There’s a famous scene in The Godfather when Sonny Corleone laughs off brother Michael’s outlandish idea to single-handedly take out a rival mob boss and a corrupt cop, calling it a personal vendetta. “It’s not personal, Sonny,” the future Don replies. “It’s strictly business.”
Many debt collectors probably feel the same way about targeting debtors on social media, which they are now allowed to do. For them, it’s just business. But for consumers, it will definitely feel personal—which is just one reason why financial institutions should tread very cautiously in this arena.
In November of last year, the Consumer Financial Protection Bureau released a final rule about how businesses can use social media platforms like Facebook, Instagram and Twitter to collect from consumers. Basically, all messages to borrowers must be private and collectors must identify themselves before asking to add the borrower as a friend or contact. They also need to give consumers the ability to opt-out of future electronic messages of any kind.
Unsurprisingly, consumer advocates say using social media to collect debt is a step too far. They may have a point. For many Americans, Facebook, Instagram, Twitter and other platforms are considered safe spaces where they have some control over who sees what.
On the other hand, it can be hard to fault financial institutions and debt collection agencies for targeting debtors on social media, which nearly three-quarters of Americans use in some form, according to Pew Research. Yet targeting consumers on social media won’t come without risk.
While debt collectors can only contact consumers through private messages, there’s always a risk of embarrassing debtors in front of their friends, which could lead to bad publicity or reputational risks. Another issue is knowing whether they are contacting the right person, since consumers don’t always use their real names on social media.
Just like there are bad actors when it comes to text messaging, there will undoubtedly be bad actors on social media, too. Consumers could try blocking aggressive debt collectors on social media, but the more devious collectors will likely try to get around these protocols by creating bots that target consumers over and over again.
If the idea of social media debt collection makes the banking industry feel uneasy—and it should—at the very least, banks, lenders and their third parties should approach it with extreme caution.
From a regulatory standpoint, it may be wise to place restraints on using social media for debt collection and instead loosen rules that stymie efforts to use email and text messages to contact borrowers.
Currently, collectors must wait 35 days before contacting a consumer by email, and they cannot send out text messages unless the consumer has opted-in to this method. These barriers are not only impractical in today’s day and age, but they also prevent consumers from resolving their obligations sooner, placing them further in debt.
The bottom line is that the most productive way to collect debt is to work with the consumer, listen to the consumer’s wants and needs, and present options that increase the chances of the debt being repaid. Social media could potentially be a place where this can happen, but it’s too early to tell if that will be the case.
While debt collectors may be thinking business like Michael Corleone, how each one of us chooses to use social media is profoundly personal. Those who decide to incorporate social media into their collection strategy would be wise to keep that in mind.