Mortgage Compliance FAQs: Digital Advertising Disclosures

QUESTION

We are going to start digital advertising soon. This is not an area that we understand well. We brought in an outside consultant for some guidance. They are good with marketing but have no experience in compliance.

I drafted the advertising policy and kept it updated. However, the section on digital marketing has to be completely revised. I need some rudimentary definitions of digital advertising and a few guidelines for disclosures.

What is digital advertising?

What are some guidelines for digital advertising disclosures?

ANSWERS

For regulatory compliance purposes, I define digital advertising as a form of marketing through online channels, such as websites, streaming content, and more. My views throughout this article are meant to apply to regulatory compliance concerning mortgage banking.

Advertising compliance is tricky and highly technical, legally speaking, and it is highly regulated. To support our clients, we offer Advertising Reviews and Marketing Compliance Reviews.

Digital ads span media formats, including text, image, audio, and video. These ads are also used for brand awareness, customer engagement, launching new products, and driving repeat sales.

Terms and Definitions

According to Regulation Z, an advertisement is "a commercial message in any medium that promotes, directly or indirectly, a credit transaction."

And "triggering terms" are specific terms used in various advertising media that "trigger" additional disclosures.

Generally, the term "advertisement" does not include promotional material containing fifteen words or less that does not contain references to specific rates, points, discounts, fees, material loan factors, or "triggering terms," for instance, such as imprinted pencils, pens, or balloons.

Traditional Advertising

There's a considerable difference between traditional advertising, such as magazines, billboards, and direct mail, and digital advertising. Here's a non-comprehensive list of traditional advertisements:

· Newspapers, magazines, or catalog advertisements;

· Brochures, direct mail literature, messages on customer statements, or other printed materials, including applications;

· Electronic media, including Internet home pages and electronic billboards;

· Signs, either interior or exterior, and displays, and billboards;

· Radio, television, or public address system broadcasts;

· Oral communications between financial institution employees and actual or potential customers, including telephonic and face-to-face solicitations or responses to inquiries; and

· Communications made through Facebook, LinkedIn, text messaging, and other social media avenues.

A host of federal and state regulations are involved in advertising compliance. For instance, an assortment of Acts, statutes, rules, regulations, guidelines, and practices apply at the federal level. Here are just a few of them:

· Fair Housing Act

· Equal Credit Opportunity Act

· Truth in Lending Act

· Federal Trade Commission Mortgage Advertising Rules

· The Federal Trade Commission (FTC) implemented the Mortgage Acts and Practices – Advertising (MAP) rules. MAP rules are designed to prohibit misrepresentations regarding mortgage products.

· FHA/HUD Regulations

· Real Estate Settlement Procedures Act

· Unfair, Deceptive, or Abusive Acts or Practices

We have found two key differences between traditional and digital advertising in our advertising compliance reviews. These differences are resilience and precision.

Resilience

An example of resilience is how quickly digital ads can go live. Printing and distributing ads through traditional channels – such as sending out newspapers or painting a billboard – can take significant time. However, digital advertising has a much shorter lead time, appearing on a website almost immediately after publishing the ad. If the digital ad is based on a template, the process may take only a few minutes.

Another feature of resilience is, unlike print advertising, where an ad can't be changed once it has been published, digital ads are resilient even after the campaign goes live. Depending on the specific channel, it may be possible to adjust the creative content, timing and frequency, targeting, and more. Professional marketers call this "in-flight optimization," where you can make adjustments to ad campaigns based on how they are performing.

Digital advertising also allows for budget adjustments in real-time. Complex and high-profile digital advertising campaigns may be just as expensive as traditional advertising (or more). Still, digital ads are also accessible to many financial institutions without significant budgets and may scale up or down to match the financial investment.

Precision

We have found that digital advertising provides another key difference between itself and traditional advertising. Traditional ads in magazines, on TV, or billboards reach anyone who sees them. In contrast, digital advertising lets the financial institution use different targeting methods to be more precise and reach audiences more likely to be interested in its products and services.

Depending on the format, a company may limit its digital ad to certain times of day or exclude audiences who have already viewed the ad from seeing it again. With digital ads, an institution can reach audiences browsing online for loan products. Or the digital ad might reach the target audience when they're streaming a TV show, visiting a favorite website, or using social media. Even if they don't choose to contact the advertiser at that moment, reaching them in these different contexts can help them remember the institution's brand.

Here's a non-comprehensive list of digital advertisements:

· Display advertising. These ads use text and visual elements, such as images or animation, and can appear on websites, apps, and devices. They appear in or alongside the content of a website.

· Online video advertising. These are video ads that use a video format. Video ads appear in places similar to display ads: on websites, apps, and devices. In-stream video ads appear before, during, or after video content.

· Search advertising. Also called search engine marketing (SEM), these ads appear in search engine results pages (SERPs). They are typically text ads that appear above or alongside search results.

· Audio advertising. These ads play before, during, or after online audio content, such as streaming music or podcasts.

· Social media advertising. Ads that appear on social media platforms like Facebook or LinkedIn.

· Streaming media advertising. These video ads appear in streaming media content delivered over the Internet without satellite or cable.

Advertising compliance is tricky and highly technical, legally speaking, and it is highly regulated. To support our clients, we offer Advertising Reviews and Marketing Compliance Reviews.

Digital Advertising Disclosures

In our compliance reviews, we follow these general guidelines regarding digital advertising disclosures, including online and mobile device advertising:

· Place any required disclosure as close as possible to the advertising claim.

· View disclosures on the same platform as the advertisement. Be sure to include any disclosures necessary to prevent the ad from being misleading.

· Incorporate disclosures into advertisements whenever possible. If incorporation is not possible because of space constraints, consider making the disclosures clearly and conspicuously on a page to which the ad links (if allowed by applicable law).

· When using hyperlinks:

o Make the link obvious.

o Appropriately label the link to convey its importance, nature, and relevance.

o Use hyperlinks consistently so customers know when they are available.

o Place the link as close as possible to the relevant information.

o Take customers directly to the disclosure on the click-through page.

o Assess the effectiveness of the link by monitoring click-through rates and other information about customer use. Make changes as appropriate.

· View the advertisement as if you are a reasonable consumer who doesn't read an entire website or online screen, just as they don't read every word on a printed page.

· Design ads so that scrolling is unnecessary to find a disclosure when possible. When scrolling is necessary, use text or visual cues to encourage scrolling.

· Stay on top of empirical research about where consumers do and do not look on a screen.

· When drafting disclosures, recognize and respond to technical limitations or unique characteristics of a communication method.

· Display disclosures in accordance with applicable federal and state guidelines.

· Repeat disclosures as needed on lengthy websites and for repeated advertising claims.

· Be on the lookout for multiple routes through a website, and be sure disclosures are repeated as necessary.

· Prominently display disclosures; for instance, be aware of color, size, and graphics.

· Review the entire ad (as a whole) to address the effectiveness of disclosures in light of other elements – text, graphics, hyperlinks, and sound.

· Use audio disclosures with audio claims presented in a volume and cadence consumers can hear and understand.

· Use plain language and syntax.

· If a digital disclosure cannot be made clearly and conspicuously to ensure that the ad is not being deceptive, do not use the ad.

· To determine whether a particular disclosure is clear and conspicuous, consider the following:

o Its placement in the ad and its proximity to the claim it qualifies.

o Its prominence.

o Whether seeing the disclosure is unavoidable.

o Whether other items in the ad might distract attention from the disclosure.

o Whether the disclosure should be repeated several times to be effectively communicated or because consumers may enter the site at different locations or travel on paths that might cause them to miss it.

o Whether audio messages have adequate volume and cadence.

o Whether the language of the disclosure is understandable to the intended audience.

· Monitor and analyze data for indications that disclosures were or were not comprehended and make necessary adjustments.

· Don't ignore technological limitations. For instance, a disclosure that requires Adobe Flash Player will not be displayed on certain mobile devices.

· Don't use blockable pop-up disclosures – even unblockable pop-ups may be problematic.

· For audio claims, use audio disclosures. For written claims, use written disclosures.

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director
Lenders Compliance Group

THE MOST COMPREHENSIVE MORTGAGE COMPLIANCE SOLUTIONS IN THE UNITED STATES.

Thursday, August 3, 2023

Digital Advertising Disclosures