Panel agrees that there’s something between “absolutely yes” and “absolutely not.” Why not try the “Karen’s Mom” test?
Posted on July 15, 2009
By Steve Cocheo, executive editor,
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Have Compliance, Marketing, and Legal ever been able to get along without each suspecting that at least one of the trio was out to sabotage their own efforts?
One forms the impression, after enough years in banking, that back when the first primitive to come up with a
wheel was about to give it the first test drive, two more
primitives—one from proto-compliance and the other from
proto-legal—came up with a “few questions and concerns.” We are not
sure if that’s how and when weapons were invented, but there’s a better
than even chance that violence would have ensued.
Now we send e-mails.
In spite of a long heritage of these three disciplines of banking being at odds with each other, speakers came together representing them at a session called, “My Marketing Department Wants To…” in an effort to demonstrate how all three functions can learn to cooperate, rather than butt heads.
Indeed, panelist David Dickinson put the matter in perspective for the compliance officers attending the session at ABA’s Regulatory Compliance Conference.
“It is not your job to say ‘no’,” said Dickinson, who brought background as FDIC examiner, bank loan officer, and compliance consultant to the discussion. “You are in the huddle, but you are not calling the plays.”
Dickinson advised listeners to approach dealings with marketers from the viewpoint of finding ways to help make things possible, rather than simply saying “no.” Dickinson is president of Banker’s Compliance Consulting, Central City, Neb.
Compliance: Trying on cooperation
“Sometimes you have to take a step back, and let your own creativity come out,” instead of resisting what the marketing department comes up with, advised Lisa Funaro, vice-president and compliance officer, Ridgewood (N.Y.) Savings Bank. “We try to offer them suggestions, rather than always saying, ‘no, absolutely not’.”
Funaro said she has gone out of her way to cultivate Marketing in this way. A while back, for instance, Marketing needed someone to participate in a photo shoot. Funaro and her family volunteered and appeared in the resulting advertising for the $4.4 billion bank.
Other cooperative efforts have blossomed from the change of attitude that Funaro described. For instance, when the “red flags” rule came out, the savings bank sponsored an event that met goals of both Marketing and Compliance: a customer shredding day.
Overall, Funaro said, “we try to be a solution, not a roadblock.”
A good case of cooperation between functions was an acquisition the bank made about 18 months ago. Funaro said that there was concern about post-acquisition customer attrition. Marketing came up with an ad directed towards the savings bank’s new customers. It showed a group of people being served dinner in a Ridgewood Savings lobby.
Funaro had her doubts about the ad, and expressed them, but in the end, after hearing her concerns, Marketing went with its concept.
“And it worked,” said Funaro. The ad and other steps taken to make the “acquired” customers feel at home with Ridgewood paid off in an attrition rate of only 5%, said Funaro, versus the more typical figure of 15%.
Legal: Going beyond “no”
Legal departments and outside counsel have the reputation among bank marketers of saying “no” almost by reflex action to anything that’s imaginative or outside of the box in nature. Cautious counsel have earned this reputation.
Speaker Karen Garrett, counsel, Bryan Cave LLP, Kansas City, Mo., said that she follows a different approach, more of a risk-management, consultative style.
“I don’t say ‘no’,” said Garrett. “I say, “Here’s the law. And here’s what you are doing. And here’s how it looks to me’.”
There was some talk during the panel discussion regarding what practices skate near or into UDAP—Unfair and Deceptive Acts and Practices—territory.
“UDAP is like pornography,” said Garrett. “It is subjective and hard to give advice on.”
Dickinson agreed: “UDAP can be very much in the eye of the beholder.”
What’s a good guide, then, to proper and compliant marketing behavior?
Garrett said she had her own rule of thumb. She calls it the “Karen’s Mom” test, named for her own mother.
Garrett said that her mother is a retired teacher. She isn’t a banker, but she’s smart. Garrett tends to look at material that’s in question and ask: “Would ‘Karen’s Mom’ understand this?”
Compliance, Marketing, and Counsel
While the thrust of much of the discussion was how to work better together, Garret also had some advice on how some banks use their outside attorneys.
“It’s silly to call outside counsel for a ruling on every ad,” said Garrett, who has worked in banking law as both outside counsel and as in-house counsel for a regional bank holding company. There are many basic do’s and don’t’s of bank advertising that could be observed without involving outside counsel, she said.
On the other hand, there are obvious triggers that flag advertising and other marketing efforts that demand some involvement by counsel. A brand-new product is one such matter. High-risk products and services would be another. And anything that can get sticky, such as a sweepstakes, which must be approached just so, in order to be legal and compliant, are another.
Garrett noted, for instance, that entry in a bank-sponsored sweepstakes “really has to be for no consideration, not even coming to your branch.” Any tie-in between doing business with the bank and entering the contest can cause problems.
Garrett gave listeners some general rules of thumb:
1. Know your strengths. If the subject matter involved is something the bank’s compliance staff is weak in, then it might be useful to bring in counsel.
2. Beware of freely using “free.” In bank advertising, “using the word ‘free’ is very dangerous,” said Garrett. Aside from the risk of violating a regulation, “free” is seen as such a pull that anything promoted as such will be scrutinized more deeply by examiners than otherwise. If the bank’s marketing staff absolutely insists on using the word, she said, the period of time that the product or service offered will be available without charge must be defined very precisely.
Question of risk and risk appetite
In addition to what you’ve read thus far of the discussion, there was recognition that Compliance and Legal remain part of a bank’s risk management apparatus. And understanding that relates to how Compliance and Legal can better get along with Marketing.
“You have to know your institution’s tolerance for risk,” said panel moderator Elizabeth Snyder, senior vice-president and chief compliance officer Leaders Bank, a $665.7 million-assets community bank in Oak Brook, Ill.
Agreeing, attorney Garrett said that “risk assessment always has to occur.”
New product and service development was identified as a phase where risks are comparatively higher and where Compliance should always be involved prior to public introduction.
Funaro said that management hasn’t always agreed with her findings and recommendations, deciding sometimes that certain risks were acceptable as presented by Marketing. Dickinson noted that risk is frequently present, in an age when people sue McDonald’s because they spilled the chain’s coffee on themselves.
Social media: The newest risk
Towards the end of the session, the panel addressed the topic of social media, and how banks ought to police it. This brought out an additional bank function that increasingly needs to be brought into the picture: Human Resources.
The panel asked for a show of hands, and determined that about a quarter of the banks represented were officially trying something in social media, whether it be Twitter, Facebook, LinkedIn, or otherwise. Garrett reminded the bankers that “these are ads,” no matter how much they don’t resemble traditional advertising. She pointed out that “they are representing the bank, what the bank does, and what the bank is.” That is an ad.
The panelists agreed, too, that a significant risk lies in the unofficial social media user, who moves into Twitter or another service without asking management permission regarding content or activity.
When this was said, someone in the audience audibly moaned. One banker, apparently a compliance officer, who works for a bank that has had national notoriety for its social media efforts, complained about not being consulted before the bank’s official efforts began—never mind renegade outreach.
“What if the Twitterer is a commissioned mortgage originator?” asked Garrett. What they do and say could get the bank into trouble as much as any of the errant bank ads that Dickinson had been screening for the audience prior to this part of the discussion.
Savings banker Funaro suggested that Human Resources would have to become involved, if it wasn’t already involved in the issue of bank employee use of the internet. Attorney Garrett insisted that a bank should adopt a policy holding that any activity that generates leads for the bank or its employees be recognized as belonging to the bank, in the sense of responsibility.
Consultant Dickinson gave Garrett some pushback.
“How will the regulators even know?” he asked.
Banker Elizabeth Snyder shot back:
“You could get a consumer complaint through your regulator,” said Snyder. Ultimately, she added, at the least the bank with unofficial social mediator users potentially faces reputation risks.
* * *
Read “Blogs and tweets can land you in compliance hell,” by ABA Banking Journal Contributing Editor Nancy Derr-Castiglione.
Read ABA Banking Journal Executive Editor’s Commentary, “Dateline: Twitterverse.”
* * *
If you’d like to join ABA’s Compliance Network group-site community (member banks only), click here.
[This article was posted on July 15, 2009 on the website of ABA
Banking Journal, www.ababj.com, and is copyright 2009 by the American
Bankers Association.]
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