Department of Consumer Affairs (DCA) Commissioner Jonathan Mintz today announced that SoundBite Communications will not sell services that include the use of text messages as a method to obtain consent to enroll consumers into overdraft protection services. The Department called upon banks and marketing firms such as SoundBite not to undermine new federal regulations with illegal or aggressive solicitations to enroll New Yorkers into overdraft protection earlier this year. SoundBite agreed its platform will only use direct mail, telephone, or e-mail and Web-based electronic communications to provide overdraft notices and obtain customer enrollments.  SoundBite Communications promotes its “text message solution” to financial institutions, which must obtain the consent of customers before enrolling them into overdraft services, per new federal regulations going into effect beginning July 1. SoundBite agreed that these new federal regulations, which make the current practice of automatic overdraft enrollment illegal, do not allow financial institutions to provide notice or obtain consent via text messages.

Last month, Commissioner Mintz wrote a letter to SoundBite, cautioning the firm against aggressive marketing strategies that defy the federal regulations and threaten the financial security of consumers.  The announcement today by Commissioner Mintz follows a meeting between officials from SoundBite and Commissioner Mintz where the marketing firm agreed with our interpretation of the federal rules. DCA also wrote Federal Reserve Chairman Ben Bernanke, requesting that the Fed prohibit financial institutions from using text messages to obtain consent from their customers before enrolling them into overdraft services.

“I am encouraged that SoundBite has agreed not to sell text-message opt-in services as a method of enrolling consumers into overdraft services,” said Consumer Affairs Commissioner Jonathan Mintz. “The 160-character limit of a text message could never genuinely inform a customer about important and complex account feature options, particularly ones with such significant economic consequences. Moving forward, we will continue to monitor overdraft enrollment efforts aimed at New Yorkers, working closely with the federal government to ensure consumers are given the information they deserve as they make this important choice in the coming months.”

In New York City, DCA enforces the Consumer Protection Law, which outlaws deceptive marketing of products and services to New York City consumers. As two examples under the leadership of Mayor Michael R. Bloomberg, the Department has prosecuted national tax preparers and wireless phone companies for such violations. Since 2005, the Department has secured more than half a million dollars in settlements from wireless phone companies alone for deceptive advertising.

DCA enforces the Consumer Protection Law and other related business laws throughout New York City. Ensuring a fair and vibrant marketplace for consumers and businesses, DCA licenses more than 71,000 businesses in 57 different industries. Through targeted outreach, partnerships with community and trade organizations, and informational materials, DCA educates consumers and businesses alike about their rights and responsibilities. DCA’s Office of Financial Empowerment is the first municipal office of its kind in the nation with a mission to educate, empower and protect New Yorkers with low incomes. DCA’s OFE administers a citywide network of Financial Empowerment Centers and other products and services that help these New Yorkers make the best use of their financial resources to move forward economically. For more information, call 311 or visit DCA online at nyc.gov/consumers.