Social Distortion: Legal and Ethical Not Necessarily Synonymous When Using Social Media for Collection Purposes

Article excerpt

In the May 2011 Business Credit Magazine, we discussed the dangers of antitrust violations in discussing debtor activities with other businesses through social media platforms. This article turns the focus onto the gray area concerning the legality of credit professionals using social media to make contact with and pressure business debtors ... and the even more gray area surrounding the ethics in doing so.

Though still an evolving platform for information, one thing appears to he clear about social media and the blogosphere: it's amazing how much people will put out there about themselves, even if they don't want to be found for reasons that include owing of debts.

"People put their life story out there," said consultant and author Michelle Dunn. "It surprises me that people think so much they put on the Internet is private. Often times, it's not private."

But the rules of the road for using it for business purposes remain far from clear both from a legal and ethical standpoint. This is the case in part because U.S. courts have yet to definitively address what should and shouldn't be allowed. This includes behavior such as posting on a Facebook wall or in the comments portion of a blog run by the "deadbeat," or even pretending to be someone else to gather information to use in an effort to collect an outstanding debt. A group of credit professionals polled by NACM typically gave the same answers when questioned on the use of social media to facilitate collections: Unethical? Yes. Illegal? Don't believe so.

"Social media is still the Wild West," said Robert Bernstein, Esq. of Bernstein Law Firm. "What happens there happens, and there aren't a lot of controls on it. Information that is out there is fair game." Plus, justice and the judicial system historically have been known to move a bit slowly. So, the gray area on the use of social media for a variety of reasons, including debt collections, remains exceedingly wide and, even if court action proceeds, the information has been floating out there in the Internet world for a likely lengthy period of time before a conclusion is reached.


Still, Lynnette Warman, Esq. of Hunton & Williams LLP told Business Credit that use of information found on social media sites, notably Facebook, has started finding its way into a variety of cases.

"They've been used in divorces, custody proceedings and so on, and the courts have so far pretty much uniformly allowed pictures to come in as evidence," said Warman. "The argument is: it is consented by participating [posting]."

The Federal Trade Commission has also taken note. Earlier this year, the FTC convened a day-long public workshop discussing the challenges posed by changes in technology, especially in the area of debt collection. The commission appeared to openly acknowledge that laws governing debt collection had fallen behind the pace at which technological tools adapted.

"Debt collectors generally should be allowed to use all communication technologies, including new and emerging technologies" FTC said in the workshop's executive summary. "The law, however, must be carefully crafted and applied to avoid collector's use of communication technologies in a manner that causes consumers to incur charges, or otherwise subjects them to unfair, deceptive or abusive acts and practices."

However, such governance--under the Fair Debt Collection Practices Act (FDCPA)--apply only to consumers and, in scant circumstances, a sole proprietorship, noted Thomas Pahl, assistant director of the FTC's division of financial practices. Still, Pahl told Business Credit that the FTC had to date brought no cases involving debt collection and social media. Pahl added that no existing laws are on the books specifically governing social media and debt collection, either in a business-to-consumer or B2B setting.

Bernstein said there still are normal defamation and harassment laws as well as antitrust regulations if discussing with other businesses in a credit group (as previously noted in Business Credit, never discuss specific terms publicly), as well as state regulations of which to be mindful. …