Circular 6/2010 of the Bank of Spain on Advertising of Banking Services and Products

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Circular 6/2010, of September 28, of the Bank of Spain, to credit institutions and payment entities, on advertising of banking services and products. (BOE of October 11, 2010) [ 1 ]

[1]

Repealed by Circular 4/2020, of June 26, repealing provision.

Order EHA/1718/2010, of June 11, on the regulation and control of advertising of banking services and products, repeals Chapter III of the Order of December 12, 1989, on interest rates and commissions, rules of conduct, information to clients, and advertising of credit institutions, which established the prior authorization regime for advertising carried out by credit institutions of operations, services, or products in which reference is made to their cost or yield for the public. In this way, an exceptional regime is ended, both in relation to the countries in our economic environment and due to its partiality from the point of view of the overall offer of financial products and services, since it only affected banking operations, but not investment operations in securities markets or insurance operations.

Thus, Order EHA/1718/2010, of June 11, taking into account, among other things, these circumstances, has replaced the prior authorization regime with a system of advertising control based on two elements: one preventive, through the elaboration by the Bank of Spain of criteria for financial advertising that promote the clarity, sufficiency, objectivity, and non-misleading nature of advertising messages, and the requirement for internal procedures and controls by credit institutions that tend to favor such requirement; and another that allows for the correction of any inadequate conduct, for which the Bank of Spain may demand the cessation or rectification of advertising that does not comply with the provisions contemplated.

In exercise of the powers conferred by Order EHA/1718/2010, this Circular, taking into account the general rules on non-misleading advertising and based on the experience accumulated during the two decades in which the system of prior administrative authorization of advertising projects was in force, first addresses the determination of the general principles to which advertising must adhere, and the general criteria on the minimum content and format of the advertising message, to which Section 2 of Article 4 of the aforementioned Order refers. As established in Section 4 of that same Article, the application of this set of criteria shall be made by the entities in a manner proportional to the complexity of the banking product or service offered and to the characteristics of the medium used for dissemination.

The second issue addressed concerns the internal procedures and controls and the commercial communication policy of credit institutions, to which Section 3 of Article 4 of the Order refers, with the aim, among others, of stimulating the adherence of these entities to some duly homologated self-regulation body for advertising activity, taking as reference that stated in the explanatory statement of the aforementioned Order and taking into account the objective of promoting codes of conduct and self-regulation systems present in Article 37 of Law 3/1991, of January 10, on Unfair Competition, after its recent reform by Law 29/2009, of December 30, which modifies the legal regime of unfair competition and advertising, for the improvement of consumer and user protection.

Credit institutions that are not associated with any homologated advertising self-regulation system, or whose advertising is not still subject to the prior authorization regime by an Autonomous Community (as is the case with savings banks and many credit cooperatives), must submit their commercial communication policy and the alternative internal controls they have to the control of the Bank of Spain to minimize risks related to the incorrect exercise of their advertising activity.

Finally, and in development of what is provided in Section 2 of Article 5 of the Order, the Circular specifies the characteristics and minimum content of the internal register that each entity must keep, in which it will preserve and record all documentation corresponding to each advertising campaign and which must be available to the Bank of Spain, allowing in certain cases its centralization within the group.

To the extent that the Order includes in its scope of application the advertising activity of payment entities, this Circular also does so, with the limitation established in the single additional provision of the Order itself.

Finally, the Circular respects the competencies of the Autonomous Communities in this matter, regulated by norms of higher rank.

Consequently, in exercise of the powers granted, the Governing Council of the Bank of Spain, upon proposal of the Executive Commission, has approved this Circular, which contains the following rules:

First Rule.

Object and Scope. –

The advertising activity carried out by Spanish credit institutions and branches in Spain of foreign credit institutions, directed to clients or potential clients resident in Spain, and referring to banking operations, services, or products, including payment services, as well as that carried out by payment entities regarding these latter services, must respect the conditions of lawfulness established in Law 34/1988, of November 11, General Advertising Law, Law 3/1991, of January 10, on Unfair Competition, and other norms of general application to advertising activity, as well as what is provided in Order EHA/1718/2010, of June 11, on the regulation and control of advertising of banking services and products, and in this Circular. In particular, in advertising on consumer credit offers, the specific norms applicable thereto shall also be observed.

The advertising activity carried out by credit institutions regarding financial instruments and investment services shall be subject to what is established in Order EHA/1717/2010, of June 11, on the regulation and control of advertising of investment services and products.

Second Rule.

Minimum Content and Format of the Advertising Message.–

In determining the minimum contents and the format of the advertising message, credit institutions and payment entities (hereinafter, "the entities") must adhere, in addition to what is indicated in the first rule –and in a manner proportional to the nature and complexity of the banking product or service offered and to the characteristics of the medium used for dissemination–, to the principles listed as an annex to this Circular.

For the calculation of the Annual Percentage Rate of Charge (APRC) referred to in letter a) of Section 5 of Article 4 of Order EHA/1718/2010, of June 11, on the regulation and control of advertising of banking services and products, the rules established in the thirteenth rule of Bank of Spain Circular 5/2012, of June 27, on transparency of banking services and responsibility in the granting of loans, shall apply. [ 2 ]

[2]

The second paragraph drafted according to Circular 3/2014, of July 30, final provision first.

Third Rule.

Internal Procedures and Controls. Commercial Communication Policy.

1. In the elaboration of the commercial communication policy referred to in the second paragraph of Article 4.3 of the Order, credit institutions must integrate the general principles mentioned in the annex and, in general, the regulations applicable to their advertising activity. Likewise, they must foresee the necessary procedures to adapt the products offered and the way of presenting them to the characteristics of the target audience, promoting their full understanding of the product and avoiding advertising attraction mechanisms that are contradictory to those characteristics.

2. Without prejudice to the obligation to have a commercial communication policy that takes into account what is established in the previous section, it shall be presumed that credit institutions have adequate internal procedures and controls to comply with what is required in the first paragraph of Article 4.3 of Order EHA/1718/2010, of June 11, if, for their entire advertising activity, they are associated with advertising self-regulation systems in Spain that comply with Article 37.4 of Law 3/1991, of January 10, on Unfair Competition, have individual or collective measures of prior self-control of advertising content, and whose codes of conduct embrace the compliance with the general principles collected in the annex.

The Bank of Spain will publish, on its Internet pages, the list of "entities" associated with advertising self-regulation systems that meet the aforementioned requirements. It will also inform about the system to which each "entity" is associated, along with its codes of conduct.

3. Those credit institutions that are not associated with any of the advertising self-regulation systems contemplated in Section 2 of this third rule will include their commercial communication policy in a single written document that also includes a detailed description of the mechanisms and internal controls they have, in order to minimize risks related to their advertising activity and ensure that the entity complies with the norms, principles, and criteria established in the applicable regulations.

This document must include the report of the body or department that performs the entity's compliance function and must have been approved either by the Board of Directors, or by the Audit Committee, or by their respective equivalent bodies.

The effective control of the functioning of the aforementioned procedures and controls must be subject to review –at least annually– by the entity's internal audit department or another functionally comparable unit, which will submit the appropriate report to the corresponding approving body, so that it can assess the sufficiency of those policies, mechanisms, and controls.

4. "Entities" will keep, in an annex to the internal register referred to in the following rule, detailed information on judicial and extrajudicial conflicts in which they have been involved in relation to their advertising activity.

5. For the purposes of this third rule, it will be considered that savings banks and credit cooperatives whose advertising is subject to prior authorization by the competent Autonomous Communities have, with respect to said advertising, sufficient internal procedures and controls.

Fourth Rule.

Control of Advertising.

1. All documentation corresponding to each advertising campaign subject to what is provided in this Circular shall be preserved and recorded in an internal register, which will be kept in the central offices of "the entity". The documentation corresponding to each campaign must include, at least, a copy –in the original format or in an electronic format that allows reproduction– of each of the advertising supports used, the start and end dates of the campaign, sufficient data to determine the scope of its dissemination, as well as sufficient justification of the representativeness of the example contained in the offer and of the data used to determine the effective costs or yields reflected in the advertising of the offered products.

In the event that a group of credit institutions, in which all credit institutions integrated into the same are associated with an advertising self-regulation system, manages its advertising in a centralized manner, the internal register may be unique for the entire group, such circumstance being communicated to the Bank of Spain in advance, indicating the entity of the group that will maintain the register.

2. In the exercise of the administrative power to require the cessation or rectification of banking advertising referred to in Article 5.1 of the Order, the Bank of Spain will address "the entity" whose products are reflected in the corresponding campaign, indicating with reasons the discrepancies it perceives with the applicable regulations and, if applicable, the rectification it considers appropriate.

The entity must, within two business days following its receipt, either communicate compliance with the request or object to it, alleging the reasons that favor its right. In the event that such allegations indicate that the advertising message has a positive prior consultation report issued by an advertising self-regulation system that complies with Section 2 of the third rule, the Bank of Spain must hear, before giving effect to the aforementioned request, the control body of the corresponding self-regulation system for a minimum period of three business days. Once these procedures are completed, the Bank of Spain will confirm or modify its request within the following three business days, a request that must be complied with immediately, without prejudice to the possibility of an administrative appeal that may be filed against it.

In the event of administrative action carried out within the framework of a sanctioning proceeding, it will be understood that the entity acted in good faith if it had adhered to said positive prior consultation report.

Repealing Rule.–

Upon the entry into force of this Circular, any norms and provisions of equal or lower rank that oppose what is established in it shall be repealed, and in particular the ninth rule of Bank of Spain Circular 8/1990, of September 7.

Final Rule.–

Entry into Force.–

This Circular shall enter into force two months after its publication in the "Official State Gazette".

ANNEX

General Principles

a) The letter, form, and presentation of the advertising message must be of size and type that make it legible and guarantee its comfortable and easy reading. In the case of moving texts, this translates into these moving at a speed and having a size that guarantee their comfortable and easy reading.

The use of references to other sources of information (brochures, Internet pages, etc.) of the entity itself must not, in any case, serve for the advertising message to induce the consumer to error regarding the characteristics of the product or service offered and generate in them an economic behavior that presumably would not have been adopted if that reference information had been included in the advertising support used. In any case, the aforementioned circumstances must be weighed according to the type of advertising support in question.

When an advertising message includes other messages of a secondary nature or in a less prominent form, these cannot contradict the content of the main message nor limit it essentially.

b) When acronyms or trademarks are used to identify the credit institution, payment entity, or company participating in the offer, and this does not allow for unambiguous identification, they must be accompanied by the registered name of the entity or company in question.

When a credit institution makes an offer of products or services of another credit institution, it must be clearly delimited which entity is making the offer and which is acting as the marketer or as a channel for transmitting the first entity's offer to its clients.

c) In those cases where the trade name of the offered product or service could introduce doubts about the legal nature of the operation, said name must be completed to clearly link it to its nature.

d) When a specific offer has a predetermined validity period, this must be stated. When said period is conditioned to any other variable (such as, for example, reaching a certain volume or the existence of a limited number of products), the total amount of the offer or the number of available products must be indicated.

e) The inclusion in advertising of superlative or diminutive adjectives or expressions indicating preference or leadership of the advertiser, the product, or the service must be verifiable when it is comparative advertising, and weighed with caution in other cases.

f) Any mention that induces belief that a offered deposit or investment is guaranteed must be avoided, unless it is guaranteed by a contractual agreement with a third party other than the Deposit Guarantee Funds or through another regime that provides an additional guarantee or insurance beyond the payment by the entity itself.

g) Clarifications, explanations, or warnings about risks, limitations, or costs of banking products or services included in the advertising message must have an appropriate size, format, position, and relevance, considering their complexity and the medium used.

h) In the event that comparisons between different products or services are made, these must be homogeneous and the sources used must be accredited, without omitting relevant data or facts. The assumptions on which the comparison made between the advertised product or service and the products or services with which it is compared must be made explicit.

i) When appropriate, the advertising message must include the following mentions, or similar ones:

The warning that, if applicable, the value of the investment is subject to market fluctuations, and that past costs or yields do not condition or generate rights in the future. It must be made clear, if applicable, that such yield could be null or even negative.

Any quantitative information, including aspects such as yield or cost, must also indicate the time period to which it refers. If two or more magnitudes are expressed, they must refer to the same time period. The maximum yield or minimum cost of an operation, to which the entity is willing to execute the operation if applicable, shall be indicated clearly and easily; the variables, conditions, or requirements to which said cost or remuneration is conditioned must also be explicitly indicated.

In the advertising of products denominated in foreign currency, special mention must be made of exchange rate risk, unless the message is directed to groups of foreign residents.

Information on past yields must not be provided partially or biasedly, nor for time periods less than twelve months.

Multi-year yield must be expressed in terms of revaluation, without prejudice to adding the Annual Percentage Rate of Charge (APRC) to this information, where applicable.

When a reference is made to the maximum variation that a certain index or quotation has had within a certain period of time, it must be completed with the data corresponding to the variation –positive or negative– of said index or quotation, taking as reference its values on the initial and final dates of the same period.

j) The magnitude upon which any type of evolution of the remuneration or cost of the operation or product depends must be identified clearly and unequivocally, and thus:

If the advertising message refers to the advantages of a certain tax treatment, it must be clarified whether it is of a general nature or depends on the personal situation of the investor, as well as that it may be subject to modifications.

In pure monetary credits or final-purpose financing operations, where there are installments of different amounts in different periods, or if the initial installment, the final installment, or any of the intermediate installments are of a higher amount than the rest of the operation, sufficient relevance must be given to the existence of installments of varying amounts. When an initial deposit or payment is required, this must also be indicated.

k) In cases where, according to what is established in Order EHA/1718/2010, of June 11, the APRC of the operation must appear:

The APRC of the operation shall be expressed, whenever possible, by means of a representative example.

When the APRC may be altered by circumstances such as the amount of the operation, the existence of different commissions, or other causes, such circumstances must be contemplated and, when relevant, the significant interval in which it may move.

In the advertising of operations at variable interest rates, the reference index used and the periodicity of the review must be mentioned with adequate clarity, and it must be highlighted that the APRC of the operation has been calculated under the hypothesis that the reference indices do not vary.

In the advertising of variable interest rate operations where a fixed interest rate is agreed for an initial period, when the initial rate is mentioned, predominant advertising relevance must be given to the APRC compared to said interest rate when, in liability products, the APRC is lower than that, or, in asset products, when the APRC is higher than the initial rate.

When it is a variable interest rate operation, in which limits and/or maximums are established for the result of the review of the same, said limits must be mentioned in the advertising and, if applicable, taken into account for the calculation of the APRC, warning that said calculation has been made with those limits.

l) When, in addition to the information corresponding to the APRC, the nominal annual rate or rates applicable to the operation are mentioned, this mention shall be made in a way that does not generate confusion regarding the different nature and utility of one and the others.

m) When there is remuneration in kind, it must adhere to the following principles:

If there is no cash remuneration, this circumstance must be explicitly indicated.

The valuation of the product for the purposes of calculating the APRC must be that resulting in accordance with tax legislation.

Both cash remuneration –if any– and remuneration in kind must be taken into account for the calculation of the APRC.

It must be explicitly indicated that remuneration in kind is subject to taxation.

Reference to the term "gift" or another equivalent term in the delivery of products remunerating deposits or deposits that tax legislation qualifies as remuneration in kind must be avoided.

In the event that certain amounts –such as VAT or advance payments– must be paid by the client, explicit mention of these circumstances shall be made and the quantification of such amounts reflected, taking them into account for the calculation of the APRC.

n) Apart from its inclusion, when applicable, in the calculation of the APRC, when referring to the cost to the client of an operation, commissions, taxes, and other expenses to be paid must be mentioned, as well as, in the same case, the premiums of insurance required by the entity for the contracting of the operation, when they aim to guarantee the entity the reimbursement of the operation.

ñ) The variables, conditions, or requirements must be explicitly indicated.