United States: FFIEC Issues Final Guidance On Social Media Usage By Financial Institutions

On December 11, 2013, the Federal Financial Institutions Examination Council (FFIEC) issued final guidance for financial institutions relating to their use of social media (the "Guidance").  With its release, the FFIEC adopts its January 2013 proposed guidance in substantially the same form.  (Socially Aware's overview of the proposed guidance is available here.)

Financial institutions should expect that the federal banking agencies, Consumer Financial Protection Bureau and National Credit Union Administration (the agencies that comprise the FFIEC) will require supervised institutions to incorporate the Guidance into their efforts to address risks associated with the use of social media and to ensure that institutional risk management programs provide effective oversight and controls related to such use.  As a result, financial institutions should consider the appropriateness of their social media risk management programs and should be cognizant of potential technical compliance traps that could result from the use of social media to interact with consumers about products governed by consumer financial protection laws, such as the Truth in Lending Act.

Changes to the Proposed Guidance

Although adopted in substantially the same form as the proposed guidance, the Guidance does attempt to address some concerns raised by commenters.  For example, the FFIEC clarifies that compliance should not be viewed as a "one-size-fits-all" process and that institutions should tailor their approach based on their size, complexity, activities and third-party relationships.  Additionally, the Guidance clarifies that stand-alone messages sent through traditional email and text channels will not be considered social media.  Nonetheless, the Guidance cautions that the term "social media" will be viewed broadly by the agencies.

While the FFIEC attempted to clarify a financial institution's obligations with respect to service providers involved in the institution's social media activities, the Guidance provides limited specific considerations.  For example, the Guidance directs institutions to "perform due diligence appropriate to the risks posed by the prospective service provider" based on an assessment of the third party's policies, including the frequency with which these policies have changed and the extent of control the financial institution may have over the policies.

Another area where the FFIEC attempted to clarify its expectations is the extent to which a financial institution would be required to monitor consumer communications on Internet sites other than those maintained by the institution ("Outside Sites").  While the preamble to the Guidance notes that "financial institutions are not expected to" monitor Outside Sites, the Guidance provides that the public nature of social media channels may lead to increased reputational risk, and that compliance considerations may arise if, for example, a consumer raises a dispute through social media.  Further, the Guidance states that institutions are still expected to make risk assessments to determine the appropriate approach to monitoring and responding to communications made on Outside Sites.  The Guidance also continues to state that, based on the risk assessments, institutions will need to consider the need to "monitor question and complaint forums on social media sites" to review and, "when appropriate," address complaints in a timely manner.

Compliance Considerations

The cornerstone of the Guidance continues to be the expectation that a financial institution will maintain a risk management program through which it identifies, measures, monitors and controls risks related to its use of social media.  The Guidance provides that a financial institution's risk management program should include the following components:

  • A governance structure so that social media use is directed by the institution's board of directors or senior management.
  • Policies and procedures regarding the institution's use of social media, compliance with applicable consumer protection laws and regulations, and methodologies to address risks from online postings, edits, replies and retention.
  • A risk management process for selecting and managing third-party relationships for social media use.
  • An employee training program incorporating the policies and procedures, and informing employees of appropriate work and non-work uses      of social media (including defined "impermissible activities").
  • An oversight process for monitoring information posted to proprietary social media sites administered by the financial institution or contracted third party.
  • Audit and compliance functions to ensure compliance with internal policies and applicable laws, regulations and the Guidance.
  • Parameters for reporting to the institution's board of directors or senior management to enable periodic evaluation of the effectiveness of the social media program and whether the program is achieving its stated objectives.

Moreover, the Guidance continues by focusing on identifying potential risks related to a financial institution's use of social media, including risk of harm to consumers.  In particular, the Guidance identifies potential risks within three broad categories: (1) compliance and legal risk; (2) reputational risk; and (3) operational risk.  While the Guidance catalogs the many risks presented by the use of social media, the focus is on the risks associated with compliance with consumer protection requirements, including:

  • Fair Lending Laws:  While it focuses on an institution's compliance with time frames for adverse action and other notices required by the federal fair lending laws and regulations, the Guidance also highlights possible compliance traps if a financial institution fails to carefully consider whether the institution's social media use is consistent with applicable law.  For example, the Guidance highlights that, where applicable, the Fair Housing Act would require mortgage lenders who maintain a Facebook page to display the Equal Housing Opportunity Logo.
  • Truth in Lending Act/Regulation Z:  The Guidance highlights that the Regulation Z advertising requirements would apply to relevant advertisements made through social media.  Credit card issuers in particular will be familiar with Regulation Z's disclosure requirements for advertisements that include trigger terms and reference deferred interest promotions, and should be cognizant of the application of these requirements in social media advertisements.
  • Truth in Savings Act/Regulation DD:  Like the considerations for compliance with Regulation Z, the Guidance highlights that Regulation DD also contains special advertising requirements for use of trigger terms such as "bonus"  and "APY," and further notes that depository institutions can ensure compliance with the federal disclosure requirements by including a link to the additional information required to be provided to the consumer. 
  • Deposit Insurance and Share Insurance:  The Guidance reminds institutions that they are required to comply with the advertising requirements for deposit insurance in non-social media advertisements and displays.

The FFIEC having finalized its Guidance, financial institutions will need to carefully review their social media policies and practices in light of the Guidance.  Indeed, even companies that are not financial institutions may find the Guidance to reflect emerging best practices for minimizing risk in using social media to promote products and services.

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.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Matthew W. Janiga
Similar Articles
Relevancy Powered by MondaqAI
Bradley Arant Boult Cummings LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Bradley Arant Boult Cummings LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions