Compliance Blog

Written by Jennifer Aguilar, Regulatory Compliance Counsel

Great advertisements can make all the difference. They can entice us to buy things we normally wouldn't, or, like this one might, make us forget about eating healthy for just a few minutes.

For those of you who haven't heard, today is National Truffle Day. So, take a moment to indulge.

At NCUA's most recent board meeting, they finalized two rules. Today's blog will take a look at (yup, you guessed it!) their final advertising rule. The rule was published in the Federal Register last week and becomes effective on May 25, 2018. It applies to all federally-insured credit unions.

A Short History

For quite some time, the NCUA and the FDIC had nearly identical advertising rules. In 2011, the NCUA amended its rule to provide for more stringent rules. Namely, it required the official advertising statement in television and radio advertisements 15 seconds or longer (the FDIC rule provides for a 30 second threshold) and on statements of condition that must be published. While the NCUA acknowledged that these requirements are not necessarily overly burdensome, the final rule seeks to bring NCUA's rule back into parity with the FDIC rule. The final rule amends these two rules as well as the official advertising statement.

Television and Radio Advertisements

Current section 740.5(c)(7) and (8) provide an exemption from the official advertising statement requirement for radio and television advertisements that are "less than 15 seconds in time." The final rule amends these two paragraphs to provide an exemption for radio and television advertisements that "do not exceed 30 seconds in time." In other words, if a radio or television advertisement is 30 seconds or shorter, the advertisement does not need to include the official advertising statement.

Statements of Condition

Current section 740.5(a) requires credit unions to include the official advertising statement on all "annual reports and statements of condition required to be published by law." As noted above, this provision was added in 2011 and the FDIC does not provide a similar requirement. Citing this requirement as "unnecessary," all commenters agreed with the NCUA that this requirement should be eliminated. So, the final rule amends section 740.5(a) to eliminate this requirement.

The Official Advertising Statement

Current section 740.5(b) provides three alternatives for the official advertising statement. First, credit unions may use the full statement: "This credit union is federally insured by the National Credit Union Administration." Second, credit unions may use an abbreviated statement: "Federally insured by NCUA." Third, credit unions may display the official sign. The final rule adds a fourth alternative: "Insured by NCUA."

Commenters generally supported this fourth alternative as it provides additional flexibility, especially for social media advertisements. One commenter noted the fourth alternative is better as it has only 13 characters, as opposed to the 22 or 71 characters of the current statements. Given the character limitations for certain social media ads, this gives credit unions more flexibility when using these platforms. Using similar reasoning, some commenters suggest even shorter statements such as "NCUA Insured" or "Member NCUSIF" (to mirror the FDIC's "Member FDIC"). While NCUA acknowledged the shorter versions can provide greater flexibility while still conveying the insurance message, it declined to accept these suggestions.

Digital Advertising

In its proposed rule, the NCUA noted that current Part 740 is designed to address traditional forms of advertisements – print, radio and television – and it may be time to update the rule to address newer forms of communication. So, the NCUA also sought comment on digital advertising, such as social media, mobile banking and text messages. Commenters had a number of suggestions ranging from outright exemptions for certain social media advertisements to an official sign emoji.

Ultimately, the NCUA decided not to amend the rule to address digital advertisements at this time. It determined that the fourth alternative and the rest of the rule provide sufficient framework for digital advertisements. The NCUA also noted that the Office of General Counsel can provide guidance on how to comply with the rules, if needed. If your credit union has digital advertising-related questions, you may want to consider reaching out to the Office of General Counsel to request a legal opinion.

You can read the full final rule here, and, in case you missed it, NAFCU's final regulation (member login required) on this rule was published yesterday.

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Webinar Today on FinCEN's CDD Rule. Today's live NAFCU webinar covers FinCEN's Customer Due Diligence Rule. As of May 11, 2018, credit unions will be required to identify and verify the identity of beneficial owners of legal entity customers, implement procedures to form customer risk profiles and monitor accounts for suspicious activity. The webinar will provide a baseline understanding of the rule, implementation challenges and practical advice for working with examiners and meeting compliance obligations. Register here.