News Flash: Social Media Presents Compliance Issues
Garrison Keillor has a great theory about neighborhood barbeques: when you have five or six people deciding when the burgers are done, many of whom aren’t quite sure how to barbecue, you inevitably end up with a grossly overcooked burger. That’s the way I feel about guidances issued by the FFIEC, the council representing all the major federal bank regulators and state banking departments. It’s not that the guidances aren’t useful. It’s just that when you have to reach consensus among that many people the resulting document is often so general as to be void of any practical value except for that relative handful of institutions that didn’t realize there were regulatory issues in the first place.
I am bringing this up because yesterday the Grand Council released a proposed guidance on regulatory issues related to the use of social media by financial institutions. Remember that just because it is called a guidance doesn’t mean it is any less binding on your credit union than a traditional regulation. It provides the framework for examiners reviewing your credit union practices and as such should not be ignored.
First, what is social media? Social media refers to the interactive use of electronic communication such as through Facebook, Instagram and Twitter. What does the proposed guidance mandate? In a nutshell, the use of social media presents compliance, legal, operational and reputational risks to your financial institution. Therefore, you should have a risk management program in place to regulate the use of social media that is commensurate with your credit union’s use of this medium. Importantly, almost every single banking law and regulation you could think of applies to representations you make online to the same extent that they would if you were making them with traditional forums such as newspaper ads or account opening disclosures. This means that the whole alphabet soup of regulations ranging from the Truth in Lending Act to the Equal Credit Opportunity Act applies to your online activities.
In addition to the regulatory issues, there are unique legal issues as well. For instance, the guidance notes that financial institutions should be aware that employees’ communications via social media, even through an employee’s own personal social media accounts, may be viewed by the public as reflecting the institution’s views (for the record, as any faithful reader of this blog will know, my views do not always reflect the views of the Association, much to the relief of our President). However, despite the important employment issues involved, the regulators take a pass on addressing them.
In a very general way, this is all good advice. But, it’s not the type of thing you can rely on in developing sound day-to-day practices. My personal advice is that any credit union with any type of online presence, whether or not it uses social media, should do a compliance audit designed specifically to assess whether its electronic representations are consistent not only with existing law and regulation but with the credit union’s own representations. The last point is important since I have seen cases involving lots of money where attorneys have tried to argue that language on a bank’s website binds them to a greater legal obligation (for instance, regarding funds availability) than does the bank’s account agreement.
A second bit of advice is to reach out to an employment law expert to understand the unique employment issues involved with employee use of social media. If you think the issues are clear cut, then you don’t understand them. I’ve done a couple of posts on the issue for those of you want to start some basic research.
CFPB delays remittance regulations
As expected, the CFPB announced yesterday that it was delaying the effective date of the international remittance regulations scheduled to take effect on February 7, 2013. The delay will give regulators time to incorporate proposed amendments to the regulations that are currently out for public comment. A new compliance date has not been released.