Internet Violations: Insley's Top 10

Richard Insley, President of APR Systems, Inc. and an advisor for ComplianceAction has cruised the 'Net for you and compiled a list of the top ten Internet violations that can be found on bank websites.

Kickbacks can occur on the 'Net. RESPA defines kickback as giving or receiving a thing of value as compensation for a referral of an applicant. The Internet problem turns on what constitutes a kickback when a kickback is a "thing of value." One of the concerns is that a link from or to a settlement service provider may be a thing of value. And there are other kinds of links and referrals that more clearly violate RESPA. It is safest to stay away from links until HUD decides whether a link is a kickback and, if so, under what circumstances. When it comes to links and any benefits from cross-selling products with settlement service providers, be diligent.

Required terminology is a common problem on Web sites. Certain regulations, most notably Regulations Z and DD, require the bank to use specific terms when describing products or making disclosures. They also prohibit the bank from using some terms under certain conditions. "Rate" is a dangerous term in the context of these regulations. Computer people tend to make up their own language with total disregard for the dictionary meaning (see "boot" for example). They also disregard compliance terminology. You have trained your marketers and given them checklists. Add the Website managers to your training and checklist group.

The alimony notice is often omitted in applications. Regulation B requires that, before asking an applicant to list sources of income that may reveal current or previous marital status (such as "divorced"), the lender must advise the applicant that they do not need to disclose the fact that they are receiving alimony unless they wish to rely on the alimony to qualify for the credit. This notice usually appears in fine print on application forms and is easy for Web site designers to disregard. Make sure it doesn't get omitted from application forms.

You're in the doghouse if you advertise or offer home loan products on your website without the Equal Housing Lender logotype and legend. That logotype, often referred to as "the doghouse," must appear as a part of any advertisement for housing credit. Check your website carefully to be sure the logotype is where it should be and can be seen by anyone that sees your housing loan ads.

Government Monitoring Data, and its subsequent use on the LAR, is another common violation on the Internet. There are two problems with monitoring data: forgetting to collect it when you should, and collecting it when you should not.

Most violations are the result of mixed-use forms, or actually using a form for an unintended use. This happens when someone gives the customer a mortgage loan application for a car loan. The customer, eager for the loan, fills everything out, including the monitoring information, which is prohibited. Check your Internet form designs to be sure that the monitoring data is where it should be and not where it should not be. As an extra precaution, ensure that the instructions to the applicant, which explain that the information is voluntary, are easily seen, read, and understood.

The FDIC membership statement belongs in lots of places on your website. Most importantly, it should be on your home page. This opening page is the Internet equivalent of your main door and lobby. The FDIC logo should be as prominent here as it is in your physical building. The FDIC logo should also accompany deposit advertisements and product pages. Putting it only on the main page is not enough. Placement of this logo is also vitally important if your bank offers any investment or annuity products that are not insured. Your website design should make clear which deposits are insured and which are not.

Bait and switch is always frowned on, but when it involves rates subject to Regulations Z, M, and DD, it is especially dangerous. If you advertise a rate, including a rate listed on the Internet, you have to honor it. A common management problem with Internet sites is failing to update the rates on the Internet site when changing rates the bank plans to charge or offer.

Discrimination through discouragement is just as illegal on the Internet as it is in the lobby or the loan officer's office. On the Internet, the issues may be subtle, such as who a message is designed to attract or deter. But it may also be as direct as with print ads and lobby signs. Look carefully at your website - all of it - and consider what people it portrays. If you use any faces in advertisements, the faces should represent the demographics of your community. Also review the text and the tone of your site and consider what it looks like - welcoming or not - to different people. To be extra confident that your website sends a positive, welcoming message, ask other people (friends, customers, and employees) to review it and tell you their reactions.

Disclosures are as important on the Internet as they are on paper. In fact, the seemingly ephemeral nature of the Internet has consumer advocates very nervous about whether electronic disclosures should even be allowed. The most common problem with disclosures on the Internet is failing to provide the disclosures that should go with the application form or when the application is taken. For purposes of the Internet, this delivery would be at the same time. These disclosures must be up on the Internet with the application form or procedure. The consumer should not be able to apply without receiving disclosures - or having the opportunity to receive disclosures.

Finally, triggering terms are a common violation on the Internet. All advertisement requirements apply to the Internet as well as to paper advertisements. Any time a rate or a triggering term is used on the Internet, all triggered terms should be included on the page. It involves using that same old marketing checklist.

ACTION STEPS

Review your website for these violations. If you find any, fix them ASAP.
Find out who can post to or change your website. That person should also be responsible for compliance on the Internet. Provide them with a copy of this article, and checklists for marketing,
Remind bank staff that the Internet site is another lobby that is subject to the same compliance concerns. Make everyone in the bank your eyes and ears.