QUESTION
I am the Director of Marketing at a mortgage lender in the Northwest. We are developing a marketing campaign using endorsements and testimonials on social media, social media influencers, press, radio, YouTube, and TV. While our compliance and legal departments are happy to review these promotions, they are not giving us clear guidelines to follow.
Our legal department tells us that, because of the wide distribution of our campaign channels, some of the rules we must follow are based on the Federal Trade Commission's rules. I don't know if this is so, but I do know those rules can be kind of strict. I need to find out about some of the FTC's regulations involving endorsements and testimonials.
What are some FTC guidelines for endorsements and testimonials?
SOLUTION
RESPONSE
The Federal Trade Commission's (FTC) regulations are essential to follow for marketing campaigns. Indeed, the FTC implemented the Mortgage Acts and Practices – Advertising (MAP) rules![i] MAP rules are designed to prohibit misrepresentations regarding mortgage products. Yes, there are other Acts, regulations, and laws – federal and state – such as the following (to name a few salient ones):
· Fair Housing Act,
· Equal Credit Opportunity Act,
· Truth-in-Lending Act,
· FHA/HUD, VA, USDA Regulations,
· Real Estate Settlement Procedures Act,
· State Regulations,
· Fair Lending,
· Unfair, Deceptive, or Abusive Acts or Practices, and
· Federally required logos and disclosures.
The Federal Trade Commission's MAP rules must be implemented in your marketing campaign.
Advertising and marketing compliance is a highly complex area that requires very careful consideration prior to launching a marketing campaign. If you do not handle endorsements and testimonials appropriately, you can easily cause legal disputes and attract regulators.
I have listed a few compliance solutions above. You can always contact me to discuss your particular marketing plan. We have worked for years with banks and nonbanks on their marketing campaigns. Here are just a few articles we've published on advertising compliance.
The FTC requires endorsers to clearly and conspicuously disclose their sponsorship by the advertiser and requires that endorsements reflect the honest experience or opinion of the endorser and not contain representations that would be deceptive or unsubstantiated if the advertiser made them directly.[ii] Therefore, if an endorsement represents that the endorser uses the advertiser's product, the endorser must actually use the product at the time they endorse it.[iii]
Advertisers using "consumer endorsements" must make clear whether the endorser's experience reflects the actual experience of typical consumers who use the product rather than the experience of a few individuals.[iv] Ensuring this clarity is critical because, in 2009, the FTC revised its guidance regarding consumer endorsements to eliminate the safe harbor previously provided for the use of disclaimers in conjunction with non-representative consumer testimonials, such as "results not typical" and "not all consumers will get this result." In other words, these disclaimers are no longer acceptable because the FTC believes they are not sufficient to overcome the misleading implication that a non-representative result depicted in an advertisement is what consumers will generally experience.
An advertisement purporting to represent the typical experience of consumers must either be substantiated or, to avoid being deceptive, must clearly and conspicuously disclose either what consumers generally can expect their results to be or the limited applicability of the endorser's experience.[v] In addition, if actors are used instead of actual consumers, that also should be disclosed.[vi]
Emphasizing the foregoing, in order to ensure that consumers are given all material information, advertisers are specifically required to disclose any connection between the endorser and the seller of the advertised product that might substantially affect the weight or credibility of the endorsement.[vii]
The FTC has made clear that the same requirement applies to endorsements made online and via social media.[viii] Notably, advertisers have a responsibility to ensure that endorsers comply with FTC disclosure requirements. Advertisers should thus provide endorsers with a clear statement of their disclosure responsibilities and guidance on disclosure placement, obtain agreements to comply with those responsibilities, and implement a system to monitor and review the representations and disclosures of endorser material, including reviewing each online video and social media posting promptly after publication.[ix]
The use of social media platforms that only allow the use of a limited number of characters in posts, such as Twitter, does not excuse advertisers and endorsers from making required disclosures. Furthermore, advertisers should not encourage endorsements using social media features that do not allow for clear and conspicuous disclosures. For online videos, such as those posted on YouTube, payments to the endorser and the company's editorial control over the endorsements must be disclosed inside the video itself as well as "above the fold" in the YouTube description box (such that it could be seen without clicking on a "Show More" button).[x] With respect to both written disclosures and disclosures in the video itself,[xi] you must be cautious because social media built-in disclosure tools alone may not be enough to satisfy the FTC's clear and conspicuous disclosure requirement.[xii]
I urge you to contact us to discuss your marketing campaign. We can work with you and your legal and compliance departments to ensure the campaign's success and legal viability. If you plan to work with social media influencers, we have considerable regulatory compliance experience and can also refer you to legal experts in this area.
Chairman & Managing Director
Lenders Compliance Department
[i]
Effective August 19, 2011.
[ii] Guides
Concerning the Use of Endorsements and Testimonials in Advertising, 16
C.F.R. §§ 255.0-255.5. See also National Advertising Division v. Cariuma
Central Pte., Ltd., NAD Case #7186C (January 31, 2025).
[iii] See,
i.e., In re Cooga Mooga, Inc., 92 F.T.C. 310 (1978) (celebrity Pat Boone
endorsed an acne medication, stating that all his daughters used the product,
when that statement was in fact false). See also, Better Business Bureau,
Code of Advertising, § 30.1.10 (2015) ("In general, advertising which
uses testimonials or endorsements is likely to mislead or confuse if . . .
[t]he advertiser represents, directly or by implication, that the endorser is
an 'actual consumer' when such is not the case and the advertisement fails to
clearly and conspicuously disclose that fact.").
[iv] 16
C.F.R. § 255.2(a). See also, Better Business Bureau, Code of Advertising,
§ 30.1.11 (2015) ("In general, advertising which uses testimonials or
endorsements is likely to mislead or confuse if . . . [a] consumer's experience
represented in an advertisement is not the typical experience of those using
the product or service, unless the advertisement clearly and conspicuously
discloses what the expected results will be.").
[v] 16
C.F.R. § 255.2(b)
[vi]
Idem
[vii] 16
C.F.R. § 255.5
[viii]
See The FTC's Endorsement Guides: What People Are Asking. Moreover, in
2015, the Better Business Bureau updated its Code of Advertising "to
reflect the many new ways advertisers reach consumers via websites, social
media, texting and other channels." See New BBB Advertising Standards
Reflect 21st Century Advertising in Traditional and New Media.
[ix] See
Stipulated Order for Permanent Injunction and Monetary Judgment, FTC v.
Teami, LLC, No. 8:20-cv-518-T-33TGW (M.D. Fla. March 17, 2020). For
instance, the FTC's settlement with Teami ordered that any material connections
between endorsers and advertisers should be clearly and conspicuously disclosed
and required Teami to take sufficient steps to ensure that endorsers make
required disclosures.
[x] In
re Warner Bros. Home Entertainment Inc., 81 FR 46078, 46080 (July 11, 2016)
[xi]
Renue By Science, LLC, NAD Case No. 7188 (May 15, 2023)
[xii] Fenty
Skin LLC, NAD Case No. 7224 (April 5, 2024) ("NAD found that Crème
Fatale's 'paid partnership' disclosure accurately tells viewers there is a
material connection between Fenty Skin and Crème Fatale, but that the built-in
Instagram disclosure alone is not enough to satisfy the FTC's clear and
conspicuous disclosure requirement. The [FTC] caution[s] that relying on social
media built-in tools alone may not be enough and that they are more effective
when used in conjunction with other clearer forms of disclosure.").
