When is free not really 'free'?

• Author: Pry, Carl G.
• Position: MARKETING COMPLIANCE - Understanding Regulation DD's advertising requirements - Column

USING THE WORD "FREE" IN AN AD for a deposit ac count can often be more trouble than it's worth. There have always been stringent rules in place dictating what you can and cannot do when stating whether an account (or a feature of an account) is free or no cost, but recent history shows the ante has been raised.

Truth in Savings (Regulation DD) is pretty straightforward: Don't use the word free "if any maintenance or activity fee may be imposed on the account." Sounds simple enough, and such fees are easy to identify: minimum balance or excessive transaction fees are mentioned in the regulation's commentary, as are flat and per-transaction fees. If these types of fees are assessed, the account is not free and cannot be advertised that way. The rule also addresses when an account is free provided conditions are met (the commentary mentions age) and specifies those conditions be clearly stated.

Be extremely obvious and clear about what it will take for the account to be truly free.

But here is where it gets more complicated, and a look at recent enforcement actions confirms advice to be extremely obvious and clear about what it will take for the account to be truly free. Failure to do so could result in problems not only with Reg. DD, but also UDAAP (Unfair, Deceptive or Abusive Acts or Practices), as both have similar standards prohibiting "misleading or inaccurate advertisements" (Reg. DD) and deception (UDAAP).

This concept extends to ads in any media

If conditions and requirements that must be met in order for the account to be free are not disclosed within the ad in a way a normal customer would identify and understand (meaning small-print language at the bottom of the ad that most people...