Lenders, Brokers, and Social Media

I recently saw a profile of a mortgage broker on a social media site and the broker's NMLS Unique Identifier number was not present on the profile. The profile had a link to the broker's website and the number was buried so deeply on the website that I was asking myself if this broker was in fact in compliance with applicable rules and regulations.

Every lender, broker, loan originator, and all other persons licensed by, or registered with, NMLS under the SAFE Act are assigned a unique identifier number.  According to the NMLS website, the Model State Law proposed by CSBS / AARMR, which has been adopted by a large number of states, suggests the use of the following language, "The unique identifier of any person originating a residential mortgage loan shall be clearly shown on all residential mortgage loan application forms, solicitations or advertisements, including business cards or websites, and any other documents as established by rule, regulation, or order of the Commissioner."  As you can see the language states that the number must be clearly shown on or in all the listed medium forms.  The purpose behind this disclosure as well as other required disclosures discussed below, is summed up by the phrase "consumer protection".

In addition to including the NMLS number on just about everything, the Federal Financial Institutions Examination Committee ("FFIEC") has issued guidelines regarding the use of social media by "financial institutions", as defined by FFIEC in its rather broad fashion.  The FFIEC consists of representatives from the OCC, FRB, FDIC, NCUA, CFPB, and the State Liaison Committee.  FFIEC has a very broad reach in addition to broad definitions.  The final guidelines (the "Guidelines") that were issued by FFIEC in December 2013, can be found by clicking here.

The Guidelines in and of themselves do not put forth any new rules and regulations, but rather suggest that every financial institution (depository as well as non depository) develop policies and rules regarding the use of social media for developing and obtaining customers and interacting with those customers.  The Guidelines also contain warnings about privacy laws, brand protection and reputation protection.  They go so far as to suggest that even if a particular financial institution does not use social media to attract business that they have policies in place for damage control in the event dissatisfied clients take to social media sites in a defamation campaign.

The Guidelines do remind financial institutions that regulations for advertising under TILA, RESPA, ECOA, and other federal laws apply to the use of social media, as well as such laws as Gramm-Leach-Bliley Act, CAN-SPAM Act, and the FTC Act.  And, the use of online payment systems create another area of regulation if clients make payment of various fees and charges using online systems. Finally, financial institutions are responsible for the acts of their employees on social media sites and the obvious, their marketing agencies.

Bottom line for any financial institution, including MLOs, is that if you are going to use social media to develop business, there are a plethora of applicable rules and regulations that need to be followed.  And be sure to put the NMLS unique identifier number on everything.