CUNA Regulatory Comment Call

January 13, 2011

Accuracy of Advertising and Notice of Insured Status

EXECUTIVE SUMMARY

 

 

Please email comments to Senior Vice President and Deputy General Counsel Mary Dunn and Regulatory Counsel Luke Martone, or contact us at (800) 356-9655 ext. 6743 with any questions.  Click here for the proposal.

 

BACKGROUND

Section 740.5 of NCUA’s regulations requires that insured credit unions include NCUA’s official advertising statement (“This credit union is federally insured by the National Credit Union Administration”) in all advertisements, including on the credit union’s website.  Credit unions are permitted to use the abbreviated title “Federally insured by NCUA” or a reproduction of NCUA’s official sign, as shown in section 740.4(b), as the official advertising statement.  In addition, Part 740 of NCUA’s regulations requires the official advertising statement to be in a font size and print that is clearly legible.  A credit union that chooses to use the official sign as the official advertising statement is permitted to modify the font size to ensure legibility.

The current rule exempts a number of advertisements from the official advertising statement requirement, these are:

 

BRIEF DESCRIPTION OF THE PROPOSED RULE

Radio & Television Advertisements

The proposal would rescind exemptions from the official advertising statement for both radio and television advertisements that are no more than 30 seconds long.  NCUA believes that, as with longer radio and television advertisements, which are currently not exempt, it is important that consumers who see or hear shorter advertisements understand that the credit union is federally insured by NCUA.  In addition, NCUA believes that the benefits of requiring the official advertising statement for shorter advertisements—specifically, enhanced consumer confidence and NCUA name recognition—“will far outweigh” any inconvenience to the credit union.  The proposal would also apply to television display advertisements.

Specifically, the proposal would add the following underlined language to section 740.5(a):

“Each insured credit union must include the official advertising statement, prescribed in paragraph (b) of this section, in all of its advertisements including, but not limited to, annual reports, statements of condition required to be published by law, radio and television advertisements, and on its main Internet page, except as provided in paragraph (c) of this section.”

 

Printed Material

The proposal would also rescind the exemption from the official advertisement statement requirement for a credit union’s annual report and other statements of condition required to be published by law.  NCUA believes that such documents are a form of advertisement and, therefore, should include the official advertising statement.

Further, in regard to any print advertisement, the proposal would clarify the requirement that the official advertising statement be in a size and print that is clearly legible.  Specifically, the proposed rule would add to section 740.5(b), that the font size and print “be no smaller than the smallest font size used in other portions of the advertisement intended to convey information to the consumer.”  However, similar to the current rule, the proposal does not dictate a specific font size that must be used for the official advertising statement.

Definition of “Advertisement”

The proposal would define the term “advertisement” in section 740.1 as, “a commercial message, in any medium, that is designed to attract public attention or patronage to a product or business.”  This is the same definition used by the Federal Deposit insurance Corporation in its official advertising statement rule.

QUESTIONS TO CONSIDER REGARDING THE PROPOSAL

  1. Do you agree with the proposed provision to rescind the exemption from the official advertising statement requirement for radio advertisements that are no more than 30 seconds long?


















  2. Do you agree with the proposed provision to rescind the exemption for television advertisements that are no more than 30 seconds long?


















  3. In regard to the proposed requirement that shorter radio and television advertisements comply with the official advertising statement rule, NCUA states that, “the benefits of this action to consumers and credit unions, namely, enhanced consumer confidence and NCUA name recognition, will far outweigh the minor inconvenience associated with requiring the inclusion of the official advertising statement in this context.”  Do you agree with NCUA’s assessment of the potential costs and benefits?


















  4. Do you agree with the proposed provision to rescind the exemption for a credit union’s annual reports and statements of condition required by law?  Do you agree with NCUA that such documents are a “form of advertisement” that merit application of the official advertising statement rule?


















  5. Can you estimate the costs of these changes for your credit union?


















  6. In an effort to “clarify” the requirement that the official advertising statement be in a size and print that is clearly legible, the proposal would require that the font size and print “be no smaller than the smallest font size used in other portions of the advertisement intended to convey information to the consumer.”  Do you support the proposed clarification?


















  7. The term “advertisement” is not currently defined in Part 740.  Do you agree with NCUA that it is necessary to establish a definition?  The proposal defines “advertisement” as, “a commercial message, in any medium, that is designed to attract public attention or patronage to a product or business.”  Do you support the proposed definition?


















  8. Any other comments or questions?