Life isn’t easy. If that surprises you, you should probably check with someone to make sure you’re still alive. Part of life’s difficulty comes from mistakes. People are very prone to making them, and they cause all sorts of problems. The good news is that most people learn from their mistakes, and figure out ways to avoid making the same mistakes in future. The even better news is that there have been a lot of mistake-making people on earth, so there is a lot of opportunity out there to learn from mistakes without actually having to make them yourself. This is true when it comes to website compliance. There have been many mistakes made in this area, so there are plenty examples of what not to do. Websites are increasingly vital for financial institutions, and they are becoming high-profile targets for regulators, industry watchdogs, and consumer advocate groups. It can be difficult to balance having an effective and a compliant website, and there have been plenty of mistakes to prove that. However, we’ve compiled the five most common website compliance mistakes so that you don’t have to make them.
1. Not defining the advertisement’s terms.
We find this error all the time and it has to do with Regulation Z (or Truth in Lending). There are too many possible Reg. Z mistakes to cover here, but the most frequently recurring error we see is failing to define important or potentially misleading terms in advertisements. These errors are especially common on promotional or seasonal advertisements.
Too often we see:
- Claims that aren’t substantiated
- The use of teaser rates without including all additional required disclosures
- Asterisks that don’t add up or are missing
These errors are especially significant given their potential UDAAP impact. You must apply the same level of scrutiny to your website as you do for your print advertising, because the same rules and restrictions apply. Carefully review your all your advertisements, including seasonal or promotional ads, for undefined or misleading terms. When in doubt, disclose!
2. Not defining the term “APY.”
At least for the time being, any time you employ the acronym “APY” on your website, you must accompany it with the acronym’s definitional meaning: “annual percentage yield.” This is most commonly achieved by adding an asterisk next to the acronym itself and again at the bottom of the page, next to the definition. Many institutions neglect to include the second asterisk, or to define the term at all, which is a violation of the Truth in Savings Act. And remember, APY percent must be expressed to two decimal points—not one, not three.
3. Not appropriately displaying application disclosures on your website.
From missing home equity lines of credit disclosures to general applications for online banking, there are countless ways a website can make mistakes with online applications. However, no matter the application type, one good practice is to display your disclosures at the appropriate times throughout the online application process, accompanied by a check box that indicates that the consumer has read and agreed to the terms, similar to how disclosures are shown by loan officers or customer services reps in person.
This one can be tough because a lot of websites simply aren’t built to do this well. One way around this, which may run the risk of inconveniencing customers or members, is to have them start their applications online, but require them to come to a branch to finish the paperwork. However, we highly recommend enlisting your webmaster to add the required disclosures to your website in a fashion that requires consent before allowing the customer to complete the online application.
4. Not disclosing the risks for non-deposit investment products, or NDIPs.
The regulatory agencies want to make sure your customers or members know that these products are not FDIC- or NCUA-insured and carry heightened risk. Clearly disclosing these facts is a must. Invariably, there will be a reversal in the market and you want to avoid having consumers who lose money in NDIPs seek action against your institution for failing to disclose the risky nature of these products. Too often, these disclosures are missing, buried, or in very small print.
When it comes to NDIPs, it’s important to remember that advertisements or promotional materials must have a statement that they are not insured, are not guaranteed by the institution, and are subject to investment risks, including possible loss of the principal amount invested.
5. Not displaying the FDIC, NCUA, or Fair Housing logos and accompanying text large enough.
These logos are often in the lower left- or right-hand corners of financial institution websites and are frequently too small to be legible. The regulations state that insured institutions must display these official logos on their Internet sites because these sites both promote the financial institutions as well as deposits and services. You may vary the font sizes from those of the official sign, but the text needs to be readable. Too often, we see logos that are shrunk so small that the text is impossible to read, resulting in an easy violation for examiners.
While these don’t represent every website compliance mistake made, they are certainly the most common. Have a look at your website to make sure you don’t become another example of what not to do. Taking the time to make sure your website is compliant is a big step toward a successful and effective website.