Pub. 2 2011 Issue 2

summer 2011 9 R emember when social networking was something you did only at an after-work cocktail party? Now, social network- ing is something people do on the computer. Everyone seems to be connected through online networks. There are 150 million Americans on Facebook, and untold numbers of others using Twitter, YouTube, MySpace, LinkedIn and other social networking platforms. There are many ways banks can use this new phenomenon as an effective business tool. This article takes a brief look at two ways banks can take advantage of social media, and also identifies how such use may increase the bank’s potential for liability. 1. To Advertise Social networking platforms are a great way to advertise. They are inexpensive, immediate and reach a large audi- ence demographic. Of course, there is the hip factor, too. But before rushing to create a Twitter account or build a Facebook page, banks need to understand that using social networking platforms opens them to the same advertising liabilities as traditional methods of advertising, as well as new ones. Obviously, banks can be subject to regulatory issues if they post untrue facts about their rates, fees or other practices on Face- book. What might surprise some, though, is that this could be true even if it was a customer, and not the bank, who posted the inaccurate message. Remember, social networking plat- forms, like Facebook, allow for two-way communication. For example, say a customer posts the comment, “I love this bank, it never charges me ATM fees.” What if, in fact, the bank’s policy is to reimburse only certain account holders $20 a month of ATM fees? Conceivably, a regulator might contend that the bank is in violation of banking regulations for displaying a misleading advertisement because it did not correct the statement. In addition to regulatory issues, banks would want to be care- ful that what they intended to be positive publicity does not turn negative by having disgruntled customers complaining or bashing them on their own social networking pages. The best way to avoid both of these possibilities is to be vigilant. If a bank decides to engage in social networking, it needs to be actively involved. Staff should be assigned specifically with the responsibility to check the page multiple times a day, regularly respond to comments and concerns posted on its page, and delete or correct inaccurate information. If a bank does not have the resources to devote to that kind of vigilance, social networking platform settings should be established to disallow customers from posting on the bank’s page. 2. To Communicate Social networking platforms are a cost-effective way to communicate with customers. The more methods a bank uses to communicate, the greater level of customer service they can provide which, hopefully, in turn leads to greater customer satisfaction. For example, suppose a bank used Facebook and Twitter to in- form customers that a power outage had temporarily disabled the bank’s phones? Taking the extra step to get this message out to its customers demonstrates the bank’s commitment to a high level of customer service. However, as banks increasingly communicate with customers through social networking platforms, customers may become more susceptible to phishing and smishing scams (smishing is phishing via text messaging instead of email). As customers become used to receiving communications from their bank via Facebook or text messaging, they become less suspicious of phishing or smishing messages. A bank should regularly remind customers that they will never request account infor- mation through texts or emails. Also, customers should be warned to confirm that a callback number in a message pur- porting to be from the bank is the bank’s actual number. These days, when customers are networking on the Internet from home, or on their smart phones in the line at the grocery store—indeed, virtually anywhere and everywhere—social networking platforms offer new, cost-effective, methods to grow and strengthen a bank’s business. But with these in- creased opportunities comes additional potential liability. A bank must be mindful of this as it considers if and how it will use social networking platforms. n Be Aware of Potential Liability When Using Social Media By Otto E. Elkins, Jr., Senior Attorney, ABA Insurance Services As a Senior Attorney with ABA Insurance Services, Otto E. Elkins, Jr. helped develop our new Social Networking Endorsement. Prior to joining our group when it was Pro- gressive Insurance in 2004, he graduated summa cum laude fromCleveland-Marshall College of Law in 2001 and practiced law at Ulmer & Berne, LLP.