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Financial Services Social Media Risk Audit Checklist

Improve Diligence, Oversight and Control in your Social Media Programs

More financial institutions are using social media every day to provide customer service, market their products and services, and communicate with customers.

Unfortunately, while bankers know that the consumer protection rules apply to any interactions with consumers without regard to the channel or medium used, it hasn’t been entirely clear which consumer financial protection laws and regulations apply to the evolving channel of social media.

Because failure to address the risks arising from social media can expose an institution to enforcement actions for compliance violations and civil lawsuits, it’s never been more important to identify and mitigate

Financial Services Social Media Risk Audit ChecklistA LexisNexis® Sheshunoff™ White Paper

the inherent risks of this program. Whether your organization engages in lending, deposit services, payment activities, or a combination of these services, risks associated with social media are heightened by poor due diligence, oversight and control.

The checklists that follow are intended to help identify the various types of consumer compliance risks that apply to social media and to provide internal auditors with a useful monitoring tool.

For more compliance tools, resources, training and programs designed for every level of your organization visit www.lexisnexis.com/sheshunoff.

Part 1: Compliance and Legal Risks1

I. Framework for Managing Social Media Compliance Risk

1. Does your financial institution have a risk management program capable of identifying, measuring, monitoring and controlling the risks related to social media use to conduct business?

2. Is the risk management program commensurate with the scope of the institution’s involvement in social media?

3. Does the institution have a procedure for monitoring various social media platforms for any potential negative comments or complaints about the institution, regardless of whether the institution itself uses social media?

4. In devising a social media risk management program, did management seek the participation of specialists, such as the compliance officer, technology and information security professionals, legal counsel, human resources manager and marketing officer?

Yes No N/A

Page 1

5. Does the social media risk management program include the following components:

• A governance structure that clearly assigns roles and responsibilities, defines the involvement of the board of directors and senior management in specifying the role of social media in attainment of the institution’s strategic goals, establishes controls and provides for ongoing risks assessments?

• Policies and procedures for assuring the compliance of social media initiatives with all applicable consumer protection laws and regulations?

• A process for selecting and managing any third-party relationships entered into in connection with the institution’s use of social media?

• An employee training program that explains the institution’s policies and procedures for official, work-related use of social media and clarifies impermissible activities?

• An oversight process for monitoring information posted to the institution’s proprietary social media sites, whether administered by the institution or by a third-party vendor?

• Audit and compliance procedures to ensure ongoing adherence to internal policies and all applicable laws and regulations?

• An evaluation mechanism by which the effectiveness of the social media program is periodically assessed relative to its objectives and by which consumer compliance performance is measured?

• A mechanism for regularly reporting the results of the assessments to the board of directors and senior management?

II. Controlling and Monitoring Compliance and Legal Risks

Deposit and Lending Products

1. Savings accounts: Are the institution’s social media communications in compliance with the disclosure and other requirements applicable to deposit and lending products under the Truth in Savings Act/Regulation DD Part 707 of the NCUA rules and the advertising rules?

Example: Regulation B requires creditors to observe certain time frames for notifying applicants of the outcome of their applications or for requesting additional information for incomplete applications.

2. Fair lending: Are social media communications regarding the institution’s credit and lending programs in compliance with the Equal Credit Opportunity Act/Regulation B and the Fair Housing Act?

Example: When denying credit, a lender must provide an adverse action notice detailing the specific reasons for the decision, including when the information used to deny the credit application comes from social media.

Financial Services Social Media Risk Audit Checklist

Page 2

Yes No N/A

3. Credit and loan programs: Are your institution’s social media communications in compliance with the Truth in Lending/Regulation Z requirements for advertising, including electronic advertisements, consumer loan applications taken electronically, and disclosures for private education loans, home-secured loans and credit card accounts?

Example: Regulation Z does not contain any exemptions for loan applications taken via social media.

4. Real estate lending: Are your institution’s social media activities in compliance with the prohibitions under Section 8 of the Real Estate Settlement Procedures Act (RESPA), such as the prohibitions against fee-splitting and giving or accepting kickbacks?

Example: RESPA applies to real estate loan applications taken electronically, including via social media.

5. Debt collections: Are your institution’s social media activities in compliance with the Fair Debt Collection Practices Act (FDCPA), which restricts how debt collectors may collect past-due debt?

Example: A debt collector that discloses the existence of a debt on a social media site or that harasses or embarrasses consumers about their debts on a consumer’s Facebook® wall or other public forum, or that makes false or misleading statements via social media, violates the FDCPA.

6. UDAAP: Are your institution’s social media activities in compliance with Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices affecting commerce, or sections 1031 and 1036 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which adds “abusive” acts or practices to the prohibition?

Example: Any advertisement or other banking activity conducted through social media could be deemed unfair, deceptive or abusive, and therefore violates the FTC Act and the Dodd-Frank Act, if it takes advantage of a consumer’s lack of knowledge, confusion or fears.

7. Deposit insurance: Do your institution’s social media activities comply with the FDIC’s advertising and notice of FDIC membership rules, which require insured depository institutions, whenever they advertise an FDIC-insured product, regardless of delivery channel, to include the official advertising statement of FDIC membership (“Member FDIC” is one acceptable form)?

Example: If a social media message generally promotes an insured depository institution’s products or services without being specific about which ones, the official advertising statement is required if the message includes the name of the institution. The official advertising statement is not permitted if the message relates solely to non-deposit products, such as proprietary mutual funds, or products with both deposit and non-deposit features, such as sweep accounts.

Page 3

Yes No N/A

Financial Services Social Media Risk Audit Checklist

LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Sheshunoff is a trademark of Reed Elsevier Properties SA, used under license. Other products or services may be trademarks or registered trademarks of their respective companies. © 2014 LexisNexis. All rights reserved. NBI01320-0 0314

This document is for educational purposes only. LexisNexis does not warrant this document is complete or error-free. If written by a third party, the opinions may not represent the opinions of LexisNexis.

Page 10

Financial Services Social Media Risk Audit Checklist

1. Dave Buzzel, Internal Auditor Alert, volume 11 No. 1, January 2014 2. Dave Buzzel, Internal Auditor Alert, volume 11 No. 2, February 2014

Internal Auditor Alert is published monthly by Matthew Bender & Company, Inc. Copyright 2014 Reed Elsevier Properties SA ., used under license by Matthew Bender & Company, Inc. All rights reserved.

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