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Financial Outsourcing Solutions


FOS Blog

15 Oct

Targeted Advertising? Can I Do It?

We get questions from time to time as to whether a bank can target the geographic area around a branch, such as during a branch opening, or do a prescreened mailing to a group of people with particular characteristics.  Of course, you can.  You just need to be certain you don’t go afoul of the law.  The two big issues are discrimination based on geography (also known as redlining) or discrimination based on the prohibitive basis in ECOA & FHA.  And if you are targeting low- or moderate-income areas or people, you are usually within the positive bounds of these regulations.

“Big data” has given you the ability to sort through myriads of information and pinpoint a very specific group of people who are likely to respond to what you’re offering.  On a general basis, pre-screening does not violate ECOA.  Be certain the information used for screening is not in itself discriminatory.  If that information is obtained through a credit reporting agency, you’ll need to include the prescreening notices of FCRA {Regulation V – 1022.54} in your mailings.

The hottest topic in targeted marketing seems to be geographic discrimination.  If you’re targeting census tracts surrounding your branch, be certain not to exclude low- or moderate-income tracts (redlining) or minority people.  If you’re using general newspaper advertising, that may mean understanding their general distribution area.  And if they post their publication online, you’ll want to understand who that targeted audience might be. Better yet, find out if there is an ethnic publication that can help get the word out to minority groups.

With digital advertising being the latest boon, the newest red flag for geographic targeting was introduced by HUD in its case against Facebook.  HUD alleges that Facebook’s targeted advertising platform violates the Fair Housing Act by restricting who can view housing ads.

In its charges, HUD cites that Facebook uses a two-phase process for determining who will see ads.  First, the advertiser has the ability to select attributes for the ad’s “eligible audience.”  They can exclude “men” or “women,” or people who do not speak a specific language or use a map tool to exclude people in a specific area.  There are thousands of attributes from which to choose.

But in the delivery phase, Facebook chooses which users will actually be shown the ad.  Facebook can use the advertiser’s criteria to create a proxy “look alike audience” and then choose from this expanded “eligible audience.” Facebook uses machine learning and other predictive techniques to target users who are likely to respond.  It’s Facebook and not the advertiser who makes this decision.  Even if an advertiser tries to target a broad audience that spans protected groups, Facebook can and has violated that by intentionally targeting or excluding users based on their protected class.

This type of targeted advertising is not desirable.  As attractive as digital advertising is, financial institutions must understand the potential risks.  Whatever your medium, discuss your distribution audience with the provider in order to avoid the disparate impact of geographical targeting.

For additional information contact the author Evie Dehmey at