Loan officers and other financial industry members utilize social media every day to market themselves to consumers on a more personal level. As more and more state regulators seek to mirror the recent regulatory pressure of the mighty CFPB, issues that might have gone previously unaddressed are bubbling to the top of examination findings. One key item: the use of DBAs. So how do DBAs play a role in industry business and consumer protection? Let’s start with the basics.
What is a DBA?
DBA, standing for “Doing Business As”, is a business name used by companies that operate under another name than their registered company name. This is sometimes used synonymously with other titles like “fictitious name”, “trade name”, or “assumed name”. Part of the purpose of utilizing DBAs is so businesses can diversify their offerings and branding to suit different marketing needs. A common marketing theme for financial institutions is to create DBAs for the corporation, branches, and licensed employees alike for the promotion of a specific location or individual. Some examples of a DBA might include:
As you can see, DBAs can vary greatly in name and often have their own logos, business colors, and marketing campaigns. DBAs can give businesses many personas to wear for consumers to see, but how does one create a DBA in the first place?
How do you create a DBA?
To create a DBA, the general procedure is to first register the desired name with the appropriate state’s Secretary of State, or SOS. This process usually involves filling out state-designated forms, providing proof of use, using a state online portal to do a preliminary search for the name, and paying a nominal fee. Filing can sometimes be completed online, though many states still require forms to be printed and mailed with check payment to a clerk’s office. Once filed, DBAs may be able to be used in perpetuity, but most states will require renewal or paperwork and payment every 1-5 years. Part of the purpose behind this filing requirement is to ensure that consumers can easily look up a registered DBA and determine what business it is tied to.
The Nationwide Multistate Licensing System, NMLS, is a free service for consumers to confirm that the financial-services company or professional with whom they wish to conduct business is authorized to conduct business in their state. Accessed in part through NMLS Consumer Access, NMLS requires that financial institutions register any DBAs utilized by the licensed institution. In their provided help doc on the topic, NMLS states that all other names used in advertising, documents, etc. should be included – including those used at the company, branch, and licensed individual levels. In this way, consumers can freely determine if a trade name is related to a particular business if that business is currently licensed, and if that licensee has had any recent enforcement action.
Advertising Parameters for Financial Institutions
Many financial institutions mandate that trade names be registered and reported prior to use in marketing materials. This can sometimes lead to internal conflict within an organization – sales teams and marketers are eager to jump into business and do not see a necessity in registering a DBA. This is not an uncommon internal battle. Though DBA registrations are not federal filings, some states like Washington and Oregon, to name a few, strictly require registration, especially if a custom logo is at play. Other states like California do not explicitly provide guidance on the subject of DBAs, but as MQMR states “the increase in enforcement at the state level indicates that grey areas such as these could come under greater scrutiny,” so lenders should “seek clarity on this marketing practice to ensure they are meeting both the letter and the spirit of California law”. Some state examiners have made allowances in the past for allowing team names that mirrored the licensed employee’s name – ex. Jim Smith Team or The Jim Smith Home Loan Group. The key to these exceptions, as argued by lenders, is that a consumer could easily decipher who the licensee was by other information listed in conjunction with the trade name (i.e., the licensees’ full registered name and individual NMLS ID were also present).
DBAs can be beneficial to financial institutions when used properly. Some common best practices can include:
Major takeaway: to help consumers easily decipher who they are working with, and to ensure regulators are satisfied with the level of consumer protections during examinations, trade names should be formalized as DBAs of the company. Registering a DBA can be a simple process and can be an easy way to make a stronger argument for compliance for multiple regulators.