Recent press attention to a case in which a debt collector sent a debtor a message through Facebook raises a question: how can debt collectors use social media?
The answer: they'd better not.
The rules around communicating with debtors remain unclear because third-party agencies must follow the Fair Debt Collection Practices Act, written in the 1970s (pre-cellphones, pre-social media), and the Telephone Consumer Protection Act, written in the 1990s.
"The laws have not kept up with technology and culture," says Mark Schiffman, a spokesman for ACA International, a trade association for third-party debt collection businesses.
Banks and other first parties have more wiggle room because they do not have to follow the FDCPA. (Some states, however, have stricter rules that apply to the original creditors.) Regardless, deploying deceptive practices to collect debt seems like a big no-no. And first parties can be tainted by the poor practices of their outsourced collection agencies.
Regulators are certainly following the evolving space. The Federal Financial Institutions Examination Council recently published social media guidance for financial services players. Though no new rules were spelled out, reminders of existing rules, including the FDCPA, were included. Meanwhile, federal regulators, including the Consumer Financial Protection Bureau and the Federal Trade Commission, continue to monitor for shady practices. (The bureau shares jurisdiction for the debt collection act with the FTC.)
"The FTC is keeping a close eye on the use of social media and emerging technology in the collection of debt," says Christopher Koegel, staff attorney at the commission. "We've been monitoring the area for several years."
Though some of the laws are older, the FTC says the rules are written in such a way as to govern debt practices regardless of the medium. The FTC stressed that collectors must make disclosures when they're collecting on a debt, for example. "When you put out something as simple as a friend request, it must be clear. You can't hide your identity," Koegel says. "Second, you can't shame someone into paying debt."
Take Facebook. If an agent maintains debt collector profile and only adds debtors as his friends, his friends' list could serve as a modern day blacklist, he points out. "We haven't seen it yet," Koegel says.
Trade groups share his philosophy. ACA International is clear with its guidance on sites like Facebook and Twitter: collectors are not to communicate through social media channels.
"It's so fraught with lack of clarity," Schiffman says. "It's really user beware. At least in terms of talking with consumers. … it's really fraught with risk for collectors."
He points to a case in Florida two years ago in which a debt collection agency contacted a debtor via Facebook. The judge ruled that the agency could not use social media sites to communicate with people who owed money.
Is there a current episode regulators are looking into? It's hard to say. The FTC said it could not comment.
However, Koegel says the FTC meets regularly with the CFPB, which is responsible for creating rules, to discuss issues with debt collection. "We meet every month or two," Koegel says. "We coordinate our efforts."
Those efforts are much broader than just debt collection technologies, he says.
Though regulators and trade groups collectively agree that communicating with debtors through social sites under false pretenses isn't OK, there is another way collectors can use the sites: to track down clues about their debtors.
"People put so much public information out there, that's fair game," Schiffman says.
Ron Brown, chief executive of CSI Group, an asset investigation and recovery firm based in Oklahoma City, and an ACA International instructor, says social media is a great tool. But he emphasizes that skip tracers must "read only."
"We will never communicate with you," Brown says.
Rather, the skip tracers, or as Brown calls them "cybertrackers," will look out for updates like, "I just bought a car" or "I just started a new job" as pertinent public information.
Which social site is the most ripe for valuable clues depends on what the debtor likes to use. Still, Brown finds Twitter and alumni sites to be good venues to uncover hints.
"Each person has his own trait," Brown says. "Look for his habits. … It's like hunting an animal in the woods. People will take the same trail every day."
However, the hunter can become the hunted.