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Thursday, July 6, 2017

Affiliate Marketing: Eligibility Information

QUESTION
One thing we have always been confused about is how we can use eligibility information from affiliates. The part about affiliate marketing that particularly confuses me is if we do not use eligibility information from an affiliate, but the affiliate uses its own eligibility information to market on our behalf. So, our question is, if we do not use eligibility information from an affiliate, but the affiliate uses its own eligibility information to market on our behalf, is the marketing that the affiliate does on our behalf covered by affiliate marketing provisions?

ANSWERS
I know this may seem somewhat complicated, but it is more straightforward than you think. If certain conditions are satisfied, the affiliate marketing provisions would not apply. But the details, like so much else, are important to consider.

So long as a financial institution does not use eligibility information in a manner that would constitute the making of a solicitation for marketing purposes, such solicitation is not covered by the affiliate marketing provisions where:

1.   The affiliate of an institution uses its own eligibility information that the affiliate obtained in connection with a pre-existing business relationship it has or had with the consumer to market the institution’s products or services to the consumer; or,
2.   The affiliate of the institution directs its service provider to use the affiliate’s own eligibility information that the affiliate obtained in connection with a pre-existing business relationship it has or had with the consumer to market the institution’s products or services to the consumer, and the institution does not communicate directly with the service provider regarding that use of the information. [12 CFR § 334.21(b)(4); 16 CFR § 680.21(b)(4); 12 CFR § 222.21(b)(4); 12 CFR § 41.21(b)(4); 12 CFR § 717.21(b)(4)]

One observation is worth considering: the ability of a financial institution to have an affiliate use the affiliate’s own eligibility information, as described above, to market the products or services of the financial institution provides a significant alternative to certain standard notice and opt out procedures.

Affiliate marketing rules of the federal financial institutions regulators and the FTC specify additional requirements regarding the involvement of service providers in a solicitation in order to avoid having the solicitation be subject to the affiliate marketing provisions. Refer to the FTC’s affiliate marketing rules for more details. [12 CFR § 334.21(b)(5); 16 CFR § 680.21(b)(5); 12 CFR § 222.21(b)(5); 12 CFR § 41.21(b)(5); 12 CFR § 717.21(b)(5)]

Jonathan Foxx
Managing Director 
Lenders Compliance Group