Marketing and advertising compliance have always been low-hanging fruit for regulators. After all, they get the same fliers in their mail at home and see the same television and newspaper ads that regular people do.
Technology has unlocked a host of new options for how mortgage lenders solicit and generate customer leads. But with these new digital marketing channels comes a host of new compliance concerns.
Long-standing regulations that dictate how lenders interact with borrowers have taken on new meaning in the age of robust customer-relationship management platforms, digital marketing and social media. And even though the legal framework hasn't kept up with the times, regulators haven't been shy about dropping the hammer on lenders for rules violations.
Since the Consumer Financial Protection Bureau has assumed responsibility for many of the rules governing mortgage industry advertising, including the Truth-in-Lending Act, the Real Estate Settlement Procedures Act and the Unfair, Deceptive or Abusive Acts and Practices Act, numerous lenders have been sanctioned for rules violations. Plus, the plaintiff's bar has not been afraid to get in on the action as well.
Many in the industry believe it won't be long before a lender will end up in regulatory hot water over its social media activity.
It goes without saying that lenders need an online presence. It's table stakes in a business that is increasingly moving online. Facebook pages, tweets, Yelp reviews and other activities provide consumers with a place they "can feel comfortable with my experience, expertise and legitimacy; that I'm not some fly-by-night character off the Internet," said George Duarte, a loan officer and the owner of Horizon Financial Associates in Fremont, Calif.
"I emphasize that I'm a bricks-and-mortar, flesh-and-blood, local person, that I have an actual office, a presence in my physical area for 30 years now. It is a matter of reputational checking," he added.
So how best can lenders manage the balancing act of trying to stand out in a very crowded field without falling afoul of the multitude of rules and standards?
At Quicken Loans, social media "is a major component of everything we do as a company when it comes to marketing and public relations," said Matt Cardwell, the Detroit-based lender's director of social media.
"At any given time during the day, there is always a person who is there, looking and monitoring for client feedback and is there to help clients if they need help or if they want to give us a compliment or just engage with us," Cardwell said. "That's pretty unusual. Most of the big bank competitors, their social media hours have traditionally mimicked their branch hours, their corporate hours."
Quicken's social media team operates daily, with a full presence between 8 a.m. and midnight Eastern time, with a reduced staff the rest of the time.
"We don't get into trying to solve problems for people on social media," Cardwell said. Rather, the team performs more of a triage function and looks to match the poster with the proper person in the organization. Although many have general knowledge from working in the industry, none are mortgage bankers.
Quicken ran a commercial during Super Bowl 50, for its recently introduced Rocket Mortgage product.
"When it comes to #mortgages, take your time, ask questions and #knowbeforeyouowe," the CFPB tweeted shortly after the commercial aired.
As for the CFPB tweet, Cardwell said it really wasn't anything the company gave much thought to. If anything, Quicken agreed with the agency.
"We agree that people should take their time when they're evaluating mortgage options or any kind of loan for that matter, not just mortgages. Anytime they're getting into a financial transaction, it's a good thing to understand what your options are, to take your time at it," he said.
"I'm not privy to why the CFPB would tweet on a Sunday night, except it was pretty common knowledge that there were going to be a lot of financial services companies [advertising during] the Super Bowl," and Cardwell interpreted the agency's activities as a reaction to that.
When it comes to regulators' activities on social media, "If the CFPB or some other government agency tweets at us, we're going to look at it the same way we look at any organization or person who wants to interact with us. There are some consumer advocate groups that tweet very good advice to people all day long. Sometimes we retweet those things," he said.
But without the proper guidelines in place, some lenders could be inviting regulatory trouble.
"Given the explosion of social media, it's been a real challenge for companies to bring themselves up to speed and figure out how to control these things," said Robert Lotstein, an attorney who specializes in mortgage compliance issues.
Mortgage companies must embrace the fact that their loan officers are active on social media. But because employees are supposed to be under the lender's control and direction, the company will be held accountable if there is a violation of regulations, he continued.
What's more, it's often difficult for the industry to meet these obligations, when regulators have not articulated what they want in a compliance program and instead have used enforcement actions as a policymaker.
"Technology will charge ahead and it is not realistic for regulation to keep up. So the more flexible regulatory standards like UDAAP will continue to be applied. That will create, inherently, uncertainty," said Ben Olson, a former CFPB attorney who now works at the Washington, D.C., law firm BuckleySandler. "The industry always just wants to know what the rules are so they can be sure they are following them. And I don't foresee the CFPB or another regulator giving up their flexibility to go after practices that maybe they don't contemplate in advance but in hindsight they believe are deceptive or unfair."
The CFPB is not afraid to use its enforcement powers, "particularly now that they are stepping up their enforcement activities. It makes sense that they would now, as more and more traffic transitions to these channels," added Steve Garrity, co-founder and chief operating officer at Hearsay Social, which provides archiving and other support services.
Examiners "look at a mortgage lender's social media communications, just as they may look at any other media in which the lender makes representations to consumers. Such a review may vary based on the particular circumstances of a CFPB exam. The bureau's broader expectation is that lenders maintain a robust compliance management system to help prevent violations of consumer financial laws and the resulting harm to consumers," said agency spokesman Sam Gilford.
When it comes to social media, the Federal Financial Institutions Examination Council's December 2013 guidance applies to companies the CFPB regulates like independent mortgage bankers and mortgage brokers, he pointed out.
And examiners are already looking in these areas. "On a pretty regular basis, customers of ours are being audited," said Michael Riedijk, CEO of online archive services provider PageFreezer, who added it gets requests several times a month to review cleints' online records.
"The other thing we're seeing are instances where there is ongoing litigation and the customer reaches out to us to produce all the social media records that contain a certain keyword, for instance," he said.
