LEGISLATIVE/LEGAL

How the Financial Reform Bill Will Affect Advertisers

By: Matthew Burr
VP of Government Affairs

Agencies beware!  In certain situations, the new financial reform bill will hold agencies, media conglomerates, and marketers liable for the content of the advertising client’s message.

In the past, the responsibility to create honest and comprehensible messages for financial services fell solely upon the shoulders of the advertising client, freeing agency minds to explore creatively and focus on the development of memorable, lucid, and cohesive campaigns.  With the passage of the Frank-Dodd Financial Reform and Consumer Protection Act, agencies and media companies may be held responsible for the integrity of the clients’ messages by the Federal Trade Commission.

Advertising agencies have long been prohibited from creating and distributing messages for illegal products or services.  However, if specific claims furnished by the advertising client were found fraudulent, the agency was usually not held accountable.  This no longer stands true.  According to the American Advertising Federation, “an advertising agency that prepares creative for a client, but does not have the expertise to verify the substance of an offer could nevertheless be subject to potential liability for false or deceptive claims”.

Not only agencies are at risk, however- media companies may also be liable under the new legislation.  Media brokers that “solely sell space and time” will remain protected, but media broadcasters and publishers are already required to perform a review of their advertisements for obscene or offensive content.  This cursory review, which is often unavoidable under FCC guidelines, may create liability for the media agency that checked a financial advertisement for overt sexuality or crude language, but missed the fraudulent messages regarding the returns on bank tools such as complex derivatives.

The Consumer Protection Act demands clearer and simpler communication from banks and other financial service providers in order to shield consumers from proceeding with financial transactions under misguided notions.  A new federal agency called the Consumer Financial Protection Bureau will be responsible for punishing those institutions that continue to mislead clients by creating contracts so complex and difficult to decipher that they have become modern day usury.

The new Consumer Bureau will be watching the agencies, the advertisers, and the advertised messages far more closely than in the past.  This may lead to increased overhead for agencies that work on large scale financial campaigns, since hiring a financial analyst or a legal finance team to protect themselves could very well become standard agency practice.

Because of the novelty of the reform bill, there is still no way to know for certain exactly how the new law will be interpreted.  A strict interpretation may lead to regular government interference with agencies, hindering creativity and increasing overhead, while a more lenient interpretation would offer more freedom to agencies while holding the banks to a far more fiscally responsible standard.

As we wait to discover exactly how the new regulations will affect the industry, I urge you to use caution and certainly have your financial messages reviewed by a business attorney or financial analyst familiar with the new legislation for accuracy and integrity before publishing or broadcasting.  With this protection, your creative minds are free to do what they do best (free from adverse risk), and you can be sure to avoid possible legal penalties as well.

Matt Burr, AdFed VP For Government Affairs, is an Intellectual Property Attorney for MWR Legal, a full service corporate law firm located in Austin, Texas.  Contact him at info@austinadfed.com or at 512.320.0601 or visit http://www.MWRLegal.com.