ALEXANDRIA, Va. NCUA and the banking regulators proposed guidance today for credit unions and banks using Facebook, Twitter and other social media, which would ensure that users abide by proper consumer rules and regulations, and limit potential legal risks, among other things.
The guidance would also require that each insured credit union include the official advertising statement of NCUA membership, usually worded, “Federally insured by NCUA” in advertisements regardless of delivery channel, unless specifically exempted.
The proposal was issued today for a 60-day public comment period.
The guidance suggest that credit unions and banks adopt formal policies for using social media, including the recognitions of the potential for defamation or libel where there is broad distribution of information exchanges. Failure to adequately address these risks can expose an institution to enforcement actions and/or civil lawsuits, according to the proposal.
If social media is used to facilitate a consumer’s use of payment systems, a credit union should keep in mind the laws, regulations, and industry rules regarding payments that may apply, including those providing disclosure and other rights to consumers. Under existing law, no additional disclosure requirements apply simply because social media is involved (for instance, providing a portal through which consumers access their accounts at a financial institution). Rather, the financial institution should continue to be aware of the existing laws, regulations, guidance, and industry rules that apply to payment systems and evaluate which will apply. These may include: the Electronic Funds Transfer Act, Bank Secrecy Act, Gramm-Leach-Bliley Act and its privacy provisions, Telephone Consumer Protection Act, Children’s Online Privacy Protection Act and Fair Credit Reporting Act.
The proposed guidance also warns credit unions about the potential reputation risk inherent in social media, such as that arising from negative public opinion. “Activities that result in dissatisfied consumers and/or negative publicity could harm the reputation and standing of the financial institution, even if the financial institution has not violated any law,” says the proposal. “Privacy and transparency issues, as well as other consumer protection concerns, arise in social media environments. Therefore, a financial institution engaged in social media activities must be sensitive to, and properly manage, the reputation risks that arise from those activities.”
Third-party risk, is another potential issue. “Working with third parties to provide social media services can expose financial institutions to substantial reputation risk. A financial institution should regularly monitor the information it places on social media sites,” says the proposed guidelines.
The proposals were issued by the Federal Financial Institutions Examination Council, which also includes the FDIC, Federal Reserve, Office of the Comptroller of the Currency and Consumer Financial Protection Bureau.