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   ARTICLE   |   From Scotsman Guide Residential Edition   |   September 2017

Digital Danger Zone

Stay on the straight and narrow to avoid social media compliance issues

Digital Danger Zone

The introduction of the printing press in the 15th century made it possible to distribute ideas on a scale never before imagined. Several hundred years later, radio and television allowed messages to reach even wider audiences and transformed how we consumed information.

With the arrival of the internet, information became available on demand and exponentially accelerated the pace at which messages are produced, disseminated and consumed. The latest online addition, social media, has made it possible for anyone to instantly connect to services that reach billions of people. This ability of mortgage originators to communicate with existing and prospective borrowers has never been easier, but this opportunity is accompanied by a potentially scary new dimension of compliance.

As new communication tools emerge and get widely adopted, communicators and legislators alike learn what works and what doesn’t through trial and error. It is believed, for example, that a father and son hearing George Carlin’s “seven dirty words” routine on the radio led to the development and implementation of safe-harbor hours. Then, in the 1990s, the Digital Millennium Copyright Act was enacted as the internet’s global expansion created new concerns with respect to intellectual property rights.

Nobody could have predicted the meteoric ascension of social media’s popularity a decade ago, but its influence is undeniable now as it has become engrained in our everyday lives. Need proof? Check out these figures.

  • 21 percent: the global increase in social media use in 2016;
  • Six to seven hours: the amount of time millennials and Gen Xers spend on social media per week; 
  • 52 percent: the share of consumers whose online and offline purchases were influenced by Facebook in 2015;
  • 20 minutes: the average time a Facebook user spends on the social media platform per visit; and
  • 47 percent: the share of millennial purchase decisions that are influenced by social media.

The bottom line is: A mortgage company’s target markets are on social media, and the only thing bigger than the opportunity within social media is the need for a policy to govern such interactions. By understanding how existing regulations apply to social media activity, lenders and originators can avoid costly mistakes, while reaping significant benefits.

The responsible management of social media when marketing and communicating with borrowers requires the same mindfulness necessary for any external outreach. After all, the wheel isn’t being reinvented; it’s just turning much, much faster. To accommodate, lenders and mortgage companies need to understand the importance of developing a social media policy, as well as the role and impact of social media in today’s business.

Interpreting regulations

With the emergence and accessibility of so many social media platforms, what constitutes advertising from a compliance standpoint isn’t always easy to define. If a mortgage company promotes the fact that it has been recognized by the local news as a “top loan producer” for example, that is not considered advertising because the information is coming from an independent source. The promotion of market research or educational materials that do not solicit business also is not considered advertising.

The only thing bigger than the opportunity within social media is the need for a policy to govern such interactions. 

Social media posts by employees such as “I’m fortunate to work for such a great lender” are fine as well. If that statement is followed by a solicitation, however, such as “contact us for the best loan possible,” then it crosses over the safe-post threshold and is subject to regulatory scrutiny. Overall, if the message promotes a consumer credit transaction, then it becomes an advertisement.

Rivaling the number of social media platforms is the number of laws and regulations that determine what is appropriate and required. Although many of these predate the existence of the medium itself, the requirements still govern how lenders, mortgage companies and their employees must interact on social media.

The SAFE ACT, for example, requires that the NMLS registration number be provided for each lender or mortgage company and individual loan originator in the initial communication with a consumer. Those communications also must adhere to any state-specific requirements. State requirements should not be overlooked because some states require the NMLS data to be provided in a specific sequence and may have additional disclosure requirements.

Electronic communication like e-mails and text messages, which are subject to regulatory scrutiny, also must include this information. This is important to remember when conducting initial communication on social media. Twitter posts are considered e-mails, for example, but do not provide enough space to include an NMLS number, an opt-out notice or the lender’s mailing address, so advertising on Twitter is difficult to do efficiently without violating compliance rules.

Protections outlined in Regulation B of the Equal Credit Opportunity Act (ECOA) and in the Fair Housing Act dictate that lenders cannot request certain information about an applicant’s race, color, religion, national origin or gender. Many social media platforms make this information publicly available, however, so it is important that this information have absolutely no influence on any lending decision.

Furthermore, when creating social media posts — as with any other form of communication — you must avoid words, symbols, models or other forms of communication that could potentially express, imply or suggest a discriminatory preference, because these would be violations of the ECOA.

It is important to limit one-on-one engagement with any consumer or borrower to private channels.

In addition, requirements in Regulation Z of the Truth in Lending Act (TILA) prohibit lenders, mortgage companies and originators from discussing downpayments, payment periods or amounts and interest rates publicly on social media without proper disclosures. Mentioning any of these trigger terms without the corresponding specific disclosure is a direct violation of TILA, so compliance training and monitoring of social media posts is a must.

Even something as seemingly innocent as offering a $10 gift card in exchange for a referral is a no-no per Section 8 of the Real Estate Settlement Procedures Act. This act prohibits any exchange of an object of value for business referrals.

Liability versus culpability

Violations aren’t always the result of a lender’s or mortgage company’s actions, however. If a consumer publicly shares personal information such as credit scores, addresses, debts, etc., through a mortgage company’s social media account, the company is not culpable, but it is expected to take action to protect the consumer.

In this case, the best action to take is to delete the private information as quickly as possible and advise that consumer by following up privately. The mortgage company also should be able to provide proof that there was no direct solicitation of that information and that it was provided voluntarily, without the company’s approval.

In general, it is important to limit one-on-one engagement with any consumer or borrower to private channels and reserve public forums for messages that reflect positive experiences and/or show responsiveness to complaints. This is no small consideration and requires ongoing oversight to ensure social media risks are mitigated.

•  •  •

Reaching a broad audience has never been as easy as it is today, and marketers understand the seemingly unlimited potential that social media has in terms of borrower engagement. Is it challenging? Of course. But it is also rewarding.

Many of the requirements surrounding social media use are similar to — if not the same as — traditional marketing and advertising requirements. Make sure social media marketing is part of your overall strategy, and review posts prior to placement.

Marketing and compliance teams must work together on outreach, regardless of profile or platform. Have a clearly defined policy in place and available to all employees and watch your digital presence take your brand to new heights.


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