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Enforcement Expectations and Marketing Compliance Best Practices · COMPLY: The Marketing Compliance Podcast

• 0:05
  Speaker 1: Hey there . Goodbye podcast listeners and welcome to this week's episode. This Comply podcast episode is part three of a discussion between Rhonda McGill, perform Line Senior Director of Client Success, and Kimberly Monty Hoel and Courtney Hayden from Goodwin as they take a deep dive into recent marketing compliance enforcement actions and share their advice for getting ahead of regulatory scrutiny. During today's episode, they discuss why public CFPB enforcement actions are down in recent years, enforcement action expectations on both the federal and state level for the rest of 2023 and into 2024, and marketing compliance, best practices and takeaways. Thanks for listening and enjoy.
• 0:51
  Speaker 2: I'd like to jump into , um, expectations for enforcement for the rest of the year and even moving into 2024, just looking at the data, the number of enforcement actions taken by the CFPB has decreased in recent years cus consumer relief is up. It seems like we are expecting enforcement actions to increase under directed choke risk significantly. But what do you make of this , make this , um, Kim, would you like to start?
• 1:19
  Speaker 3: Um, I was gonna hand it over to Courtney. Who ? Oh , you
• 1:21
  Speaker 2: Wanna go to Courtney? Okay, well , sure. I was trying to be fair .
• 1:25
  Speaker 4: Thank you, . Um, yeah, no, I was gonna say that I , I don't think the numbers tell the whole story there. I think. Okay . Um , from what we've seen, there is a lot, a huge number of non-public supervisory activity amongst these agencies that, that's been happening behind the scenes, including in 2022. Um, and it's that non-public supervisory activity that's going to yield more enforcement matters and more public , um, uh, investigations enforcement matters that, that, that we all become aware of. So, yes, while perhaps there might not be as many public matters, especially between 2021 and 2022 that we all expected , um, I think that, you know, whether it's in 2023 or 2024, I think the non-public activity that we've seen in the past year and a half, two years is really going to , um, kind of make its way to the public sphere.
• 2:14
  Speaker 2: Hmm . I can , I can, I can see that happening. And I , you know, I'm glad that you're saying that because there's this false sense of there's not a lot going on over there in the CFPD when in reality it sounds , sounds like there really is, they
• 2:29
  Speaker 4: Are extremely busy and we are extremely busy. Yes .
• 2:32
  Speaker 2: busy . Well , that's good to know. Kim, would you like to chime in on that?
• 2:36
  Speaker 3: Yeah, just one thing to add, which is , um, you know, with that background and broad brush, there's more specific focuses that the CFPP has , um, both for enforcement but also supervision. So one of the things that we're watching really closely is , um, the CFPB has publicly , uh, stated that they have a priority to focus on FinTech companies and particularly on buy now pay later earn way to access , um, and similar companies, which is really interesting to us for a couple reasons. Um, on the one hand, it's kind of expected because some of these companies are huge now, they're, they're bigger than many of the banks. Um, they're large public companies. They have a really big portion of the market share. And , um, as, as many of you may know, the CFPB does take market share into account when it determines its , um, supervision priorities. They, they really do look for , um, how to get the most bang outta their buck. So , um, it's unsurprising to see some of these companies wind up on their radar. What troubles me greatly is the fact that a lot of these FinTech companies will actually offer their products by using banks that the CF PB has no jurisdiction over for supervision and very minimal jurisdiction for enforcement. Um, so for example, if Europe FinTech company that offers a credit card program or debit card program , um, most of those partnerships are offered by, well not just the partnership, but the actual regulated product is offered by a small community bank under $10 billion. Um, the reason for that is because banks under $10 billion are exempt from some of the interchange fee caps on debit cards, and they can generally be more profitable , uh, for these FinTech companies to partner with smaller banks. Um, however, the CFPD has , uh, no supervisory authority over banks under $10 billion in assets. And , um, they have I guess, sort of secondary , um, enforcement authority, very little enforcement authority over these banks as well, because their primary regulator is maybe the FDIC or the OCC. Um, and so I'm very interested to see how this plays out because on the one hand, you know, sure the CCF PD can go after the non-bank FinTech company, but if the regulated product isn't even offered by them , um, they're gonna have to be very careful in carving out which activity they're actually gonna go after or supervise. Um, because if it's the activity of the bank, which they have no jurisdiction over, that's gonna be a really tough road for them . Uh, that being said, there are plenty of activities that the CFPB could regulate for the non-bank FinTech company. You know, advertising, as we've been talking about is a big one. They can just use their udap authority to say that the, the non-bank company advertises program and made false or misleading statements about it. That's a very easy way for them to go. Um, but I think , uh, it'll be interesting to see if anyone pushes back on this because , um, at the end of the day, the product is offered by someone that they have no jurisdiction over.
• 5:35
  Speaker 2: Wow, that's very interesting. So outside of the CFPB , what else are you seeing? Maybe you've , uh, what about what's happening at the state level?
• 5:45
  Speaker 4: Um, yeah, I'm happy to jump in there on that, on that point too. Um, so one thing that kind of te tethering the, or tying the CF PB discussion to what's happening at the state level. Um, so as , as you know, you may know the CFPP often is , uh, um, I guess it doesn't have as many tools in its tool belt necessarily as other regulators. And so it tries to at times expand the tools available to it. Um, and with respect to the states , um, while state enforcement activity has actually been down over recent years, we expect that activity to start to increase because the CFPB had issued an interpretive rule that reinforced state's authority to actually enforce federal consumer financial protection laws in particular. Um, so now, now state regulators are armed with enforcing the Consumer Financial Protection Act, for example, and it's implementing regulations. Um, and this , uh, interpretive ruling also permitted the states to bring and assert CFPA claims against entities that even the CFPB could not assert claims against , um, given its limited authority. And so, you know, in part because of that, we do expect, and we have seen there to be an uptick in , um, state regulator activity. There's a lot of , uh, state regulatory state regularly state regulator activity behind the scenes with confidential investigations going on. And we expect that to absolutely continue and eventually make its way to the public sphere as well.
• 7:21
  Speaker 2: Wow, very informative. Anything else we wanna add before we move forward?
• 7:28
  Speaker 3: Yeah, I think on the state level, we're seeing , um, a lot of , uh, informal inquiries as well, which may be turn into public enforcement, but sometimes these inquiries will land on my desk on the business law side and compliance side first before they turn into public enforcement. Um, and we are seeing an uptick in that and we're seeing an uptick in it from , uh, states that are not usually considered the usual suspects. Um, the most common types of actions we see are , um, either false advertising, u dap type claims , um, but also licensing. And I think what the states are trying to do here is , um, they're seeing the development of technology into, you know, crypto, FinTech. Um, and a lot of these products are set up by, you know, lawyers like us , uh, who are really trying to carefully , uh, draw lines around the rules and figure out what is the product subject to and what is it not? And we're dealing with these old laws , um, that maybe require licensing for one particular thing. Um, a good example is these loan broker laws , um, and do they apply to somebody who , uh, markets a credit card program that's actually offered by a bank? You know, if you build the app, you take the application, you help the consumers get the loan , um, there's enough there for some of these , uh, states to come after these FinTech partnerships and say, well, the FinTech partner should have been licensed , um, as a loan broker, or maybe they're involved in servicing and collections. That's another way . And so , um, what we're seeing is the , uh, the, the states have enough information at this point about where the state of the industry is. Um, we've been in this FinTech and crypto world for quite a few years now, and I think they've finally , um, grown wise to how these are set up and they're thinking about ways that they can assert their jurisdiction to protect consumers in their state. Um , and so we're seeing a lot of licensing inquiries , um, and we're seeing a lot of advertising inquiries , um, just from a general udap perspective.
• 9:28
  Speaker 2: Absolutely. So from the marketing compliance perspective , um, based on all the things that we were discussing today, what are some of the best practices and strategies that you would offer to those that are listening in? Things that they can do right now to , um, get their compliance programs in order?
• 9:48
  Speaker 4: Um, yeah, happy to mention a couple and then kick it to you, Kim, if that works. Um, I would say, you know, going back to some of the initial enforcement actions that we were talking here with respect to , um, potential discrimination claims and making sure that you have, you know, not only robust compliance programs, but those that oversee , uh, marketing endeavors of the company to ensure that, you know, your marketing in assuming it's applies to your company in both minority and majority neighborhoods, communities, et cetera. Make sure that you're monitoring for that. Um, and then I think monitor , like data monitoring is always helpful to do. Most compliance programs have some sort of data monitoring compliance aspect, but I would say , um, being aware to the extent feasible of what peer companies are doing as well with respect to their advertising always helps to , it's never , um, or it's not considered a best practice to say, well, just because, you know , my peer's not doing something means I don't need to do something. That's nothing that , that's not an argument that ever bodes well with , uh, regulators or courts. But, you know, at least like knowing whether you're in the market , um, average is, is helpful to assessing compliance risk in that area.
• 10:57
  Speaker 2: Absolutely.
• 11:00
  Speaker 3: I think from the beginning of all this, I, I was an examiner at the CFPB from the early, early days and I , I remember on my first exam , um, I didn't know anything , uh, but we zeroed in on the process by which the bank was , um, was conducting its marketing reviews and we noticed holes in who was reviewing what. And maybe there was a circumstance where something was initially , uh, approved by someone in compliance, but then maybe it was changed and not run back through the process. Um, the other thing too is understanding the scope of the items that need to be reviewed. Uh, we have seen, we've seen companies get in some hot water with regulators, not necessarily from the usual marketing or the website, which underwent, you know , perfect compliance review, but then someone wrote a blog post and made some , uh, statement that wasn't necessarily untrue, but it was written in a imprecise manner. 'cause it was a blog post, it was supposed to be informal. Um , and that has generated , uh, attention from regulators. So I think it's really important to look at your process and make sure that , um, there's a clear process for who , uh, approves what and when, and that there is an approval at the last step out the door, including for anything that comes back for any sort of edits , um, understanding the scope of your procedure. Um, and then also I think in the, you know, in the world of vendors and, and partners , um, and you know, these FinTech partnerships, there's a lot of fighting around , um, you know, how to divide that responsibility between the bank and the FinTech partner. So , um, I think at the end of the day, whoever's actually offering the product under their charter or their , uh, license is the one that needs to be responsible for all that. Um, and what that means for their partner who might be directing the marketing activities is that , um, they need to run things through the bank or through the licensed company that's offering it. Um, and I know that is such , um, you know, the bane of their existence sometimes, especially for some of these , uh, smaller nimble startups who wanna go a million miles a minute. Um, but it's, it's a really important process because something so small on their website could really generate a lot of problems. Um, and so , uh, again, going back to process and making sure we understand the scope of the materials, the scope of the people that have to come to who for, for , uh, approval , um, and just generally having that plan in place.
• 13:31
  Speaker 4: Absolutely. And it all ,
• 13:32
  Speaker 2: Oh, go ahead. I was gonna just, I was just gonna chime in too, but go for it .
• 13:35
  Speaker 4: Oh, I didn't mean to interrupt. Go ahead.
• 13:37
  Speaker 2: No , no, no. I was just, one of the things that kind of sits with me just from the past I had in the marketing compliance space was the importance of the ongoing monitoring and just being on top of, it's not just approved and done, that there has to be a , um, process in place for that ongoing monitoring because you don't know what could change up on a website. You don't know what could change up on social or anywhere. So just being vigilant about, you know, staying on top of the ongoing monitoring and documenting any changes
• 14:08
  Speaker 4: And, and maintenance. So if there's ever an unfair advertising claim of sorts, then, and if it makes it to, you know, the court system, there's a lawsuit , um, regulators absolutely will demand the data or documents supporting advertising statements, including those made on your own website or your vendor's websites. Um, and so making sure that you have data or documents supporting current statements that are on websites, ensuring and monitoring your vendors , um, or any sort of third party affiliates, websites, statements , uh, marketing brochures that perhaps advertise your company as well to ensure that those statements are accurate. Um, that's something that needs to be done as well.
• 14:49
  Speaker 2: Totally agree. Totally agree. So as we are , um, coming up to the top of the hour, I just wanted to thank you both, but before we leave, I wanted to give you at least an opportunity if you had any , um, additional last minute thoughts, any additional nuggets that you would like to share that you maybe didn't get a chance to get out there. But I feel like we had such a great discussion here, so, so much good stuff. But I definitely would like for you to feel free to have a closing, closing thoughts.
• 15:19
  Speaker 4: Um, yeah, first of all, thank you for having us really appreciate the opportunity to engage in this discussion. Um, no, I, I think our, our main takeaway is , you know, ensuring that there's a robust compliance system and completely understand also that with , with respect to , um, startup companies as Kim mentioned, kind of move a mile a minute, but having a designated employee who's at least starting to monitor that stuff is really helpful , um, especially in the new company space.
• 15:43
  Speaker 2: Appreciate that.
• 15:45
  Speaker 3: Yeah, absolutely. And then just to move back to the monitoring piece, I think , um, you know, making sure that there's monitoring not just on, you know, the website and marketing, but monitoring that the procedures and processes that you have in place are being followed. Um, because as, as Courtney said, the regulators will come back for proof of compliance. Um, and you know, even if you follow the law, there's a concept of a policy violation where if you're not following your policies, even if your policy went above and beyond , um, that is an important , um, thing that regulators look at as well. So overall , um, having a process that makes sense and is realistic , uh, for your organization is really important.
• 16:27
  Speaker 2: Totally agree, and thank you so much for those closing thoughts.
• 16:33
  Speaker 1: Thanks for listening to this episode of the Kapi podcast. If you wanna read more about the enforcement actions from the first half of 2023 and the marketing compliance insights from them, I'll drop two resources for you on these exact topics in today's show notes. And if you think it might be time to invest in a marketing compliance software that will help automate discovery of non-compliant messaging from your brand, but you aren't exactly sure if the timing is right, I'll drop another piece for you titled Five Signs . It's Time to Invest in a marketing compliance software in the show notes as well as always for the latest content on all things marketing compliance, you can head to content, do perform line.com and for the most up-to-date pieces of industry news events and content. Be sure to follow perform line on LinkedIn. Thanks again for listening and we'll see you next time.