Legal Marketing: Balancing Creativity and Compliance

1. A Kick start to Legal Marketing in 60 MinutesIn 60 minutes learn how to balance creativity with practicalities and legalities of marketing compliance in the equipment finance landscape. From Can-Spam to TCPA to ECOA and more, be a savvy marketer without stepping outside the law. 

2. About Us BOB COHEN PARTNER Moritt Hock & Hamroff, LLP RCohen@moritthock.com JACKLYNN MANNING MARKETING DIRECTOR Axis Capital Finance JManning@axiscapitalfinance.com

3. CAN-SPAM ACT An Overview

4. CAN-SPAM Act What does it do? • Establishes rules and requirements for commercial messages sent by email. • Gives recipients the right to have you stop emailing them. • Sets forth tough penalties for violations. The CAN-SPAM Act covers all commercial email messages including business-to-business email. What does it stand for? “Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003”

5. What is a Commercial Message? “Any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service,” including email that promotes content on commercial websites.

6. WHAT IS A Transactional Messages EXCEPTION: Transactional Message It is a message which only contains transactional or relationship content (i.e., facilitates an already agreed-upon transaction or updates a customer about an ongoing transaction). If your message only contains transactional or relationship content, it is exempt from most provisions of the CAN-SPAM Act, but still cannot contain false or misleading routing information.

7. COMMERCIAL VERSUS Transactional Messages Commercial Content: Advertises or promotes a commercial product or service, including content on a website operated for a commercial purpose. Transactional or Relationship content: Facilitates an already agreed-upon transaction or updates a customer about an ongoing transaction.

8. PRIMARY Requirements If the message contains only commercial content, each email must comply with all the following CAN-SPAM requirements:

9. PRIMARY Requirement #1 You must (in each email): • Avoid false or misleading header information. • Header information includes the email's "From," "To," “Reply-to” and routing information (originating domain name and email address). Be accurate—identify the person who initiated the message.

10. PRIMARY Requirement #2 You must (in each email): • Avoid deceptive subject lines. Examples of Deceptive Subject Lines: • You  are  approved  for  a  $10,000! • Re: Important Information Regarding Your Business  • JANET!  – Here’s  Money  You  Never  Knew  You  Had • Don’t Wait Any Longer • Every Second Counts • Your Loan/Financing/Capital Is Waiting The subject line must accurately reflect the content of the message.  

11. PRIMARY Requirement #3 You must (in each email): • Identify the message as an advertisement.

12. PRIMARY Requirement #4 You must (in each email): • Advise recipients where you’re located. • Valid physical postal address • Post office box registered with the U.S. Postal Service • Private mailbox registered with a commercial mail receiving agency established under Postal Service regulations

13. PRIMARY Requirement #5 You must (in each email): • Advise recipients how to opt-out of receiving future email from you. • Clear and conspicuous explanation of how to opt out • Ordinary person must be able to understand • Use type size, color, and location for clarity • Provide a return email address or another easy Internet-based way to communicate choice • Opt out menu allowed, but must include option to stop all commercial messages from you One of the most important parts of an email is your valid physical postal address. An easy way to make sure you remember to include your address is to put it in your email template. 

14. PRIMARY Requirement #6 You must (in each email): • Honor opt-out requests promptly • Opt-out mechanism must last for at least 30 days AFTER you send your message • Must honor opt-out request within 10 business days • Can’t charge a fee • Can’t require any personally identifying information beyond email address • Can’t require any step other than sending a reply email or visiting a single page on an Internet website as a condition for honoring opt-out request • Can’t sell or transfer opt-out email addresses, except to a company you’ve hired to help comply with CAN-SPAM Allowing people to unsubscribe is an important rule to keep in mind because anyone receiving your emails should actually want to receive them -- otherwise, you're just spamming them.

15. PRIMARY Requirement #7 You must (in each email): • Monitor what others are doing on your behalf • Even if you hire another company to handle your email marketing, you can’t contract away your legal responsibility to comply with the law

16. Mixed Messages? It depends on how a reasonable recipient would interpret the message. What to consider: • Subject line (It's a big deal!) • Location of the commercial content within the email. • Color, graphics, type size, style, etc.

17. What are the Risks? Penalties of up to $16,000 per email. KOBENI INC. - $350,000 judgment for failing to provide consumers the opportunity to decline to receive future emails, and a valid physical postal address.

18. TCPA An Overview

19. What is the TCPA? The Telephone Consumer Protection Act of 1991 ( “TCPA”) was enacted in 1991 to address certain practices thought to be an invasion of consumer privacy and a risk to public safety. Statute: 47 U.S.C. § 227. FCC Regulations: 47 CFR §64.1200 et seq.

20. What is Prohibited? Prohibits telemarketing calls using an artificial or prerecorded voice to a residential telephone. Prohibits any call using an autodialer or an artificial or prerecorded voice to a wireless telephone. Establishes the type of consent required to make certain types of autodialed or prerecorded/artificial-voice calls. Restricts unsolicited faxes (whether or not sent by an autodialer!)

21. Unsolicited Faxes It is unlawful “to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement. . .” §227(b)(1)(C). “Unsolicited advertisement” means “any material advertising thecommercial availability or quality of any property, goods, or serviceswhich is transmitted to any person without that person’s prior express invitation or permission, in writing or otherwise.”

22. Exception: Prior Business Relationship It is not unlawful to send an unsolicited advertisement from a sender with an established business relationship with the recipient. §227(b)(1)(C)(i). However, all solicited and unsolicited advertisements sent by fax must contain an opt-out notice. The FCC’s rules require that a “facsimile advertisement that is sent to a recipient that has provided prior express invitation or permission to the sender must include an opt-out notice that complies with the requirements in [section 64.1200(a)(4)(iii)].”

23. Opt-in marketing procedures Telephone • Make it part of the sales process • Customer service calls Text Message • User-initiated texts • Consider a double opt-in process or authentication process Email • Replies to email • Redirect customers to company-controlled website to capture written consent U.S. Mail • Postcards • Account statements

24. Opt-in marketing examples

25. Opt-Out Notice The rules specify that the opt-out notice contained in fax advertisements must: (1) be clear and conspicuous and on the first page of the advertisement; (2) state that the recipient may make a request to the sender not to send any future advertisements and that failure to comply, within 30 days, with such a request is unlawful; and (3) contain a domestic contact telephone number and fax number for the recipient to transmit an opt-out request.

26. Opt-Out Notice Fax advertisements sent pursuant to an established business relationship must also contain this opt-out information. Even if the fax sender places an opt-out notice on its fax advertisement, it will not comply with the law unless the opt-out notice satisfies each requirement contained in the rule.

27. TCPA Tips How to prepare for TCPA for your business marketing: • Understand the law as applied to your business • Prepare appropriate policies and procedures • Train all your employees • Create a customer complaint “feedback loop” • Maintain good records • Store consent records for at least 4 years • Carefully document the date and substance of any changes • Create a storing method so you can easily access, search, and retrieve relevant data • Document the process and technology used to sent text messages and/or make calls • Monitor and test your policies • Be aware of State and Federal laws

28. What is the Risk? • $500 per violation (i.e., per call, text message or fax). • Strict liability statute. Can be increased up to $1,500 for a “willful” or “knowing” violation in court’s discretion.

29. ECOA An Overview

30. What Is ECOA? The Equal Credit Opportunity Act (ECOA) was enacted in 1974. The purpose of the act is to ensure that all consumers are given an equal chance to obtain credit. Anyone involved in granting credit, such a broker who arranges financing, is covered by the law. Codified at: 15 U.S.C. § 1691 et seq.

31. Applying for Credit A Creditor May Not... • Ask them to reveal their sex, race, national origin, or religion. • Ask if they are widowed or divorced. • Ask about marital status when applicant applies for a separate, unsecured account. OR • Discourage the applicant from applying because of sex, marital status, age, race, national origin, or because they receive public assistance income.

32. Applying for Credit A Creditor May Not... Request information about applicant’s spouse, except when: • their spouse is applying with them, • their spouse will be allowed to use the account, • they are relying on their spouse’s income, • they are relying on the alimony or child support income from their former spouse; or • they reside in a community property state. Inquire about plans for having or raising children. However, a creditor may ask if they have to pay alimony, child support, or separate maintenance payments.

33. In Deciding to Give Credit, A Creditor May Not Consider... • sex, marital status, race, national origin, or religion. • whether the applicant has a telephone listing. • the race of people in the neighborhood where applicant plans to buy, refinance or improve a house.

34. In Deciding to Give Credit, A Creditor May Not Consider... Age, unless: • Applicant is too young to sign contracts. • Applicant is 62 or older, and creditor will favor them because of age. • To determine the meaning of other factors important to creditworthiness. • It’s used in a valid scoring system that favors applicants age 62 and older.

35. When Evaluating Applicant’s Income, A Creditor May Not... • Consider public assistance income differently than other income. • Discount income because of sex or marital status. • Discount or refuse to consider income because it comes from part-time employment or pension, annuity, or retirement benefits programs. • Refuse to consider regular alimony, child support, or separate maintenance payments.

36. Other Requirements A creditor must provide notice if it has taken adverse action on an application. Creditor may not use indefinite or vague reasons to reject an application: • Acceptable reasons include: "Your income was low," or "You haven’t been employed long enough." • Unacceptable reasons are: "You didn’t meet our minimum standards," or "You didn’t receive enough points on our credit-scoring system." Creditor must provide: • why they offered less favorable terms than what was applied for. • why they closed an account or changed the terms of an account to something less favorable.

37. What is the Risk? Failure to comply with the Equal Credit Opportunity Act can subject a financial institution to civil liability for actual and punitive damages. Liability for punitive damages can be: • as much as $10,000 in individual actions, and • the lesser of $500,000 or 1% of the creditor’s net worth in class actions.

38. BEST PRACTICES Guidance for Direct Mail, Email, Websites & Testimonials

39. GENERAL MARKETING BEST PRACTICES • Claims made in advertising must be accurate and, if applicable, supported by substantiation.  Claims that are capable of being supported by substantiation (that is, objective claims that can be measured) should have that support. • Fineprintcanbeused to explain more prominent information; itshouldnotbeused to change themeaning of more prominent information. • Marketing material should not mislead recipients about the material’s purpose.  For example, marketing material presenting an unsolicited loan offer should not imply that the material is non-sales information rather than a sales pitch or that the material relates to an existing credit account when that is not the case. • Marketing material should not mislead recipients about their approval status.  Unsolicited marketing material should not represent that the recipient has already been approved for credit if that is not the case.

40. GENERAL MARKETING BEST PRACTICES • The terms “pre-approved” and “pre-qualified” have attracted regulator scrutiny.  The results of that scrutiny have been inconsistent, so all marketers should proceed with caution before using these terms.  This applies to the prescreening context, where these terms are used most frequently.  If the recipient will be subject to subsequent creditworthiness evaluation prior to approval, these terms should not be used.  “Pre-selected for this offer” is one alternative. • The FTC has taken the position that “up to” and “as little as” claims include the implied representation that reasonable consumers are likely to achieve the maximum benefit (that is, the highest “up to” figure and the lowest “as little as” figure).  As a result, advertisers should have substantiation supporting that fact. • Marketing material should not imply a government connection or endorsement. 

41. GENERAL MARKETING BEST PRACTICES • In general, the less conditional a claim is, the more likely it is to attract regulator scrutiny.  For example, a claim about “all competitors” is not conditional at all and should not be made without support.  A claim about “most competitors” represents that the claim applies to more than half of the competitors.  A claim about “many competitors” is the most conditional and therefore should attract the least amount of scrutiny, but still should be supported by some evidence.

42. BEST PRACTICES | DIRECT MAIL • Envelope design or content must not imply a government connection.  This includes symbols and logos associated with the government as well as literally true statements about the illegality of tampering with mail delivery that have the effect of creating the impression that the mailer is from the government. • Facsimilechecks are widelyregulated at thefederal and state levels.  Thesestandards are notconsistent, and itisdifficult, ifnotimpossible, to create single facsimilechecksolicitationthatcanbeusedacrossvariousjurisdictionsthatregulatethispractice. • Ifusing a creditcardinsert in a direct mail piece, youshouldtakesteps to ensurethatthecarddoesnotresembleanactualcredit or debitcardthatcouldbeused to accessfunds.  Thismeansthat design elementssuch as a magneticstripe on theback, a hologram icon on the front, and a signaturelineforthe recipient are notrecommended.

43. BEST PRACTICES | EMAIL • The “from” line and header information of all messages must be truthful and not misleading. • Thesubjectline of commercialmessagesmaynotbedeceptive. Subjectlinesthat are ambiguous or misstatetherelationshipbetweentheparties or therecipient’s status shouldbeavoided. • Avoiddeceptivesubjectlines.

44. BEST PRACTICES | WEBSITE • There should be sufficient contrast between text and background. • Applying the “clear and conspicuous” standard online, use of fine-print disclaimers that are not on the audience’s initially viewable screen introduces risk of a challenge, unless there is a prominent disclosure directing the audience to the information.  • Whenattempting to obtainconsentfromapplicants and customersviaan online web site form, using a pre-checked box isnotrecommended.  Itisgenerallyunderstoodthatconsentmustbeinformed or knowing to bevalid.  Pre-checkedboxesmaybechallengedunderthatstandard as inadequateevidence of informed or knowingconsent. Electronicwrittenconsentispreferred. • Hyperlinks to materialinformationshouldbeeasilyidentifiable as links, and thelinkshouldtaketheaudiencedirectly to thatmaterial, or relevantinformation. • Makesure to have a Terms Of Use and PrivacyPolicyeasilyaccessiblethroughoutyourwebsite.

45. BEST PRACTICES | TESTIMONIALS • As a general rule, endorsements and testimonials are subject to the same deception analysis as claims made directly by the advertiser.  This means that claims must be accurate.  Further, statements from customers are considered implied representations that reasonable consumers are likely to experience the same results as the speaker.  If a customer’s experience was not representative, the advertiser should disclose the representative experience along with the endorsement or testimonial.  Further, compensation paid to the endorser should be disclosed because that affects the weight that the audience gives to the statement.

46. THANK YOU! RCohen@moritthock.comJManning@axiscapitalinc.com