a pre-existing business relationship, but
it seems that our violation also was caused by our use of “eligibility information.” What is “eligibility information?” Also, how is it a factor in
affiliate marketing?
ANSWER
A consumer has the right to restrict affiliate marketing from a
financial institution, where the former does not have a pre-existing business
relationship with the latter. The restriction applies to using certain
information obtained from an affiliate to make solicitations to that consumer.
This provision is distinct from giving a consumer the right to restrict the
sharing of certain consumer information among affiliates. [Section
603(d)(2)(A)(iii)]
A financial institution may not use information received from an
affiliate to market its products or services to a consumer, unless the consumer
is given notice and a reasonable opportunity and a reasonable and simple method
to opt out of the making of such solicitations. The affiliate marketing opt-out
applies to both “transaction” or “experience” and “other” information, such as
information from credit reports and credit applications.
To be clear, exceptions to the notice and opt out requirements apply
when an entity uses “eligibility information” in certain ways. Eligibility
information includes not only transaction and experience information, but also
the type of information found in consumer reports, such as information from
third party sources and credit scores. Eligibility information does not include
aggregate or blind data that does not contain personal identifiers such as
account numbers, names, or addresses. [12 CFR 571.20(b)(3)]
Specifically, “eligibility information” is defined in the affiliate
marketing regulation as any information the communication of which would be a
consumer report if the exclusions from the definition of “consumer report” in
Section 603(d)(2)(A) of the Fair Credit Reporting Act do not apply.
With respect to the pre-existing business relationship, a financial
institution establishes this relationship based on:
- A financial contract between the person and the consumer which is in force on the date on which the consumer is sent a solicitation covered by the affiliate marketing regulation;
- The purchase, rental, or lease by the consumer of the person’s goods or services, or a financial transaction (including holding an active account or a policy in force, or having another continuing relationship) between the consumer and the person, during the 18- month period immediately preceding the date on which the consumer is sent a solicitation covered by the affiliate marketing regulation; or
- An inquiry or application by the consumer regarding a product or service offered by that person during the three-month period immediately preceding the date on which the consumer is sent a solicitation covered by the affiliate marketing regulation.
One of the regulatory triggers for affiliate marketing violations is in
the area of solicitations, which is the marketing of a product or service
initiated by a person, such as a financial institution, to a particular
consumer that is:
- Based on eligibility information communicated to that person by its affiliate; and
- Intended to encourage the consumer to purchase or obtain such product or service. [12 CFR 571.20(b)(5)]
Examples of a solicitation include a telemarketing call, direct mail,
e-mail, or other form of marketing communication directed to a particular
consumer that is based on eligibility information received from an affiliate. A
solicitation does not include marketing communications that are directed at the
general public (i.e., television, general circulation magazine, and billboard
advertisements).
Jonathan Foxx
Managing Director
Lenders Compliance Group
