ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, September 15, 1996 TAG: 9609130185
SECTION: BUSINESS PAGE: 1 EDITION: METRO
COLUMN: Banking
SOURCE: MAG POFF
All bank advertising seeking your deposits carries the logo of the FDIC, which tells you that your account is insured by an agency of the federal government.
You may have thought that the bank was trying to assure depositors of the safety of their money. That may be true, too, but banks that are insured by the FDIC - as all Virginia banks are - must by law use the Federal Deposit Insurance Corp.'s logo if their advertising mentions deposits.
That's just one of the myriad of rules that banks must follow in their advertising. Banks, among the most regulated of all industries, operate under tight controls about what they can tell customers, both in ads and in their own lobbies.
Brochures included with a monthly statement, posters inside branches, messages on ATM screens and even pitches given on the phone while a customer waits on hold are considered to be advertising. Even message boards in a bank lobby posting rates for savings accounts and loans are considered advertising if they can be seen from the street, thus requiring disclosure.
Gene Kennedy, director of advertising for First Union Corp., said any bank information on deposits, whether in print or on radio or television, must mention the Federal Deposit Insurance Corp.
What's more, he said, the rate must be stated as the annual percentage yield, named for a specific method of calculating compounded interest paid on the account.
Because all banks must comply, Kennedy said, consumers can "compare apples to apples." Anyone reading bank ads, or comparing banks in the chart of rates that appears on Business pages in The Roanoke Times each Wednesday, can be assured the rates are consistent with each other.
What's more, Kennedy said, any bank advertising a certificate of deposit must also place in the copy a notice of a penalty for early withdrawal.
The rules are structured to make certain the consumer understands all the nuances of the bank product, said Grant O'Neal, advertising director for NationsBank. "Brokers try to do it, too," O'Neal said. "Everybody tries to explain rates in some form."
It also explains why you so seldom see advertising for free checking, O'Neal said. A bank cannot say checking is free unless it makes absolutely no charge and sets no minimum balance on such accounts.
But, he added, these rules mean advertising should be checked by an in-house lawyer before it can be published.
When it comes to loans, O'Neal said, "trigger words" set off rules for a full disclosure. That applies to other industries as well, which is why you hear radio advertising by car dealers in which the announcer races through the disclosures in a 30-second spot.
Any advertiser who offers a loan is required to state the complete terms, such as the total number of payments, the amount of each payment and the total cost of the loan repayments.
Kennedy said any bank or mortgage company advertising a Veteran's Administration or Federal Housing Administration mortgage is required to state that it is an equal housing lender. Many banks simply state as a matter of course for every loan, that they are an "equal opportunity lender."
You see too much advertising that interest on a home equity line is tax-deductible, which for many borrowers is a primary consideration. That's because the interest on amounts over $100,000 can't be deducted and not everyone itemizes deductions on income tax returns. Kennedy said banks get around the issued by suggesting borrowers should see a tax consultant about a possible deduction.
O'Neal said all fees must be disclosed, and notice of any changes in charges must be given 30 days in advance. So you should read those printed notices that arrive with your monthly statement.
Banks' big entry into selling mutual funds has prompted other regulations. O'Neal said that regulators require banks to state "clearly and boldly" that their mutual funds are not insured by the FDIC or anyone else.
Mutual fund advertising is "a whole new area for us," Kennedy said, and the rules for banks are "harsher" than those for brokers. When it comes to new cash management accounts, he added, the disclosures must state when the account is uninsured.
A. Wayne Lewis, executive vice president of Valley Bank, said no disclosures are required for so-called image advertising that contains no mention of a bank product. Regulations only "kick in" when a rate is mentioned.
But Lewis said that advertising regulations are "not a huge factor" because they require nothing more than information that a bank wants to give its customers.
Kennedy agreed that banks want to give full disclosure. Anything less, he said, would cause the bank's own employees a problem trying to explain terms to irate customers. "The last thing you want to do is put your employees in an awkward situation."
LENGTH: Medium: 89 linesby CNB