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Social Media Legal Risks for Financial Institutions
November 10, 2015

A financial institution’s social media engagement can not only attract new customers and increase community engagement, but it can also create exposure to serious legal risks. Without implementing a social media risk management program, financial institutions can experience compliance and legal risk that can result in lawsuits, regulatory investigations audits, and enforcement actions. This can significantly impact the financial institutions profits by diverting funds toward paying fines, court costs, and attorneys’ fees. Even worse, financial institutions that violate these laws will suffer irreparable damage to customer goodwill – and ultimately lose customers to a competitor.

Here are a two critical social media laws and regulations that must be part of a social media risk management program to ensure your financial institution remains complaint on social media:

Real Estate Discrimination and The Fair Housing Act

Financial institutions that make real estate-related loans must comply with non-discrimination laws and regulations. Generally speaking, these regulations prohibit a financial institution from directly or indirectly engaging in any form of advertising of real estate-related loans that implies or suggests that the institution discriminates in violation of the Fair Housing Act.

The Fair Housing Act is a federal statute that prohibits discrimination with regard to the sale or financing of real estate on the basis of race, color, religion, sex, familial status, national origin, or handicap. To comply with the act, a financial institution must implement two compliance safeguards when promoting real estate-related loans:

First, any social media post advertising a financial institution’s real estate-related loan products should include the Equal Housing Lender or Equal Housing Opportunity logo. The logo should also be placed in each social media profile’s cover photo.

Second, the Fair Housing Act requires that lenders’ marketing materials reflect an affirmative intention to comply with the anti-discriminatory intent of that act. To show an affirmative intention to comply with the act, advertisements depicting people should represent as diverse a racial makeup as possible, and that both genders get as near equal time as possible.

Savings Accounts & Truth-in-Savings Act Compliance

The Truth-in-Savings Act is a consumer protection statute that assists consumers in comparing deposit accounts from various financial institutions. Financial institutions must satisfy several regulatory requirements from the Act when promoting savings account related products – even on social media – since these regulations extend to any commercial message, in any medium, that directly or indirectly promotes the availability or terms of a deposit savings. For purposes of social media, there are two main compliance requirements:

First, the social media post must be accurate – in other words – it shall not contain any inaccurate or potentially misleading statements. For example, a social media post promoting a savings account may not refer to or describe an account as “free” or “no cost” (or contain a similar term) if any maintenance or activity fee may be imposed on the account.

Second, if an advertisement states a rate of return, it must state that rate as an annual percentage yield. The abbreviation APY may be used, as long as the term “annual percentage yield” is stated at least once in the advertisement. However, if the APY is stated in an advertisement, the post must clearly and conspicuously include additional terms, conditions, and disclosures that will certainly not fit within a 140- character tweet. So what is a financial institution to do?

Financial institutions can comply with the Truth-in-Savings Act on social media by inserting an easy-to-follow hyperlink on each social media posts that advertises a savings product that directs customers and the public to the complete terms and conditions. They should also advise customers, whenever possible, that the hyperlink accompanying the advertisement will direct them to the complete terms and conditions or additional information about the financial product (such as, “Select the link for complete terms and conditions”).

Social Media Marketing Compliance

The Fair Housing Act and Truth-in-Savings Act are only two of many financial laws and regulations that govern a financial institution’s social media engagement. Financial institutions must ensure that all financial regulations are followed on social media, including Truth in Lending Act, Regulations DD, Regulation Z, Bank Secrecy and Anti-Money Laundering Act, and the Gramm-Leach-Bliley Act Privacy Rules.

To ensure compliance, every financial institution that maintains a social media presence must have a risk management and compliance program encompassing marketing, technology, legal, and human resources.

The first step is to conduct a social media risk assessment. A social media attorney’s risk assessment will consist of interviews with key personnel, a review your existing policies and compliance procedures, development of a risk assessment report, and the identification of compliance solutions that can prevent lawsuits and regulatory problems.

The next step is to ensure an attorney knowledgeable with social media legal issues reviews your financial institution’s advertisements for compliance with financial regulations or it will be at risk of a lawsuit or regulatory audit.

Finally, each financial institution must implement a social media marketing compliance-training program to help employees understand how complicated financial laws and regulations apply to social media and how to prepare the proper disclosures that must be included for social media compliance.

Failure to implement these compliance solutions will not only result in lawsuits and regulatory scrutiny, but a tremendous amount of backlash from customers on your social media pages – and that could be the biggest headache of them all.