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Financial Industry Gets New Guidance on the Use of Social Media

By Heather Nolan on July 28, 2011

Banks and other financial institutions face unique issues when it comes to the use of social media. Faced with conflicts between social media platform rules, customer expectations, self-regulatory standards, and the strict regulations that govern the industry, guidance has been needed. The industry received some of that guidance recently through a whitepaper issued by BITS, the technology arm of The Financial Services Roundtable whose members are 100 of the largest financial institutions in the U.S.The report addresses the compliance, legal, operational, and reputational risks - and related mitigation strategies - of using social media in connection with a financial or banking operation. Regarding compliance, the report discusses the myriad of compliance areas relevant to banks, including marketing, privacy and security. For example, because social media web sites and web activities are deemed advertising by regulators, the report warns of the risks of failing to comply with various marketing laws and regulations applicable to the banking industry, including state Unfair and Deceptive Acts or Practices Acts and Prize and Gift Acts, as well as others that require additional steps for financial institutions, such as Truth in Lending, Truth in Savings, and FDIC membership rules. The paper predicts even stronger and more subjective requirements to come under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Risks of non-compliance vary widely - from litigation and reputation risk, regulatory enforcement actions and in some cases civil money penalties.

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House and Senate Enact Amendment of FCRA, Limit Scope of Red Flags Rule

By InfoLawGroup LLP on December 07, 2010

The Blog of Legal Times is reporting that late on December 7, 2010 the House of Representatives passed a bill on a voice vote that amends the definition of "creditor" in the Fair and Accurate Credit Reporting Act (FCRA) and, as a result, dramatically limits the scope of the Red Flags Rule. The House bill is identical to the legislation enacted by the Senate last week. We previously covered in detail on our blog both the House bill and the Senate bill.The legislation has the effect of largely limiting the applicability of the Red Flags Rule to financial institutions and entities commonly understood to be "creditors". It will generally exclude from the Rule's scope organizations whose "credit" activities are limited to providing a product or service and allowing customers to pay for the product or service at a later time. The legislation leaves open the possibility that the FTC would bring various types of creditors within the scope of the Rule through rulemaking. However, it sets a procedural threshold for expanding the scope of the Rule and appears to require the determination to be specific to the type of creditor. "When I think of the word 'creditor,' dentists, accounting firms and law firms do not come to mind," said Rep. John Adler (D-N.J.), speaking on the House floor.

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