5 Steps For Banks To Avoid Problems With Regulators When Using Social Media

August 01, 2017
Joanna Belbey

Community banks and credit unions can use social media to level the playing field with big banks. With a thoughtful, and sometimes, inexpensive social media and digital presence, a smaller bank can resonate with its community and engage with existing and potential customers in their area. But what about banking regulations? How do they apply? To find out, I spoke with Ethan Wall, president of the The Social Media Law Firm, a social media attorney, marketing consultant, author, and recognized keynote speaker.

Belbey: What are some opportunities for community banks and credit unions to use social media?

Wall: There’s no better place than social media for banks and credit unions to be on their customers’ and potential customer’s radar screens. Facebook, Twitter, LinkedIn, and Instagram are where people spend their time these days. Social media provides a unique opportunity for banks and credit unions to engage and interact with their audience on personal, professional and community issues. Banks can take people from where they are, on Facebook, to where the banks wants them to go, which is their website. It’s also incredibly effective for marketers. Through analytics, banks and credit unions can learn about their customers’ and potential customers’ interests and how they respond to advertisements. Banks can share the wonderful things they are doing in the community. Social media also allows banks to attract attention through contests, sweepstakes or influencers and create a complete, unique and personal experience for people online.

Belbey: Tell us about the challenges that banks and credit unions face when using social media.

Wall: Banks face the roadblock of applying antiquated laws to new technologies. The same laws that apply to marketing and advertising, television, and even billboards, equally apply to a Facebook page, a Tweet or Instagram post. Technology and social media advance faster than the law can adapt, so banks and credit unions find themselves between a rock and a hard place. Banks need to innovate to keep customers, but risk being penalized by regulators, auditors and customers who can file a lawsuit for a violation of the various financial regulations that apply to social media.

Belbey: What regulations do banks need to think about before they start using social media?

Wall: Start with the Federal Financial Institution Examination Council (FFIEC) Social Media Guidelines. This guidance is a collection of many of the laws and regulations that apply to financial institutions as well as how they relate in terms of compliance on social media. The FFIEC says that your compliance program needs to be commensurate with the scope of your social media engagement. However, FFIEC Guidance is over 20 pages long, is general and doesn't describe how to specifically comply with those laws and regulations. This is a challenge because attorneys and compliance departments charged with interpreting the rules typically didn’t grow up with social media.

Belbey: What about the Federal Trade Commission (FTC) rules? Does those apply to banking as well?

Wall: The Federal Trade Commission is a governmental entity that enforces Federal Trade Commission Act, which includes rules on “truth in advertising”. Essentially, if you advertise, you have to do so truthfully. For example, if people are saying great things about your bank’s products or services online, and they’ve been incentivized in some way, that connection must be prominently disclosed. “Influencer marketing” is powerful because we trust our friends and colleagues more than any institution. But banks need to be careful not to mislead the public about any “material connections” that may exist between endorsers and the products and service that they are endorsing. A bank or credit union needs to make sure that people leaving reviews and endorsements on their behalf include appropriate disclosures and to protect themselves when influencers don’t follow rules and training about disclosures.

Belbey: How can banks create compliant social media programs?

Wall: There’s no one size fits all approach. However, there are five basic steps to follow:

  1. Define the goals of the social media program and gain support of senior management.
  2. Conduct a social media assessment. Outline the current social activities and determine what is needed from a compliance perspective. Create compliance checklists to define levels of risk and identify gaps. Work with in-house compliance or auditing departments familiar with social media and the rules and regulations. Or ask an outside expert to conduct the risk assessment and report back whether the institution is currently compliant or not. Based on the significance of non-compliance in terms of regulatory, legal or reputational risk, develop a plan to address those issues to get the bank back into compliance. Some solutions may be implemented internally. Others may require technology or outside professionals.
  3. Follow regulatory guidelines. Per the FFIEC, establish a social media governance structure and framework that describes how social media will be managed. Define clear roles and responsibilities. Develop comprehensive risk management procedures and policies to address social media. Ask senior management to provide guidance of how social media will accomplish overall objectives. Create policies and procedures for specific activities such as social media contests and sweepstakes. Consider National Labor Relations Board directives about employees’ use of social media. Per the FTC, follow processes related to influencers to ensure clear and conspicuous disclosures. In general, if the bank is using social media for recruitment, establish a social media policy that properly screens candidates but doesn't expose the bank to potential risks relating to anti-discrimination laws.
  4. Stay compliant. Develop a social media compliance infrastructure that enables compliance moving forward. Monitor and preserve social media content. Audit social media related activities to ensure compliance with internal policies and various financial laws and regulations. Provide training on a regular basis to ensure that employees know what they “should” or “should not” do. Explain why. Conduct appropriate recordkeeping to be able to demonstrate compliance with various regulations if audited by a regulator or requested as part of e-discovery. And the last piece of the puzzle is to…
  5. Report progress regularly to senior management. Marketing professionals should describe activities and whether the goals are being accomplished. Compliance should report the type of protections pertaining to social media. Regular reporting gives senior management the opportunity to engage in the conversation about the best way to use social media to meet goals for the bank now and in the future.

This blog appeared previously on Forbes.