If our lenders are sending out email newsletters (some with generic information and some encouraging the email recipient to refinance a loan), would the CAN-SPAM Act apply, and would the emails be considered advertisements under Regulation Z?

Commercial Emails under the CAN-SPAM Act

As explained by the FDIC’s Examination Manual (Chapter VIII, Section 4.1), the CAN-SPAM Act applies only to commercial emails, defined as “any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service.” 15 USC 7702(2). The FTC’s CAN-SPAM regulations provide some guidance as to how to identify an email’s “primary purpose,” particularly when a message combines both commercial content and other content. Such dual purpose emails are considered commercial if:

(i) A recipient reasonably interpreting the subject line of the electronic mail message would likely conclude that the message contains the commercial advertisement or promotion of a commercial product or service; or

(ii) A recipient reasonably interpreting the body of the message would likely conclude that the primary purpose of the message is the commercial advertisement or promotion of a commercial product or service. Factors illustrative of those relevant to this interpretation include the placement of content that is the commercial advertisement or promotion of a commercial product or service, in whole or in substantial part, at the beginning of the body of the message; the proportion of the message dedicated to such content; and how color, graphics, type size, and style are used to highlight commercial content. 16 CFR 316.3(a)(3).

Advertisements under Regulation Z

As you pointed out, the commentary to Regulation Z’s definition of “advertisement” specifically excludes “direct personal contacts, such as follow-up letters, cost estimates for individual consumers, or oral or written communication relating to the negotiation of a specific transaction.” Official Staff Commentary, Paragraph 1026.2(a)(2), Comment 1(ii)(A). That comment also excludes “Market-research or educational materials that do not solicit business” and “Communications about an existing credit account (for example, a promotion encouraging additional or different uses of an existing credit card account).” Id., Comment 1(ii)(E), (F).

We do not believe that emails sent to a list of customers would constitute a “direct personal contact,” unless the emails were for the purposes of following up about a specific transaction, providing a cost estimate, or negotiating a specific transaction. The other exceptions from the definition of “advertisement” could apply, though. A newsletter informing customers about a time change, without soliciting any business, would seem to fall under the exception for educational materials. However, an email message promoting a refinance loan product would not likely fall under any of the exceptions and would be considered an advertisement. Stating that an email is for “informational purposes” would not change this conclusion.