Mortar to Mobile Part 4: You've decided to care, so now what?

In Part 3 of our series on mobile banking, Colleen MacRae covered trends in, and growth of, mobile banking in the United States and the rest of the world. In part 4, we shift focus and begin to look at some of the regulatory issues associated with mobile banking. There are a number of regulations implicated by mobile banking services. In many cases, these regulations have been around much longer than mobile banking services, or even electronic banking.

Despite the older vintage of some of these regulations, their impact on mobile banking can be significant. One example is Regulation B, which was written to implement the Equal Credit Opportunity Act of 1974. Regulation B limits a bank's ability to prescreen applicants for certain credit products. This regulation could take on new meaning in a world where banks are able to tailor advertisements via mobile platforms to particular groups of consumers based on data collected from consumer use of electronic platforms. Banks that are planning to use mobile banking to market tailored products to certain consumers need to be mindful of Regulation B's requirement that banks not discriminate against certain groups of consumers. A bank still cannot provide information in a way that discourages minority groups from applying for certain credit products. In the same vein, the Fair Housing Act prohibits advertisements expressing a limit on eligibility for credit based on race, color, national origin, religion, sex, familial status, or handicap. A bank that is using mobile banking to market products to certain classes of consumers needs to be cautious about implying any kind of limitation on access to credit. Regulation DD, which implements provisions of the Truth in Savings Act of 1991, regulates the information exchange between banks and consumers. Regulation DD requires banks to provide information about the terms of deposit account agreements. Critical for banks that are looking at possible fee revenue from mobile banking services is the requirement that consumers be advised about fees associated with deposit accounts. Banks that plan on marketing to consumers via their mobile platforms must also ensure that advertisements are not misleading. Regulation Z makes clear that any information disclosed to consumers via a mobile banking platform will be considered an 'advertisement' for purposes of the restrictions identified above.

An 'advertisement' is any commercial message that promotes consumer credit products. The commentary explains that this applies to electronically delivered information. There are many, many more regulations that affect mobile technology. This series will continue to cover the potential regulatory pitfalls for banks to be aware of as they implement new technologies. With a new technology like mobile banking, there are significant opportunities for banks to help customers. However, with new technology comes new oversight from regulators who will be applying old rules. These rules, in many cases, will have been written long before mobile technology was conceivable. Banks need to consult with their compliance specialists and legal counsel to try to chart a way forward that minimizes the risk of running afoul of existing regulations.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- John Lande