In this piece we continue with our series examining the principles exemplified by the securities marketing regulations pertaining to communications with the public embodied primarily in FINRA Rule 2210 in the context of marketing principles manifested in other financial product markets. We began these comparisons with the life insurance market and continue here with consumer credit. These comparisons demonstrate the similarities in purpose of marketing-related regulations across financial products. The more similar these purposes are, the more likely one compliance approach can be applied across products and institutions and one industry can learn from another. And by documenting the differences that do exist, compliance approach differences can be tailored to the differences in the regimes. We hope that with this series we can begin a conversation amongst compliance professionals across industries.
In the realm of financial regulations, consumer protection stands as a top priority, with transparency forming the foundation of trust between consumers and financial institutions. Regulation Z, the implementing regulation of the Truth in Lending Act (TILA), exemplifies this commitment by aiming to ensure that consumers receive clear, accurate, and truthful information in consumer credit marketing. This federal regulation mandates that all marketing materials related to credit products, such as credit cards, mortgages, and loans, provide clear, concise, and accurate information to consumers. By detailing essential aspects like interest rates, fees, and repayment terms, Regulation Z can empower consumers to make more informed financial decisions, ultimately fostering trust in the lending process.
Several fundamental principles under Regulation Z resonate with those found in the securities world in FINRA Rule 2210. Reg Z aims to promote integrity in consumer credit marketing by:
- Prohibiting particular words and phrases.
- Banning misleading language.
- Restricting promissory language.
- Requiring fair and balanced comparisons.
We will examine each of these restrictions in turn.
Prohibited words and phrases
Regulation Z prohibits a variety of deceptive words. Specifically, under § 1026.16(d)(5), advertisements may not refer to home-equity plans as "free money" or use other misleading terms. An advertisement cannot state “no closing costs” or “we waive closing costs” if consumers may still be responsible for costs such as recordation fees. This prohibition aims to ensure that consumers are fully informed about potential costs and can make financial decisions based on clear and accurate information.
While FINRA Rule 2210 prohibits no particular words, it does prohibit any phrases which are false, exaggerated, unwarranted, promissory or misleading. Specifically, phrases predicting performance or stating that past performance is a guarantee of future performance are more explicitly prohibited. As both regulations ban words or phrases intended on misleading the public, they share a common goal.
Misleading language
At the heart of Regulation Z is the goal of preventing deceptive practices in consumer credit marketing. Regulation Z requires specific disclosures to ensure that consumers are fully informed about the terms and costs associated with borrowing. For example, advertisements that include triggering terms—such as "no interest," "no annual membership fee," or "12 percent Annual Percentage Rate"—require additional information to be provided. These disclosures help clarify how finance charges are determined, as outlined in § 1026.16(b). This framework aims to foster transparency, allowing consumers to compare credit products accurately and make informed borrowing decisions.
While both Regulation Z and FINRA Rule 2210 prohibit misleading language, they approach this objective differently based on the unique nature of the products they regulate. Regulation Z prescribes detailed requirements for how interest rates, finance charges, and other credit terms must be disclosed, promoting comprehensiveness in consumer credit marketing. By contrast, FINRA Rule 2210 mandates that all material differences be disclosed when comparing financial products or services in retail communications and also references SEC Rule 482 to ensure standardized performance data is presented accurately. FINRA relies on SEC rules to help enforce performance standards in while maintaining its own requirement that statements be fair, balanced, and not misleading.
Ebook → Navigating regulatory compliance: Three questions to help you get on the right path
Thus, while both regulations share a commitment to ensuring accurate information, they reflect the distinct regulatory priorities of consumer credit and securities markets.
Promissory language
Regulation Z opposes the use of promissory language in consumer credit marketing. Under Regulation Z, lenders are not allowed to promise specific outcomes, such as guaranteed loan approval, without first considering the applicant's qualifications. This protects consumers from misleading promises that could falsely suggest guaranteed access to credit. Similarly, FINRA Rule 2210 prohibits promising guaranteed performance of investments.
Comparisons
While Reg Z does not explicitly address comparisons between credit products, it prohibits the use of deceptive or unclear terms that could mislead consumers. For example, under §1026.16, advertisers must avoid misleading language, omissions, or half-truths that distort the true cost or terms of credit. The goal is to provide consumers with factual, transparent disclosures that allow them to make informed financial decisions.
Similarly, FINRA Rule 2210 prohibits any misleading language, comparisons, or communications regarding securities. For comparisons in particular FINRA Rule 2210 requires that any comparisons to retail investors made between investments or services must disclose all differences between the two including investment objectives, costs, safety, and more. Additionally, comparisons, and all other forms of communication, must also be fair and balanced.
Unified principles, diverse applications
In the landscape of consumer protection, Regulation Z and FINRA Rule 2210, though governing different financial products, converge on a shared mission: to ensure transparency, fairness, and trust in financial marketing. While Regulation Z provides a uniform federal standard for consumer credit products, FINRA Rule 2210 regulates Broker Dealer communications with the public by Broker Dealers. Despite these differences, both regulatory frameworks stem from substantially similar core principles—prohibiting misleading language, restricting deceptive terms, and ensuring accuracy in advertising.
Together, these regulations create a more transparent marketplace, empowering consumers to make informed decisions, whether they are evaluating a credit offer or choosing between potential investments.
For more on financial services public communications regulations, download the ebook, Navigating regulatory compliance: Three questions to help you get on the right path.
Published March 5, 2025
The opinions provided are those of the author and not necessarily those of Fidelity Investments or its affiliates.. This information is general and educational in nature, is for informational purposes only, and should not be construed as legal advice. No warranties are made regarding the information and recipients should not act or refrain from acting on the basis of the information.
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