Did You Miss It? Important New Guidance for Financial Institutions Using Social Media

by Spilman Thomas & Battle, PLLC

At the end of last year, the members of the Federal Financial Institutions Examination Council (FFIEC), published final supervisory guidance titled “Social Media: Consumer Compliance Risk Management Guidance.” Financial institutions must be aware that examiners will look at compliance efforts and policies related to the institution’s use of social media. As more institutions utilize social media, such as Facebook, LinkedIn, Twitter and other services to engage customers, the FFIEC has now issued guidelines that must be reviewed and integrated in the risk management program. The new guidance will be used as supervisory guidance by the OCC, Federal Reserve, FDIC, NCUA and CFPB, and the institutions they supervise are “expected to use the Guidance in their efforts to ensure that their policies and procedures provide oversight and controls commensurate with the risks posed by their involvement with 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.” Social media can include “micro-blogging sites” such as Facebook, Google+, MySpace, and Twitter; forums and customer review websites such as Yelp; photograph and video sites such as Flickr and YouTube; and games. The defining characteristic of the social media, according to the Guidance, is that these communications are more interactive. The Guidance acknowledges that supervised institutions may use social media in a variety of ways that impact the financial institution’s “risk profile.”
With respect to expectations of regulators regarding specific attributes of a compliance risk management program, many variables influence the contents that are appropriate for each institution. The program should allow the financial institution to “identify, measure, monitor, and control the risks related to social media,” and the size and complexity of the program “should be commensurate with the breadth of the financial institution’s involvement in this medium.” The Guidance provides the examples that institutions relying heavily on social media to attract and acquire new customers will require a more detailed risk management program.
Regarding who should be tasked with developing an organization’s program, the Guidance explains that financial institutions should include input from compliance, technology, information security, legal, human resources and marketing constituents. Additionally, the Guidance states that institutional should provide guidance and training for employee official use of social media.

The FFFIEC has provided a general outline of concepts to include in a risk management program, which are as follows:

  • A governance structure with clear roles and responsibilities, including board of directors input on how social media contributes to the strategic goals of the institution and defining controls and ongoing assessment of risk in social media activities.
  • Policies and procedures regarding the use and monitoring of social media and compliance with all applicable consumer protection laws and regulations. The Guidance also explains that policies should incorporate methodologies to address risks from online postings, edits, replies and retention.
  • A risk management process for selecting and managing third-party relationships in connection with social media;
  • Employee training that incorporates the institution’s policies and procedures for official, work-related use of social media. The training should also address other uses of social media, including defining impermissible activities.
  • An oversight process for monitoring information posted to proprietary social media sites administered by the financial institution or a contracted third party.
  • Audit and compliance functions to ensure ongoing compliance with internal policies and applicable law.
  • Parameters for providing appropriate reporting to the financial institution’s board of directors or senior management that enable periodic evaluation of the effectiveness of the social media.

Finally, more than half of the Guidance is dedicated to specific compliance and legal risks presented by social media. This information discusses laws and regulations that may be relevant to a financial institution’s social media activities, and includes commentary on the following laws:

  • Truth in Savings Act
  • Equal Credit Opportunity Act/Reg B and Fair Housing Act
  • Truth in Lending Act/Reg Z
  • Real Estate Settlement Procedures Act
  • Fair Debt Collection Practices Act
  • Unfair, Deceptive or Abusive Acts or Practices
  • Deposit Insurance or Share Insurance (FDIC/NCUA notices)
  • Electronic Fund Transfer Act/Reg E
  • Rules Applicable to Check Transactions (UCC provisions)
  • Bank Secrecy Act/Anti-Money Laundering Programs
  • Community Reinvestment Act
  • Gramm-Leach-Bliley Act Privacy Rules and Data Security Guidelines
  • CAN-SPAM and Telephone Consumer Protection Act
  • Children’s Online Privacy Protection Act
  • Fair Credit Reporting Act

For financial institutions attempting to develop risk management programs, including provisions that touch on all of the aforementioned provisions is challenging to say the least. Because community banks are working to broaden their customer base and communicate via social media, these laws and regulations must be considered. Community banks and other financial institutions should consult the Guidance to identify the specific risks in each of these statutes, as well as other concepts that should be part of their risk management programs.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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