Banking on the Internet: Advertising

As more and more banks develop a home page on the internet, they are finding that there are some interesting compliance aspects of banking in cyberspace.

The internet offers an opportunity to give new strength to the advertising requirements of the consumer credit protection act. Most of the components of that act, including Truth in Lending and Equal Credit Opportunity, are founded on the concept of providing information to consumers. With information, the consumer can make better choices and understand each party's rights and obligations.

To carry out the information purposes of consumer credit protection, the laws and regulations contain disclosure requirements, including information that should be included in advertisements or provided before the consumer files an application. The internet offers a unique opportunity to provide this information in ways that the alert compliance manager can monitor and control. All information posted on the internet should be reviewed for compliance before being shipped into cyberspace. (Remember, examiners have internet connections too!) Consumers should be able to peruse the products and terms offered by different banks and make informed decisions. In this respect, the internet makes the consumer credit protection act more powerful.

As fast as we develop home pages and new ideas, there are questions. One of the most fundamental questions is whether a home page is an advertisement, and, if so, whether it is subject to the exemptions for electronic advertisements.

Staff at the Federal Reserve Board is currently reviewing how regulations should affect electronic disclosures and communications. Among their questions are:

• Is information that shows on the screen a "writing?"
• How is information transmitted "in a form the consumer may keep?"
• Should there be a specified order in which information is given?
• Should the advertising rules, including triggering terms and additional disclosures, apply to home pages?

Our recommendation is that until the FRB provides clear guidance, include all information that you would include in print advertising.

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 20, 12/96