Online Disclosures 101: FTC Dot-Com and Mobile Disclosures April 15, 2013 Alan S. Kaplinsky Practice Leader Consumer Financial Services 215.864.8544 [email protected]Mercedes Kelley Tunstall Practice Leader Privacy and Data Security 202.661.2221 [email protected]Amy S. Mushahwar Consumer Financial Services Privacy and Data Security 202.661.7644 [email protected]Trevor Salter Consumer Financial Services Privacy and Data Security 202.661.2224 [email protected]Copyright 2013 by Ballard Spahr LLP
Transcript
Online Disclosures 101: FTC Dot-Com and Mobile Disclosures April 15, 2013 Alan S. Kaplinsky
Practice Leader Consumer Financial Services 215.864.8544 [email protected]
Mercedes Kelley Tunstall Practice Leader Privacy and Data Security 202.661.2221 [email protected]
Amy S. Mushahwar Consumer Financial Services Privacy and Data Security 202.661.7644 [email protected]
Trevor Salter Consumer Financial Services Privacy and Data Security 202.661.2224 [email protected]
Copyright 2013 by Ballard Spahr LLP
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Auto Finance Industry in the CFPB's Crosshairs April 16, 2013
Coping with a Growing CFPB Database of Consumer Complaints May 15, 2013
Mortgage Daily 2012 Litigation Index May 17, 2013
The CFPB and the Interstate Land Sales Full Disclosure Act May 21, 2013
Regulatory and Litigation Challenges to Lender-Placed Insurance May 29, 2013
The Nationwide Mortgage Licensing System & Registry (NMLS) TBD
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E-Commerce Series Webinars
Register for upcoming webinars at www.ballardspahr.com or by e-mailing [email protected]. Request materials from past webinars by e-mailing [email protected].
Privacy / Cyber Security: Data Security and Privacy Claims and Disclosures (Upcoming June 2013)
E-Commerce: Mobile Channel(Upcoming July 2013)
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Moderator – Alan S. Kaplinsky
• Practice Leader of the Consumer Financial Services Group at Ballard Spahr
• Devotes his practice to counseling financial institutions with respect to bank regulatory and transactional matters and defending them in individual and class action lawsuits (including CFPB investigations and government enforcement matters)
• First President of the American College of Consumer Financial Services Lawyers
• Former Chair of the American Bar Association Committee on Consumer Financial Services of the Business Law Section
• Co-Chair of the Practising Law Institute's Annual Consumer Financial Services Institute, now on its 18th year
• Has been named as a tier one banking and consumer financial services lawyer in the 2006 through 2012 editions of Chambers USA
• Has been named in The Best Lawyers in America under financial services regulation law and banking and finance litigation from 2007 to 2013
• Named the 2012 Philadelphia Lawyer of the Year for Litigation-Banking & Finance
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Panelist – Mercedes Kelley Tunstall
• Practice Leader of the Ballard Spahr’s Privacy and Data Security Group
• Also a member of the Consumer Financial Services Group, Bank Regulatory and Supervision Group, Mortgage Banking Group, software and business methods practice team in the Patents Group, and Trademark and Copyright Group
• Practice focuses on digital marketing, social media, and privacy and data security issues, in addition to emerging payments, including mobile wallets.
• Former in-house counsel for major financial services companies, with focus on e-commerce issues, compliance, and responding to state attorney general and federal regulator inquiries into consumer protection, privacy, and disclosure issues
• Former staff attorney at the Federal Trade Commission, where she investigated and litigated the Commission's first Internet hijacking case, among other Internet fraud matters
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Panelist – Amy S. Mushahwar
• Of Counsel at Ballard Spahr and a member of the firm's Privacy and Data Security, Consumer Financial Services, Mortgage Banking, and E-Discovery and Data Management Groups
• Defends companies in privacy-related matters and advises on regulatory issues involving e-commerce, including social networking sites, the use of mobile platforms in banking transactions, and PCI compliance for payment cards
• Conducts online and offline privacy assessments and information security policy audits and advises on all state, federal, and international privacy requirements and data protection laws
• Has developed in-house compliance policies, procedures, and training programs for Fortune 500 companies across the nation, including those in the mortgage, banking, and consumer finance space as well as other industries
• Before entering the law, Amy spent several years as a technology consultant, performing network security design and implementation; from 1997 to 2001, she owned and operated a technology consulting company
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Panelist – Trevor Salter
• Associate in the Business and Finance Department at Ballard Spahr and a member of the firm’s Consumer Financial Services and Privacy and Data Security Groups
• Counsels clients on compliance with consumer financial services laws, advises on developments at the Consumer Financial Protection Bureau and other financial regulators, and represents companies during civil investigations
• Regularly advises on privacy, data security, and other legal issues in delivering financial products through online and mobile platforms
• Before joining Ballard Spahr, Trevor was Legal Counsel to a major solar power company
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Dot.Com Disclosures—Overview
• First issued in 2000
• Provides guidance on what constitutes “clear and conspicuous” online and mobile disclosures - Advertisements that do not
contain clear and conspicuous disclosures may be considered an “unfair or deceptive act or practice,” or UDAP. UDAP violations are enforced by the FTC under Section 5 of the FTC Act.
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Unfair or Deceptive Acts or Practices
• An act or practice is unfair when:
1. Act or practice is likely to cause substantial injury • Actual injury is not always required – a significant risk of concrete
harm is also sufficient.
2. Injury is not reasonably avoidable; and • Does the act or practice hinder the consumer’s decision-making?
• Actions the consumer must take to avoid injury must be reasonable
3. Substantial injury is not outweighed by countervailing benefits to consumers or to competition
• Public policy considerations may be taken into account, but may not be the primary basis for determining unfairness
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Unfair or Deceptive Acts or Practices
• An act or practice is deceptive when: 1. There is a representation, omission or practice that is likely to mislead
the consumer; 2. The consumer’s interpretation is reasonable; and 3. The representation, omission or practice is material.
• The question to ask is: Will the representation affect the consumer’s decision regarding choosing the product?
• What is material? - Express claims - Implied claims - Claims involving the purpose, cost or efficacy of the product.
• Keep in mind that you do not need to know that the claim is deceptive, nor, does the consumer have to show actual injury.
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UDAP and Claim Substantiation
• Not always a disclosure problem, but may be a problem with the claim itself
• Failure to have adequate prior substantiation for a material claim is a deceptive act or practice
• The substantiation must provide a reasonable basis for the claim being made.
• Determining whether substantiation is adequate involves: - Type of claim - The product
- Consequences of a false claim - Benefits of truthful claim
- Cost of developing substantiation
- Amount of substantiation common in the industry
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Claims & Substantiation Examples
• Save up to 20% - Is there a significant minority of customers who can achieve the
savings??
• Earn More Rewards with a Performance Checking Account - Are the additional rewards non-trivial? Would a reasonable
consumer actually believe Performance Checking is better?
• Conditions 25% better - Make sure you are comparing apples to apples
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Puffery
• “The advertiser’s right to lie his head off because no consumer will believe him anyway.”
• You don’t need to substantiate claims that are so vague or exaggerated that no reasonable person would take the claim seriously. Chevy Truck Survives
Armageddon Super Bowl ad
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Dot.Com Disclosures—Overview
• Clear and Conspicuous – the “4 P’s” - PROMINENCE: Is the disclosure big and clear enough for
consumers to notice and read?
- PRESENTATION: Is the wording and format easy for consumers to understand?
- PLACEMENT: Is the disclosure where consumers would expect it?
- PROXIMITY: Is the disclosure within or close to the claim it qualifies?
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Dot.Com Disclosures v.2—What’s New?
• No changes to overall themes and requirements - Advertising claims must be substantiated and qualified with a
disclosure if an unqualified claim would deceive, mislead, or be unfair to a customer.
- Disclosures must be clear and conspicuous
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Dot.Com Disclosures v.2—What’s New?
• Changes to reflect multi-platform, multi-channel customer experience - Emphasis on ensuring clear disclosures across:
• platforms (e.g. desktop, tablet, mobile)
• devices and software (e.g. iOS versus Android)
• channels (website, social media, SMS)
- Expands focus on “space-constrained ads,” such as banner ads, Twitter and other social media; further guidance on: • Scrolling
• Hyperlinking
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Dot.Com Disclosures v.2—What’s New?
• PROMINENCE - Advertisers should test ads and
disclosures across platforms
- “[I]f a particular platform does not provide an opportunity to make clear and conspicuous disclosures, it should not be used to disseminate advertisements that require such disclosures.” • Be careful about mobile web:
optimize your websites per platform to ensure proper viewing
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Dot.Com Disclosures v.2—What’s New?
• PROMINENCE (Cont’d) - “Important” disclosures
should not be buried in the terms of use.
- Rule of thumb: prices or fees, use restrictions, or other terms that might surprise or be unexpected to a reasonable customer should also be clearly disclosed outside of the terms of use.
- Should be within or adjacent to the claim.
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Dot.Com Disclosures v.2—What’s New?
• PROMINENCE (continued) - Consumers should be “held up” before agreeing to a secondary
offer.
- Example: Purchase a prepaid card and the customer is automatically enrolled in a six-month free trial of a financial planning newsletter. The offer is a negative option, meaning that at the end of the six months, the customer is charged for the seventh month unless the customer takes affirmative steps to cancel. • The customer should be held up by, for example, checking a box to
indicate that the customer understands and would like to be receive the newsletter.
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Dot.Com Disclosures v.2—What’s New?
• PRESENTATION - Disclosures should be presented in the same manner as the ad.
• E.g. written ads should have written disclosures
• Example: Customer sees an ad online for a music streaming service. Customer is interested and clicks on a tutorial web video and is told an important disclosure by the presenter on the video.
- While okay to provide the disclosure on video, the disclosure should also be conveyed in writing on the website.
- A note on advertising icons (e.g. AdChoices icon): The FTC continues to disfavor reliance on icons as a substitute for a disclosure that the customer is being tracked and is served advertising based on the customer’s online behavior.
• PLACEMENT - Evaluate all avenues a consumer may use to find the claim and
check to see that the disclosure accompanies the claim in each avenue.
- Do:
- Don’t Follows on Next Page:
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Dot.Com Disclosures v.2—What’s New?
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Dot.Com Disclosures v.2—What’s New?
• PLACEMENT (cont.) - Pop-Ups
• In general, do not use them to convey disclosures
- They could be blocked by the consumer’s software
- Even if they are not blocked, consumers tend to associate pop-ups with ads and the pop-ups are typically exited quickly.
• If you do use them, ensure that the pop-up is unblockable.
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Dot.Com Disclosures v.2—What’s New?
• PLACEMENT (cont.) • Research – the FTC expects your company to keep abreast of general
empirical research and your specific data about where consumers do and do not look on a screen.
- Note that some of these analytics services may have their own privacy concerns.
- Carefully inventory, evaluate and ensure appropriate disclosures for all third parties on your website to collect ‘click’ data.
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Dot.Com Disclosures v.2—What’s New?
• PROXIMITY - Scrolling. The one-click rule: important disclosures should be
adjacent to the claim; if the ad is space-limited, then important disclosures may be accessed by hyperlink, but the consumer should not have to scroll down on the landing page. • If it is necessary to scroll down, the consumer should be alerted or
guided to scroll down.
• Disclosures should never follow a block of white space, the “contact us/privacy policy/terms of use” line, or other roadblock that would signal to the consumer that they need not scroll further.
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Example: Skype
Sometimes products are complicated, but try to pull material terms
up front.
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Example: Credit Expiration Terms, Still Looking
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Example: Credit Expiration Terms, Still Looking
• Three iPhone scroll screens later within the Terms of Use, you will find the following language:
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Dot.Com Disclosures v.2—What’s New?
• PROXIMITY (cont.) - Hyperlinks: When using a hyperlink to lead into a disclosure,
• Make the link obvious;
• Label the hyperlink appropriately to convey the importance, nature and relevance of the information it leads to;
• Use hyperlink styles consistently, so consumers know when a link is available;
• Place the hyperlink as close as possible to the relevant information it qualifies and make it noticeable;
• Take consumers directly to the disclosure on the click-through page;
• Assess the effectiveness of the hyperlink by monitoring click-through rates and other information about consumer use and make changes accordingly.
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Dot.Com Disclosures v.2—What’s New?
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Dot.Com Disclosures v.2—What’s New?
• PROXIMITY (cont.) - Note for online marketing partners/affiliates:
• Disclosures should be on the website where the claim is found, not just on the website where the product is purchased.
- Same is true for the same company/different channel: Disclosures in the brick-and-mortar store do not cure a claim made without those disclosures online.
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Take-Aways
• PROMINENCE: The medium is the message. Optimize for different platforms, applications and formats.
• PRESENTATION: Negative Options? Or, other contract reoccurrences? Flag the consumer online!
• PLACEMENT: Know thy consumer (know every way they can see the claim and keep abreast of empirical research and your own analytics).
• PROXIMITY: Use the one-click rule; make any hyperlinks obvious and pay careful attention to the need for consumer scrolling on the hyperlinked page.
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Questions?
If you have questions about anything we covered today, please contact:
Alan S. Kaplinsky Practice Leader Consumer Financial Services 215.864.8544 [email protected]
Mercedes Kelley Tunstall Practice Leader Privacy and Data Security 202.661.2221 [email protected]
Amy S. Mushahwar Consumer Financial Services Privacy and Data Security 202.661.7644 [email protected]
Trevor Salter Consumer Financial Services Privacy and Data Security 202.661.2224 [email protected]
