By Michael T. Fraser, Esq., Associate, Saxon, Gilmore, Carraway & Gibbons, P.A.
The Federal Financial Institutions Examination Council (“FFIEC”), which comprises the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Consumer Financial Protection Bureau, and the State Liaison Committee, recently released its Social Media: Consumer Compliance Risk Management Guidance (the “Guidance”). The Guidance operates as a guide for financial institutions and their employees on using social media, in both personal and business settings. The Guidance, which was immediately effective, does not change existing requirements imposed on financial institutions; rather it is intended to serve as “a guide to help financial institutions understand the applicability of existing requirements and supervisory expectations associated with the use of social media.”
The Guidance defines social media as “a form of interactive online communication in which users can generate and share content through text, images, audio, and/or video.” According to the Guidance, it is the interactive nature of social media that distinguishes it from “other online media.” Because certain activities of financial institutions, or the products they offer, might not have kept pace with changes in the marketplace related to the explosion of social media, the Guidance suggests that all financial institutions have a risk management program that allows the institutions to “identify, measure, monitor, and control the risks related to social media.” The FFIEC recognizes that due to the highly factual and individualized nature of social media, as well as the differing sizes and complexities of the various financial institutions themselves, the risk management plan should be individually tailored to the specific institution’s needs.
Potential issues discussed in the Guidance that involve social media include possible violations (inadvertent or otherwise) of the Truth in Savings Act, the Fair Debt Collection Practices Act, the Equal Credit Opportunity Act, and the Fair Housing Act, among many others. For example, the Guidance cautions creditors against improperly requesting, collecting, or using certain information from applicants, such as inquiring into an individual’s race, gender, religion, or national origin, via social media, even though such information is generally available in various forms of recognized social media platforms. Additionally, if the financial institution engages in residential mortgage lending and has a Facebook presence, then the Equal Housing Opportunity logo must be displayed on its Facebook page. And, of course, all products advertised via social media must comply with the Truth in Lending Act and Regulation Z, 12 C.F.R. pts. 226 and 1026.
The Guidance lists many potential hazards facing financial institutions and social media accounts. Because the Guidance was only intended, as the name suggests, to serve as a guide to financial institutions, its list of potential issues is only illustrative, not exhaustive. Indeed, as the Guidance states, it “is intended to help financial institutions understand and successfully manage the risks associated with use of social media.” Although social media is an accepted tool to generate new business opportunities and to aid in interacting with customers, as with any other product channel, it is up to the individual financial institutions to properly create and administer effective “risk management programs [that] provide appropriate oversight and control to address the risk areas discussed within [the] Guidance.”
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