Financial Services SMS Compliance

Financial Services Regulatory Framework

Why Financial Services Face Heightened Scrutiny

Financial institutions operate under multiple overlapping regulations: TCPA (marketing consent), GLBA (customer privacy), Reg E (electronic fund transfers), FDCPA (debt collection). SMS campaigns must comply with ALL applicable frameworks simultaneously, creating complex consent and content requirements.

Recent Enforcement:

• $40M TCPA settlement (2023) - bank marketing
• $15M CFPB fine (2022) - collections texts
• $8.5M settlement (2021) - fintech alerts

Common Violations:

• Marketing to account holders without consent
• Collections messages violating FDCPA
• Fraud alerts containing sensitive account data
• Cross-selling via transactional message campaigns

Transactional Use Cases

✓ Fraud alerts (suspicious activity detection)
✓ Transaction confirmations (wire transfers, large purchases)
✓ Balance alerts (low balance, overdraft warnings)
✓ Payment due reminders (credit card, loan installments)
✓ Account access notifications (login attempts, password resets)

Marketing Use Cases

✓ Product promotions (new account bonuses, rate offers)
✓ Credit card offers (balance transfer, reward programs)
✓ Investment opportunities (advisory services, portfolio reviews)
✓ Loan pre-approvals (mortgage, auto, personal)
Requires separate express written consent

Sample Message Templates

✓ Fraud Alert (Compliant)

[Bank]: Unusual activity detected on card ending [XXXX]. If you made a $487 purchase at [Merchant], reply YES. If not, reply NO to lock card. Call [Phone] for support.

Compliant: Account security notification, no marketing, clear action instructions, contact method provided

✓ Payment Reminder (Compliant)

[Bank]: Your credit card payment of $125 minimum is due [Date]. Pay now: [URL] or call [Phone]. Late fees apply after due date. Reply STOP to opt out.

Compliant: Existing customer relationship, transactional content, opt-out provided, no promotional language

✗ Cross-Sell Violation (Non-Compliant)

Your checking account balance is $2,847. Did you know you could earn 4.5% APY with our savings account? Open one today! [URL]

Violation: Marketing content in transactional campaign, requires separate consent for promotional offers, potential TCPA exposure

✗ Collections FDCPA Violation (Non-Compliant)

URGENT: Your account is 90 days past due. Payment required immediately to avoid legal action. Contact us now or face consequences.

Violations: Threatening language (FDCPA), no validation notice rights, excessive urgency, potential harassment claim

Regulatory Compliance Requirements

GLBA Privacy Requirements

Gramm-Leach-Bliley Act mandates privacy notices and opt-out rights for customer financial information sharing. SMS messaging must comply with GLBA privacy safeguards.

✓ Annual privacy notice delivery (can be via SMS if customer consents)
✓ Opt-out mechanism for information sharing disclosures
✓ Security safeguards for customer data transmission
✓ Third-party service provider agreements (messaging platforms)

Reg E Error Resolution

Regulation E governs electronic fund transfers. SMS notifications about transactions must not interfere with consumer error resolution rights.

✓ Transaction confirmations must include amount, date, merchant
✓ Error reporting instructions: phone number or website
✓ 60-day dispute window disclosure in periodic statements (not required in SMS)
✓ No language implying SMS alert acceptance = transaction approval

FDCPA Collections Limits

Fair Debt Collection Practices Act restricts communication with debtors. Collections messages via SMS face strict content and frequency limits.

✓ No contact before 8am or after 9pm consumer local time
✓ No harassment, threats, or abusive language
✓ Validation notice rights must be provided (typically mail, not SMS)
✓ Cease communication upon consumer written request
✓ Third-party disclosure prohibited (SMS visible to phone sharers)