Payments Law Tool Kit

Venable / 6 5 / Venable representation or omission is deceptive, the FTC considers the entire advertisement, transaction, or course of dealing. If a disclosure is necessary to prevent an advertisement or promotion from being deceptive, the FTC requires that the disclosure be made in a “clear and conspicuous” manner. Types of Advertising and Marketing Techniques The concepts of unfairness and deception are applicable to the various ways in which a company may advertise and market its products and services, as are other specific requirements and prohibitions. • Affiliate Marketing – Affiliate marketing offers cost-effective advertising with a broad reach. However, the failure of an affiliate to comply with marketing laws can cause big problems for marketers • Lead Generation – Lead generation is a powerful tool for performance- based customer acquisition but can create big legal risks for advertisers • Negative Option Marketing – Regulators continue to scrutinize consumer advertising and marketing that use a negative option or continuity plan approach. Negative option marketing can include pre- notification negative option plans, continuity plans, automatic renewals, and free-to-pay (or nominal fee-to-pay) conversions • Social Media and Influencers – In today’s marketplace, social media are a hot channel for marketing products and services, particularly as a platform to have influencers speak positively about their products and services. Many companies fear being left behind if they do not launch campaigns via social media. While there are many advantages to using the medium to market a brand, there are just as many potential regulatory pitfalls Given the complexity of advertising and marketing, it is important for payments companies to understand these requirements – both for their own activities and for those of their customers. Advertising and Marketing For payments companies, understanding advertising and marketing regulations is important for two purposes. First, the sales of your own products and services to businesses are likely covered by laws prohibiting unfair and deceptive business practices, notwithstanding the business-to-business nature of those sales. Second, your merchants’ advertising and marketing practices factor into underwriting and risk management processes to help ensure you are not facilitating payments for merchants engaged in conduct that is unlawful or otherwise harmful to consumers. The Legal Framework for Advertising and Marketing Section 5 of the Federal Trade Commission Act (FTCA), the Consumer Financial Protection Act of 2010 (CFPA), and various state laws (known as mini-FTC acts) generally prohibit unfair or deceptive acts or practices, including the dissemination of false or misleading advertising. An unfair practice is one that injures consumers, violates established public policy, or is unethical or unscrupulous. The Federal Trade Commission (FTC) has alleged in some cases that providing payment processing services to merchants engaged in marketing or advertising practices that defraud consumers constitutes an unfair practice. On the merchant side, enrolling someone in an automatic billing and shipping program without adequate disclosures about the offer terms could also be deemed unfair. A deceptive practice is defined as a representation, omission, or practice that is likely to mislead consumers. The FTC views potential deception from the perspective of the reasonable consumer under the circumstances. Misleading pricing claims, unsubstantiated product claims, false endorsements, and other practices fall in the deception category. Most deception involves written or oral misrepresentations or omissions of material information. In determining whether a