"Ur checking account is overdrawn! Going to have to charge u $35. #Sorry #LOL"
You'll probably never see a tweet like this aimed at you, but banks are increasingly using social media sites such as Twitter and Facebook to market their products, communicate with customers and resolve complaints. JPMorgan Chase & Co. alone has 10 employees on its social customer service team whose primary responsibility looks to be helping customers over Twitter.
Regulators appear to have taken notice. Last week, the Federal Financial Institutions Examination Council issued a new set of guidelines designed to ensure that protections extended to consumers in a bank's use of traditional communications such as snail mail and phones also include social media.
To do that, it's created a set of preliminary guidelines for banks on how to apply consumer protection laws to social media interactions and asked for feedback from the public and affected industries. Overall, the guidelines seem to be more about opening a constructive dialogue than any kind of punitive action against banks, says Jonathan Cedarbaum, a partner at WilmerHale, a law firm that handles banking regulatory issues for many large financial institutions.
"I think this provides an important opportunity for both the regulated financial institutions and for the technology service providers to inform the regulatory agencies about the day-to-day realities of how these new technologies work and how they are reshaping how financial institutions interact with their customers," Cedarbaum says.
Here are some of the key proposed guidelines.
- Banks can use social media to market products like loans and bank accounts, but they're prohibited from presenting crucial numbers such as CD rates or mortgage rates in a way that's misleading or inaccurate.
- If a bank advertises a loan rate or a deposit rate on social media that has strings attached such as a teaser rate or minimum balance, they have to mention it in the post or provide a link to the fine print.
- Lenders can't make a statement on social media that could appear to discourage a certain group of people from applying for a loan, and they can't mine social media for information about you that they're not allowed to consider in lending decisions, such as race, religion or sex.
- Debt collectors can't disclose to the public that you have a debt by posting a reminder on your Facebook page, and they can't contact your friends and family over social media to ask them about the debt either.
- Banks and credit unions have to let you know they're a member of the Federal Deposit Insurance Corp. or the credit union equivalent, the National Credit Union Association, on their social media pages.
- The old catchall that banks can't employ unfair, deceptive or abusive acts or practices also applies to social media.
These guidelines aren't final and could change as regulators are confronted with some of the challenges of squeezing meaningful disclosures into 140 characters or less. But just their existence is proof that in a few short years, social media has come into its own as a place for banks and customers to do business, said Vidya Phalke, CTO of MetricStream, a governance, risk and compliance firm.
"The new guidance officially recognizes and legitimatizes social media as an acceptable form of communication, which is a victory for social media," Phalke said in an email. "However, for organizations around the world, this serves as a cautionary reminder of the many associated risks around rising social media usage, including data privacy and security risks, regulatory and compliance risks, and brand and reputation risks."
What do you think? Should regulators be looking at how banks deal with customers on Twitter and Facebook? Do you ever interact with your bank over social media?
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