There are a lot of predictions being made for 2025. Some are surefire and others are guestimates. Financial institutions can expect a few things in the market next year including a release of the pent-up demand for loan products on the heels of rate cuts, increased reliance on AI, data analytics and machine learning to progress institutions forward, and increased emphasis on branding and customer experience at every banking juncture.
One thing that might not be on your bingo card for 2025 is compliance.
Awareness During Acquisition Campaigns
Financial institutions may need to pay extra attention to lending and deposit-driven acquisition marketing compliance. Understanding and navigating the intricate web of regulations is critical.
As financial institutions pivot toward acquisition-focused marketing, primary compliance concerns center around fair lending laws and the prohibition against unfair, deceptive, or abusive acts or practices (UDAAP). Fair lending laws focus on discrimination and specifically prohibited targeting criteria, while UDAAP focuses on whether an act or practice is considered “unfair,” meaning it causes, or is likely to cause, substantial injury, including financial injury, to the consumer. The key under UDAAP is that the injury is not reasonably avoidable by the consumer, and the injury must not be outweighed by benefits to the consumer or competition.
Compliance requirements can be complex, but they need to be a top priority for financial institutions to minimize the risk of even unintended violations, especially when it comes to targeting. This is where we must closely evaluate the attributes used when creating campaigns.
Targeting Challenges: Don’t Take Regulation to Chance
When it comes to targeting attributes, certain factors should typically be avoided, such as age, gender, national origin, or marital status. However, there can be exceptions, such as meeting specific Community Reinvestment Act (CRA) goals or marketing an age-based account. It’s essential for financial institutions to work closely with their legal and compliance teams, ensuring that their marketing partners are doing the same. The key is to make sure that any attributes used for targeting comply with all fair banking laws. This is a tricky area that requires focused attention, as something that seems benign can become a compliance issue.
Prioritizing compliance in selecting attributes is crucial because, while identifying the right audience is important, it shouldn’t come at the expense of treating consumers unfairly. Besides consumer attributes, there are other data points that financial institutions can use in a compliant way. For example, having several different views of market data—such as product penetration, consumer loyalty, and average product balances—can provide valuable insights into market opportunities even before those opportunities fully emerge.
Handling compliance regulations in marketing can be challenging for financial institutions. Often, it comes down to staff knowledge about compliance interpretation and the difficulty of maintaining a “speed to market” mindset. This can result in compliance being viewed as a lesser priority. It’s not that compliance isn’t important, but some financial institutions may not have the same level of dedicated compliance and legal resources that larger institutions enjoy.
Every time a marketing program launches, it must be compliant. If you’re working with a partner who lacks experience in financial marketing and compliance, the time it takes to get to market can be significantly longer. It’s important to work with a partner who understands both marketing and compliance to ensure everything is in line.
Compliance Power in Your Partners
When assessing compliance qualifications in a marketing partner, it’s important to ask about their specific compliance protocols and monitoring practices. If your marketing partner doesn’t understand compliance, it can be problematic. Having dedicated legal resources focused on marketing compliance is essential. Taking the time to digest legislative and regulatory information and applying that knowledge to improve every targeting program is an investment that truly makes a difference.
At Vericast, we’ve made significant investments in our compliance-forward approach by partnering with market experts to get a holistic view of the market, ensuring that our acquisition strategies are both effective and compliant. With legal and compliance experts on our expanded team, many of whom are former regulators, we view compliance not as an afterthought, but as a core strategy that adds value.
In 2025, compliance is not just about adhering to regulations; it’s about safeguarding a bank’s future in a rapidly changing world. As regulations continue to evolve, financial institutions that make compliance a strategic priority will be better equipped to thrive in an increasingly complex and regulated environment.
This piece is for informational purposes only and should not be construed as legal advice on any subject.