Saturday, October 11, 2014

Editorial: What are we to think about M&T sanction?

M&T Bank (Buffalo NY) was recently fined by the Consumer Financial Protection Bureau (CFPB).

The CFPB stated that the fine centered around M&T's advertisements to the public about free bank accounts.  In essence, M&T ran ads stating that consumers could get free checking at M&T Bank if they signed up for a specific account.

The CFPB stated that M&T bank failed to 1. Notify customers that to maintain their status of free checking, they needed a certain amount of activity in the account and; if they did not do so they 2. Would no longer qualify for the free checking account, 3. M&T Bank would not tell them they no longer qualified, 4. M&T would put them in a fee based account 4. The consumer would only find out after being billed a monthly maintenance charge in a new, fee based, account with a different name on it.

M&T Bank, in essence, stated that this happened prior to the creation of the CFPB (true) and that laws and regulations are have dramatically changed over the past few years (true).  Furthermore, they have tried to keep inline with the regulations and currently are compliant (we should take them at their word on these last two points).

However, what M&T failed to address in their statements is that deceptive advertising is not a new regulatory issue.  In fact, deceptive ads have been a focus on government regulators going back to the 1960's or further back. 

As for the financial world, to thwart deceptive ads, the State of New York (where M&T is domiciled) specifically has financial and consumer laws that address this.   Transparency are utmost importance and some regulators, long in existence prior to the CFPB, have gone so far as to mandate the size of fonts and what is and is not misleading or deceptive threatening fines and sanctions.

So, for M&T to say they are just going to agree with this -and refund the fees and pay a 200,000 fine to the CFPB to put it behind them continues to muddy the waters that M&T swims in.

Truthful advertising is a mainstay of any business.  It is unethical otherwise.  Period.

M&T should have fessed up to what, in the end, probably was really just an oversight on their part - where someone in some department who approved the ad did not vet it for compliance.

Had M&T stated that this was an oversight on their part, it would have been the ethical thing to do.

Ethics, especially in banking, is the cornerstone to a bankers lifeline.  M&T stumbled here and is bruised.

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