NCUA Finalizes Changes to Its Advertising Rules; Dallas

Written by Steve Van Beek

Yesterday, NCUA held their monthly Board meeting.  One of the final rules will impact every credit union.  NCUA finalized an amendment to change its requirements for the "official advertising statement."  In 2008, NCUA amended the "official advertising statement" to allow credit unions three options.

Those three options are:

1. The full text version.  "This credit union is federally insured by the National Credit Union Administration."
2. The short title.  "Federally insured by NCUA."
3. Use of the official NCUA share insurance logo.  

This latest amendment changes when the "official advertisement statement" is required.  

Part 740 - Accuracy of Advertising and Notice of Insured Status

Exemptions.  NCUA had proposed to remove three exemptions to its requirement to disclose the "official advertising statement."  After reviewing the comments, NCUA ended up eliminating one of the exemptions and limiting (rather than removing) the two other exemptions.  

Currently, section 740.5(c) of NCUA's regulations include these three exemptions (among others):

(c) The following advertisements need not include the official advertising statement:

(1) Statements of condition and reports of condition of an insured credit union which are required to be published by state or federal law or regulation;

.................

(8) Advertisements by radio that do not exceed thirty (30) seconds in time;

(9) Advertisements by television, other than display advertisements, that do not exceed thirty (30) seconds in time;"

NCUA completely removed the exemption for "Statements of condition and reports of condition."  After January 1, 2012, these statements need to include the "official advertising statement" in "a prominent position on the front cover of the document or on the first page readers see if there is no cover page."

After reviewing the comments to the proposal, NCUA decided not to completely eliminate the radio and TV exemptions.  Instead, NCUA reduced the exemptions to 15 seconds.  Thus, radio and TV advertisements longer than 15 seconds need to include the "official advertising statement."

Definition of Advertisement.  NCUA also defined the term "advertisement" for the purposes of Part 740.  The finalized definition is:  "(b) Advertisement as used in this part means a commercial message, in any medium, that is designed to attract public attention or patronage to a product or business."  12 C.F.R. 740.1(b).  This definition is identical to the FDIC's definition.  

However, keep in mind that Part 740 relates to member accounts and when the "official advertising statement" is required.  One of the current exemptions (which was not changed in this final rule) indicates that loan advertisements do not fall within the realm of this rule.  

"(c) The following advertisements need not include the official advertising statement:

.......

(12) Advertisements that do not relate to member accounts, including but not limited to advertisements relating to loans by the credit union, safekeeping box business or services, traveler's checks on which the credit union is not primarily liable, and credit life or disability insurance." 

And, this makes sense as these products are not federally-insured.  

Font Size for Print Advertisements.  NCUA's rule also attempted to clarify its requirement that the "official advertising statement" be clearly legible.  The new standard after January 1, 2012 is that the official advertising statement (whether it be the text in the NCUA logo or the "Federally insured by NCUA" text) must be "in a size and print that is clearly legible and may be no smaller than the smallest font size used in other portions of the advertisement...."  

The good news is NCUA did not mandate a font size requirement.  The bad news is the credit union will need to review its advertisements to make sure the "official advertising statement" is not smaller than other language used.

Mandatory Compliance Date.  Compliance with these changes will be required by January 1, 2012.  However, if you want your advertising campaign to be able to extend into 2012 you would need to review your ads for compliance at an earlier date as NCUA declined to "grandfather" existing advertising campaigns.  

The full language of the rule is here.  Cover letter is here.  

Pro Tip:  If you are new to compliance or want to improve your understanding of the rulemaking process, this is a great rule to read.  NCUA does a very good job explaining its proposal, the comments submitted and the rationale for their final decision.    

***

My fiance, my (future) in-laws and I are headed to downtown Dallas for a short 3-day trip.  If you have any must-sees, must-dos or especially must-eats in or around Dallas - don't be shy!  We are open to ideas.  

***

Also, considering it appears to be an early "rivalry week" for Michigan-Ohio State on the blog - I had to share this photo of my soon-to-be Divided House.  

 That photo was obviously taken before last November's meeting. 

Comments

[Dianna]

Congrats on the pending wedding!! Sorry, no Dallas knowledge to pass on (beyond the Compliance Seminar from last year).

[Rob Hatfield]

What about billboards? Do you have any idea about what they would require on billboards? Certainly they aren't expecting us to follow print rules on billboards?

[Steve Van Beek]

Rob,
There is no exception for billboard advertisements. I don't think those ads were something that NCUA considered when they amended the regulations.

One option that some credit unions are looking at is including the "Federally insured by NCUA" language on the billboard below the NCUA logo to help ensure legibility. But, I'm not sure there is a perfect solution.

[Rob Hatfield]

Thanx! Probably have to fudge the "no smaller than the smallest type" rule on boards;

[Joyce]

But doesn't 740.5(b) state that a CU can use "Federally insured by NCUA" - at their option OR a reproduction of the official sign as the official advertising statement? Meaning, we can use EITHER the sign or just the "Federally insured by NCUA"? Then, it really wouldn't be an issue with billboards, right?

[Steve Van Beek]

Joyce,
Yes - the CU does have the option of using one or the other. You wouldn't have to use both, you are right.

The use of "Federally insured by NCUA" or the official sign would work - provided you meet the size requirement.

[Joyce]

Phew! Thanks for the confirmation, Steve... and welcome back :-)

[Lori Martinez]

Just to confirm, the "Federally insured by NCUA" statement can also be used on direct mail/post cards in lieu of the logo, yes? Are there any specifics as far as placement?

[Steve Van Beek]

Lori,
Yes - the credit union has the option to use the short version of the official advertising statement "Federally insured by NCUA" on its ads.

There is no placement requirement but you'd need to make sure the disclosure was the same font size as other information on the ad.

[Lori Martinez]

Thanks for the info, Steve!

[Veronica Esparza]

I have a question-our credit union is working on creating a separate website that would allow credit union members to open accounts online. This includes savings, checking, and loan accounts. This site can be accessed from our home page (which does carry the NCUA logo) and from our home banking page. Would we be in compliance if we only use the verbiage "Federally Insured by NCUA" or do we need the official logo on this page as well?

[Steve Van Beek]

Veronica,
The credit union would need to use the official sign on this website because members would be able to open accounts from that page. Section 740.4(a) of NCUA's regulations requires the official sign on Internet pages where the credit union allows members to make deposits and open accounts. Using just the "Federally Insured by NCUA" would not be sufficient.

[VE]

Thank you so much Steve! I really appreciate the quick response!