Getting your 'FACTs' right.

In December we will all face new federal regulatory standards designed to ensure that our clients are nor subjected to "unfair or deceptive acts or practices." These requirements stem from the Fair and Accurate Credit Transactions Act of 2003 (FACT Act). As we all gear up to meet these new rules, consider how your client satisfaction measurement and management program might help in demonstrating your compliance with the FACT Act's requirements.

To provide guidance, the Board of Governors of the Federal Reserve System and the FDIC recently published a statement outlining the standards that will be considered by these regulators as they carry out their responsibility to enforce the prohibitions against unfair or deceptive trade practices found in section 5 of the Federal Trade Commission Act (FFC Act). You can read this statement at www.federalreserve.gov/BoardDocs/Press/bcreg/2004/20040311/attachment.pdf.

In summary, it says that we bankers are going to be under closer scrutiny to make sure our products and advertising materials do not mislead or deceive our clients or prospects. One problem is that the language of the FTC Act and its body of law are general in nature and often not specific to banking. For example, an activity or practice might be considered unfair when it (1) causes or is likely to cause substantial injury to consumers; (2) cannot be reasonably avoided by consumers; and (3) is not outweighed by countervailing benefits to consumers or to competition. In practice, this may mean that your regular may have to adopt the attitude of U.S. Supreme Court Justice Potter Stewart when he said of pornography:

"I shall not today attempt further to define the kinds of material ... but I know it when I see it."

To its credit, the Fed has published a set of 20 guidelines to help us avoid problems. Among these:

Draw the attention of customers to key terms, including limitations and conditions, that are important in enabling the customer to make informed decisions regarding whether the product or service meets the customer's need.

Clearly inform customers of contract provisions that permit a change in the terms and conditions of an agreement.

Ensure that the costs and benefits of optional or related products and services are not misrepresented or presented in an incomplete manner.

There are 17 other rules, and they are all general, leaving much for interpretation. It might be advisable for banks to augment their active implementation of the FACT Act with a parallel "voice of the customer" set of satisfaction surveys. The purpose of this move would be to illustrate the degree to which clients are or are not confused or mislead by your business practices. If you can demonstrate, for example, that your clients understand your deposit, loan, and fee-based services, and that your clients like them, this might go a long way in bridging any interpretive gaps.

There are many ways to construct and conduct such surveys. You can start by visiting the ABA Financial Client Satisfaction site at www.clientsatisfaction.com.

L. Biff Motley is Senior Vice President Retail Banking and Marketing, Whitney Bank, New Orleans. He can be reached at [phone].