When it comes to compliance and social media, experience can inform the next generation of mortgage professionals. Those of us who have been in the industry for a while have deep memories and a lot of experience with compliance issues, and in today’s landscape, compliance has become an integral and growing aspect of social media.
For those of you who are new to the mortgage industry—but familiar with social media—the integration of the two is much more complex than a tweet. Actions which are spontaneous and simple in the social media realm are actually multifaceted and can have a long regulatory shadow. This is a day and age of real-time, real presence in which communication is assumed to be subsumed in the cloud, lost forever—except for a possible subpoena coming down the pike in the future. Of course, social media simplifies the way in which, and the casualness with which, our data goes into real time. However, adding the element of regulatory action changes everything.
It's our business, real estate finance, that moves the entire discussion of social media into a deep regulatory context. What is simple, benign and easy suddenly becomes an issue of disclosure, fairness and statute. Here is where compliance and social media becomes a real eye-opener for the uninformed, most often—and unfortunately—only after the fact.
Social media and compliance
Regulations with social media bite were not specifically designed for social media. They were designed for the protection of the customer, prevention of fraud, and for procurement of many other important social and business goals. Social media is just one more clown in the circus tent. There are many ways in which mortgage business is conducted and the rules are designed to help the mortgage industry navigate their professional responsibilities. The regulations are written broadly, not narrowly.
Having a good grasp of the impact of social media and regulations can help your firm steer their way ahead of competitors in this new media. Here is a quick sampling and some issues to give you a bird eye’s view into how the regulators see the mortgage business and social media in it.
Social media folds under existing regulations
Mortgage professionals must have a thorough understanding of the Bank Secrecy Act/Anti-Money Laundering Programs (BSA/AML)
, which deals with transaction reporting, internal controls, and compliance programs. In this case, you should think about activities in social media that might trigger reporting. If suspicious activities have been detected, have you filed a Suspicious Activity Report (SAR)? Has social media been used to obtain password credentials? Think of fraud and think of how money laundering can be used and Internet games that can allow cash out. Think about Reg. GG, the Prohibition on Funding of Unlawful Internet Gambling, and whether or not you have policies and procedures in place that prevent taking payments from gambling companies that are involved in unlawful Internet gambling.
Then, there’s the CAN-SPAM Act
, which focuses on issues around sending unsolicited messages to people through social media channels. This impacts your marketing department and your loan originators. The most important component of the commercial messages and promotions that are sent out is that they are always factual and transparent. The best way to ensure this is to include criteria for high quality and accurate content within your policies and procedures for social media, and to provide ongoing training to staff involved with your institution’s social media outreach.
In addition, your company’s policies and procedures should include a section on social media use for personal and professional purposes and how it will be handled within your organization. Whatever the policy, it should be a strict one and rigorously adhered to. This will ensure compliance and protect the organization from regulatory exposure.
These policies and procedures will be especially handy when loan originators or marketing department personnel are posting messages on Facebook. Everyone posting needs to know that there is a significant difference between casual posting filled with unsubstantiated personal views and a business professional post that is accurate and informative, leaving any judgment or decision from it to the customer.
Turning our attention to the Equal Credit Opportunity Act (ECOA) Regulation B, mortgage professionals have to make sure that they’re not discouraging anyone from making an application. In this case, your loan officers can’t make oral or written statements, or put out advertising, in any environment, print or electronic, that sends out a signal to a person that they should not apply for a loan. Loan originators also need to be aware of inadvertently making a Reg. B decline decision without realizing they’ve done so. For example, if a loan originator says to a potential applicant, “you don’t fit our guidelines,” then you would have to send out a notification under Reg. B.
It also goes without saying that none of their comments can be discriminatory. This ties into an important concept that must be understood by all involved with social media: While we can’t control what people say to us, we can control what we say to them. The Fair Housing Act relates to real estate-related transactions and requires that we be non-discriminatory in our deals.
No review of federal regulations would be complete without taking a look at Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). I’m sure I’m preaching to this choir … but this one covers everything we do. Even the CFPB advises that ‘you know it when you see it.’ Really? How do I prevent it? You can’t. Think of your least sophisticated consumer. Think about being open. Think about honest. Think about being transparent. Yet we can do everything right and still have a UDAAP issue because of new interpretations, so it must be considered in everything mortgage professionals do, including social media.
Then there’s the Fair Credit Reporting Act (FCRA). If you’re using social media to make solicitations using eligibility information from credit bureau reports, and if you also have disputes from consumers, consider if someone says that you’ve reported data on them incorrectly. That’s a scenario that could fall under FCRA as a violation.
As for the Fair Debt Collection Practices Act (FDCPA), this comes down to making sure you and any of your third-party collectors are compliant. Are you using third party services or sub servicers? What is their use of social media? What are their guidelines? Even if you don’t consider yourself to be a debt collector, under FDCPA, it really is a good practice to avoid a UDAAP issue by following FDCPA.
When we think about Gramm-Leach Bliley Act (GLBA), our minds automatically go to privacy and security. These are two issues that are on the top of the regulator’s hit list. We want to ensure that we protect the customers’ personally identifiable information and that their information is secure. We need to look out for hacking, to look for triggers in our posts, or watch out for triggers in our correspondences or tests with customers. We should ask ourselves if we have triggered privacy rules that require privacy disclosure. Have we gone past the point where we have an application now and that’s triggered initial exposure? Protection of the customer is of the utmost priority, as we have a duty to protect their information.
The Mortgage Acts and Practices–Advertising (MAP)
rule is one your advertising department should know well. It sets rules for defective acts and practices in mortgage advertising and it prohibits misrepresentation concerning certain terms. For example, a Facebook post can be considered advertising if you use certain “trigger terms.” These terms would include interest charged or fees or costs associated with any mortgage credit product. In addition, taxes, insurance, or any penalty for making prepayments on the mortgage require additional disclosures or links that provide additional information.
As we move on to Real Estate Settlement Procedures Act (RESPA), this is something everyone has heard about: Section 8, kickbacks. Anyone in the business knows those terms. We know RESPA Section 8 prohibits fee splitting, kick-backs, and unearned fees, and this goes into an area of social media that may not register with mortgage loan officers. Are you offering a gift card to anyone who follows you, knowing that most of your followers are realtors or other service providers in the business? That could be a kick-back. It could be viewed as an unearned fee. A quick Internet search of different feeds provides triggering language and terms for regulatory scrutiny. In light of this, provide them with guidance on what’s acceptable to your company and what needs to be approved by your company so that they don’t find themselves having a problem, or worse, subject to fines and penalties.
Regulations you thought would never apply
Just when you thought you have it all down, you just may not. You might think the Telephone Consumer Protection Act (TCPA) only applies to restricting telephone or cell phone marketing calls and automated dialing to consumers. But Facebook tests may also fall under this category. It’s a form of communication and it can be used for telemarketing. This underscores the need from the compliance end to have a written telephone policy.
The Truth-in-Lending Act (TILA) and Truth-in-Savings Act (TISA) have requirements where if certain triggers are used, they require certain disclosures. That may seem obvious, but sometimes it is missed. For example, you can’t give interest rates without APRs. Also, your NMLS number should be on your Facebook page with your contact information.
Over and above these regulations, there are state guidelines which may be even tougher than the Federal regulations. Be aware of how this additional layer of regulation can impact your business. Your compliance department needs to be aware of the related state compliance issues and be able to address the potential pitfalls.
Triggers and layers, compliance processes have to be broad and deep
Our review is a primer of sorts designed to illustrate potential interpretations of social media posts and how regulations that are NOT immediately associated with an advertising or marketing spin, can trigger a violation. There are a lot of layers to these types of challenges. Peel back the onion and get an understanding of the regulations to formulate policies and procedures based on your business and social media practices. Offer training and other compliance education on issues surrounding them. When done well, the odds are that there will be no tears over compliance violations.
Joy K. Gilpin is vice president of mortgage learning and compliance for Indecomm Global Services. Her role requires a keen understanding of the lending process, regulatory oversight, and risk mitigation. With nearly 20 years of professional expertise in the mortgage lending space, she provides great insight and understanding of the challenges lenders face today. She can be reached by e-mail at [email protected].
This article originally appeared in the July 2019 print edition of National Mortgage Professional Magazine.