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9/19/2013
1
THE ELECTRONIC CREDIT DEPARTMENTTHE ELECTRONIC CREDIT DEPARTMENT
BY RANDALL K. LINDLEY
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
CFDD NATIONAL CONFERENCESEPTEMBER 20, 2013
ALBUQUERQUE, NEW MEXICO
Good Morning!!
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
9/19/2013
2
THE
ELECTRONIC
CREDIT
DEPARTMENT
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
THE ELECTRONIC CREDIT DEPARTMENT
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
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What does that mean?
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A. A department open 24/7 where applicants complete and submit documents entirely on-line
B. A department filled with credit managers and credit analysts, each described as having an…
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“Electric Personality”
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FATHER OF ELECTRICITY
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FATHER OF ELECTRICITY
Change…
…can be daunting at times…
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Taking the paper credit application Taking the paper credit application
and turning it into an electronic credit application
can also be daunting
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…can also be daunting…
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Each of you are a modern-dayEach of you are a modern day
Benjamin Franklin!!
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We have traveled a long way from Benjamin’s kite
To the Consumer Electronics Convention…
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9/19/2013
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CUTTING EDGE ELECTRONICS
Includes Includes
• Smart Phones
• Tablets
• HDTVs
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HDTVs
And now … we move into the Electronic Future…
What MOVIE best propels us forward into the electronic future…
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9/19/2013
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TODAY, TODAY,
OUR 2½ HOUR MISSION IS…
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…TO BOLDLY GO WHERE… O O GO
NO CREDIT DEPARTMENT
HAS GONE BEFORE!!!
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9/19/2013
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WE ARE NOW ENTERING THEWE ARE NOW ENTERING THE
ERA OF THE ELECTRONIC
CREDIT DEPARTMENT
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
CREDIT MANAGER’S
Job Description for 2013:
• effectively implement electronic documents
• learn how to make them legally enforceable
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enforceable
• become an “Internet Aficionado"
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TODAY, WE WILL DISCUSS
1. The World of E-Commerce
― Legal Issues and E-Contract Formation
2. Electronic Documents – implementation of
― Credit Application
― Guaranty
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
y
3. Using the Internet and Social Media
ASK QUESTIONS!!
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9/19/2013
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POWERPOINT IS AVAILABLE
INSTRUCTION SHEET WITH DIRECTIONS TO ALINK ON LAW FIRM’S WEBSITE
OR
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“LEAVE A BUSINESS CARD”
THE WORLD OF E-COMMERCE
LEGAL ISSUES AND E-CONTRACT FORMATION
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THE AGE OF THE INTERNET
Quite literally – the world is now “connected”connected
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The business world is marching toward the “Paperless Office”
GLOBAL ECONOMY
Indeed, we have an…
E-conomy
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9/19/2013
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INTERNET USE…
…has expanded dramatically for two reasons:
• Smart phones t bl t
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• tablets
THE NUMBERS FOR 2012
• 75% of Americans are online (239 % (million people)
• 114 million people are mobile internet users
— includes smart phone and tablet users
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— this number increased 17.1% from 2011
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THE NUMBERS FOR 2013
Over 50% of American adults now • Over 50% of American adults now have a smart phone with access to the internet
• 75% of those smart phones run out f b tt b 3 00 PM
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of battery power by 3:00 PM
TO SURVIVE
Businesses must connect via the internet with customers and potential customers
• a competitive advantage
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• a competitive advantage
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WRITTEN CONTRACTS…
…are the backbone of free …are the backbone of free enterpriseTwo concerns:
• are they enforceable
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• are they secure
E-CONTRACTS
We have the same concerns
• are they enforceable
• are they secure
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y
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THREE TYPES OF CONTRACTS
• Traditional Paper ContractTraditional Paper Contract
• Hybrid Contract
• E-Contract
All three governed by the well-defined
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principles of contract law
TRADITIONAL PAPER CONTRACT
The terms are within the “four corners” of the document
The document is signed by the parties
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TRADITIONAL PAPER CONTRACT
“The Credit Application”
Face-to-face meeting – Applicant signs contract
or
Electronic Transmission – via e-mail or download
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Signature of applicant is faxed Signature of applicant is scanned and e-mailed
HYBRID CONTRACT
Paper contract references terms and Paper contract references terms and conditions posted online
Courts are beginning to enforce termsposted on web that are incorporated “by reference” into written agreements
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
9/19/2013
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THE FUTURE IS NOW!!
Today – we will learn about E-contractsToday we will learn about E contractsthat are Electronically…
• Formed• Stored• Signed
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Signed
E-CONTRACTS
Governed by the same basic legal principles as written contracts
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ONE KEY DIFFERENCE BETWEEN…
Written Contracts
And
Electronic Contracts
is
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is…
the Signature
BELLNUNNALLY.COM
SIGNATURES
• Identification of the signerIdentification of the signer
• Conveys the requisite consent to the contract’s specific terms (i.e. acceptance)
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
( p )
• It’s your…
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© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
FORMATION OF AN E-CONTRACT
Requires that the parties…q p
• identify themselves – verify they are who they say
• establish they are aware of the terms, and
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• confirm they accept and agree to the specific terms
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IDENTIFICATION
Face-to-face business transaction
― not a problem
Electronic business transaction
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― verification is problematic
E-SIGN“ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT”
• Enacted June 30, 2000
• To ensure the legality of electronic contracts and signatures
• Applies to on-line business in all 50 states and across state lines
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• Makes electronic contracts just as enforceable as if written on paper
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CONSENT OF SIGNATURE
A Writing —A Writing —
A Mark — X
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Electronic — ?????
“ANY ELECTRONIC SOUND SYMBOL
E-SIGN defines E-Signatures as:
ANY ELECTRONIC SOUND, SYMBOLOR PROCESS LOGICALLY
ASSOCIATED WITH A CONTRACT OROTHER RECORD AND EXECUTED OR
ADOPTED BY A PERSON WITH THE
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
ADOPTED BY A PERSON WITH THEINTENT TO SIGN”
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Electronic Sound?
Ding:
“You’ve got mail!”
“Chi k di !!”
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
“Chicks dig me!!”
UETA
• Uniform Electronic Transactions Act
• Effectively makes the E-SIGN rules applicable under state law
• Adopted in 47 states (not in the states
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Adopted in 47 states (not in the states of New York, Illinois or Washington)
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NEW YORK, ILLINOIS AND WASHINGTON
• Still have laws enforcing contractsStill have laws enforcing contracts
• Signatures are enforceable to show consent
• E-Sign and UETA make it easier to prove
• Validates by law the electronic process
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Validates by law the electronic process
E-CONTRACT PROBLEMS
Same challenges as ink-and-paper counterparts:
• Mistaken identity,
• Mistake as to the terms
F d
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• Forgery, and
• Unauthorized alteration of terms
BELLNUNNALLY.COM
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E-CONTRACT PROBLEMS
The Solution:
• Obtain a “credible” e-signature
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Maintain the security of the e-contract
THE E-SIGNATURE SOLUTION
A valid and enforceable E-Signature…• gathers identification information; and • uses an authentication process
― which captures an IP address in an audit trail
― created by an Information Technology
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
y gyDepartment or an Electronic Signature Service Provider
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THE E-SIGNATURE SOLUTION
Maintain Security by…y y
• establishing a secure web portal where customers can access the company’s contracts, which are
— stored on independent server; and
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p ;
— completed securely on-line
Server forBusiness
Website
Internet
Website
E-contractESSP Server
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TermsE-Signature
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Legally and technologically…
Electronic Signature and
the Digital Signature are
DIFFERENT
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
DIFFERENT
THE PROBLEM…with the simple Electronic Signature
In other words, the
• single mouse-click;
• push of one button; or
• typing of a name
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
…these are UNRECORDED actions within the computer
(i.e. NO AUDIT TRAIL)
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LORRAIN V MARKET AM INS CO (2007)
Does the Electronic Signature cut it in Court?
LORRAIN V. MARKET AM. INS. CO. (2007)
— US District Court of Maryland
Landmark ruling on the admissibility of
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
electronically stored information (“ESI”),
including electronically signed contracts
Essential elements of an effective e-contracting process:
LORRAIN V. MARKET AM. INS. CO.
“creating and securely archiving and retrieving an audit trail of the entire ESImanagement process, from the steps to verify the identity of the person signing the record all the way through to sealing electronically the
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
y g g ydocument and then securely archiving and retrieving the e-contract”
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RELIABLE ELECTRONIC RECORDS
How to build a better mousetrap?
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MIGHTY MOUSE
…the Digital Signature to the Rescue
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DIGITAL SIGNATURE/SEAL
If the contract is changed or altered the If the contract is changed or altered, the change is noted in the hidden code
ensures the integrity of the underlying contract
th t t f th d t
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
secures the content of the document against alterations
P ti ll ki thi k f it
DIGITAL SIGNATURE/SEAL
Practically speaking, think of it as …
Tupperware with a pad lock
(i.e. the Digital Seal)
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
(i.e. the Digital Seal)
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The digital record created inside the electronic d t id
DIGITAL SIGNATURE/SEAL
document provides…
A time-stamped audit log or audit trail that enables the parties to verify when a document was created, viewed, signed and archived
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
And it records the changes to the document and the time such changes were made
DIGITAL SIGNATURE/SEAL
Verifies identity / stops forgeryy / p g y
Also, the audit trail includes the Internet Protocol address of the sending computer (i.e. physical address)
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YOU KNOW WHO THE DOG IS!!
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How does the IP Address track
to the Applicant’s location?
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COMPUTER GEEK ALERT!!
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Domain Name Service
(DNS Server)
Creditor’s Server
(Business Website)
Applicant’s Server
(IP Address)
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Creditor’s Workstation(IP Address)
Applicant(IP Address)
Where is the Applicant??
New technology known as…New technology known as…
GEOLOCATION SOFTWARE
uses the IP Address and cross-references a web traffic database in order to map the
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
computer to a specific postal address
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…digital signature on its Electronic Credit Application?
How Do You Create a…
Application?
Answer: Electronic Signature Service Provider
SPECIALIZED BUSINESS that
sets up a platform or process that is t d ith b i b it
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
connected with your business website
completes the e-signature process
COMPUTER GEEK ALERT!!
THE ELECTRONIC SIGNATURESERVICE PROVIDER PROCESS…
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Provides a separate server which holds the electronic document and facilitates the electronic signature
The electronic document is converted into a The electronic document is converted into a “hash value” (numbers), then encrypted with a private key containing the debtor’s IP address (location information)
The debtor electronically signs the document
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
The creditor then verifies receipt of the signature
How does the Digital Seal
lock this data?
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Server forBusiness
Website
Internet
Website
E-contractESSP Server
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
TermsE-Signature
Business Website ESSP Server
E-Contract
H h #
Converted into
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Hash #s
Encrypted with key
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Business WebsiteESSP ServerE-Contract
Applicant
Applicant completes Credit App and signs
Then, Key verifies it is the same
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Copy of signedE-Contract is sent…Credit Manager
Enough Legal/Technical “Mumbo Jumbo”
Now Let’s Discuss Why You “Go Green” and
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You Go Green and How To Do So
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ELECTRONIC DOCUMENTS
CREDIT APPLICATION AND GUARANTY
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
PRIOR TO E-CONTRACTING
In the past…several day processp y p
Salesman meets with Customer
Customer signs
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Delivery to Credit Department (hand delivery, mail or fax)
BELLNUNNALLY.COM
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ADVANTAGES OF E-CONTRACTING
Today, the Electronic Credit Department y, phours extend from 9-5 to 24/7
Greater accessibility
Increased speed of processing
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Increased speed of processing
ADVANTAGES OF E-CONTRACTING
contracts signed fasterg
reduce paper and postage costs
more legally enforceable than paper
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
satisfied customers
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CONVERSION PROCESS:FROM PAPER TO ELECTRONIC
1. Design the ECA
2. Keep Security in mind: Safeguard Against Fraud
3. Utilize Tech Savvy Personnel
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
#1. DESIGN THE E-CREDIT APP FROM THECUSTOMER’S POINT OF VIEW
You are the “Electronic” ArchitectYou are the Electronic Architect
• Design the online navigational features to replicate the traditional practice of reviewing and signing a paper contract
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
9/19/2013
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THE SIGNING PROCESS
Traditional Electronic
Design the ECA
#1 Hand the document to the customer
#2 Review and analyze
#3 Fi d d i
Click to open the document
Review and analyze
K i t i t fi ld
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
#3 Find a pen and sign before a notary
Key into e-signature fields personal data or codes, adopt the signature, and confirm intent
DESIGN THE ECA
• Make it “user friendly” with online fill-in forms
• Emphasis on ease of use
• Obtain a valid e-signature
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
9/19/2013
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#2. SECURITY: SAFEGUARDING AGAINST FRAUD
Electronic Safeguards…
Verification of IP address
Password requirement via ESSP
Website needs to be capable of
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
collecting customer’s information securely
#3. UTILIZE TECH SAVVY PERSONNEL
In-house web department or outside third-In house web department or outside thirdparty, e.g., an “ESSP”…
VeriSign
EnTrust
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
EnTrust
DocuSign
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Let’s now walk through the
process of signing your new
Electronic Credit Application
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Electronic Credit Application
BELLNUNNALLY.COM
THE ELECTRONIC SIGNING PROCESS
DocuSign – an e-signature service provider
Microsoft
Wells Fargo Bank
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Wells Fargo Bank
BELLNUNNALLY.COM
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See Handout
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EXHIBIT - 1
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THE CUSTOMER’S 4 STEP PROCESS
1 Provide personal data1. Provide personal data
2. Review the document
3. Sign the document
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
4. Save your copy
BELLNUNNALLY.COM
STEP 1: PERSONAL DATA
A k f l/b i i f tiAsk for personal/business information
a name and e-mail address of the debtor
this information will be used to
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this information will be used to automatically populate fields
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EXHIBIT - 2 • Add data and select document type
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EXHIBIT - 3 • Review instructions for completing document
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
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STEP 2: REVIEW THE ECA
The customer arrives at the electronic credit The customer arrives at the electronic credit application Presented with general instructions Security features include an audit trail that
will monitor and record the location
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
— i.e. the IP address, and— time stamp of the click
BELLNUNNALLY.COM
EXHIBIT - 4
Read the
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
Read the fine print
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EXHIBIT - 5 • Automatic population features
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EXHIBIT - 6 • Customer asked via pop-ups and electronic sticky notes to complete fields
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
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EXHIBIT - 7• Once a customer clicks
on the “Sign Here” tab, customer is presented with a separate pop-up
• Choose a signature with the scroll bar
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
EXHIBIT - 8 • Now the debtor can “confirm” the signing
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EXHIBIT - 9
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Thank you for your desire to establish an account with ABC Corp. We appreciate the opportunity to takecare of your equipment needs as we build a long-term relationship that is mutually beneficial.
To begin the online process of opening a credit account with ABC Corp., please provide your name and e-
EXHIBIT - 11 • Detailed information about the signing procedure on website
mail address, and click on the “Business Credit Application and Personal Guaranty” link below to fill outthe information requested.
Once your application is completed, click on the “ADOPT SIGNATURE” button at the end of thedocument and the completed Business Credit Application and Personal Guaranty will be automaticallydelivered to an ABC Corp. credit account representative for processing.
It is important that you understand that by checking the boxes and entering your name and personalinformation, you are authorizing your signature to the Business Credit Application and PersonalGuaranty and you are personally guaranteeing the obligations of the company to ABC Corp.
The process of checking the boxes and entering your name and/or your company’s name into theBusiness Credit Application and Personal Guaranty will have the same weight and effect as if you hadcompleted a paper copy version of the Business Credit Application and Personal Guaranty and hadexecuted it with your ink signature. If you have any questions about the online process of opening anaccount with ABC Corp. and your contractual responsibilities under the Business Credit Application aPersonal Guaranty, please call one of the ABC Corp. local offices.
TO SECURE AND MAINTAIN YOUR PRIVACY, THE CREDIT APPLICATION AND PERSONAL
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
TO SECURE AND MAINTAIN YOUR PRIVACY, THE CREDIT APPLICATION AND PERSONALGUARANTY DOCUMENT IS TRANSMITTED VIA A SECURE CONNECTION. IF YOU WOULD LIKEA COPY FOR YOUR RECORDS, PLEASE PRINT OR SAVE YOUR COMPLETED FORM PRIOR TOSUBMISSION.
Once your account is established, you will be entitled to do business with all ABC Corp. locations.
Once again, thank you for choosing ABC Corp. We are pleased to be a partner in your success andgenuinely appreciate your business.
Business Credit Application and Personal Guaranty
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With the E-Credit App signed, With the E Credit App signed,
…let’s focus on the E-Guaranty
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
EXHIBIT - 12 • The E-Guaranty
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3 REASONS THE ELECTRONIC GUARANTY IS SUPERIOR
Solves all three guaranty mishaps:
reduces “Misidentification of Guarantor” by forcing the collection of personal data
increases clarity of “Personal Liability” – no more corporate title issues
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
clearly links the guarantor to debt by auto-populating the fields
What is the basic principle behind every Guaranty?
Here is a scene from the movie “Jerry Maguire” that
illustrates the very essence of
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
illustrates the very essence of a Guaranty
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I guarantee…g
“to pay the indebtedness”…
SHOW ME THE MONEY!!
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SHOW ME THE MONEY!!
And now let’s take a
10 minute break!
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PITFALLS OF SOCIAL MEDIA / FDCPA
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THE HISTORY OF COMMUNICATION
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3500 BC
Phoenicians develop an alphabet
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PHOENICIANS
They also had Goats, which
means they had Milk…
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1270 BC
In the land of Syria…
the first encyclopedia was written
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776 BC
Messages were first sent via carrier pigeons
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The first map app
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200 BC
Messages were sent via human couriers
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450 TO 1,000 AD
The Dark Ages
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1450
Newspapers appear in EuropeNewspapers appear in Europe
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1835
Samuel Morse invents Morse Code
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1876
Alexander Graham Bell patents the electric
telephone
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p
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1904
The First Facebook
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1910
Thomas Edison demonstrated the first talking motion picture
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1930
The “Golden Age” of Radio
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1969
Captain Kirk used the first Captain Kirk used the first
communicator
to speak those immortal words
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“Scotty, beam me up!!”
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1979
First cellular phone
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1979
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1981
IBM sells first PC
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1994
Al Gore creates internet
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2005
ZUCKERBERG LAUNCHES
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THE INFORMATION AGE IS UPON US
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Today, the InternetToday, the Internetplays a role in
• Business World
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• Personal Life
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The Real World -- Outernet
The Virtual World -- Internet
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Let’s convert the InternetLet s convert the Internet
… into the Outernet
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© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
Th T l th i f b t
THE INTERNET AND THE CREDIT MANAGER
The Tool – gather info about debtors
The Trap – do not cross legal privacy lines or i l t FDCPA
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violate FDCPA
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Social Media Defined
TOPICS COVERED
Social Media Defined
Gathering Information from the Internet / Social Media
Social Media as Evidence
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Social Media as Evidence
S i l M di Th Pitf ll
TOPICS COVERED
Social Media – The Pitfall
— FDCPA
— Privacy Law Concerns
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SOCIAL MEDIA
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
WHAT IS SOCIAL MEDIA
"Social Media" refers to web-based platform
• Accessed through the internet with a computer or mobile device
• Has an interactive social networking element
includes user generated content
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
― includes user-generated content
• e.g., Facebook, LinkedIn and Twitter
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• 1 billion active users worldwide
• 483 million users, on average, access it daily
• 425 million users access Facebook on a mobile device at least monthly
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
at least monthly
• Public Forum – constitutes 83% of all Social Networking
BELLNUNNALLY.COM
“Connect with Friends and the World Around You”
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Features:Features:• Home Page – shows friends’ activity (“News Feed”)
• Profile Page – shows individual user’s activity
• Search for Friends, Organizations, Businesses
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Message Friends
• Join Groups
BUSINESSES USE
…for many reasons, but mainly…
• digital word of mouth
• allow customers to offer suggestions on how to make the product better –interactive process
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• strengthen the brand (i.e. advertising)
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Starbucks
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Coca-Cola
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Oreo
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Facebook profile pictures…
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© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
“Find out what’s happening, right now, with the people and organizations you care about”
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• 500 million users
• 350 billion Tweets every day
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
• Is a Public Forum
Features:
— Send text-based messages of up to 140 characters (“tweets”)
— Subscribe to other users’ tweets
— Follow “trending topics” (e.g., #NACM, #chihuahuas)
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#chihuahuas)
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• 225 million users
“The World’s Largest Professional Network”
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Features:— Contacts to connect with – a network of first,
second, and third degree connections— Can upload resume and highlight experience/skills— Companies can list job opportunities and search
for candidates
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COMPARISON OF POPULAR SOCIAL MEDIA SITES
All sites:All sites:
• Must create username and password to access (i.e. “membership”)
• Must provide first and last name at sign-up
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Free to access
THINGS WE DO:
100%Consume Food92%72%
EmploymentSocial Media
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
In a Word – WOW!
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SOCIAL NETWORKING
2005 8% of Americans use Social Media
2013 72% of Americans use Social Media
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
And now…
Social Media Revolution
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© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
GATHERING INFORMATION FROMTHE INTERNET / SOCIAL MEDIA
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INTERNET USE – THE TOOL
• Immediate access to Credit Applicant i f tiinformation
• You can do something that Credit Managers 10 years ago – could not…
• You can “Google” the Applicant!!
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
• You can Google the Applicant!!
“GOOGLE” THE APPLICANT
• Allows you to:• Allows you to:
— Learn about existing business
— Learn about prior businesses
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
• Helps to make informed decisions
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INTERNET USE – THE TOOL
• Access to public records has expanded ti llexponentially
• Courts across the country allow for the review of docket sheets and documents
— State Courts; and
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
— Federal Courts; including
— Bankruptcy Courts
TOOLS TO EVALUATE CREDIT WORTHINESS
• Credit ReportsR f f Oth C dit• References from Other Creditors
• Financial Statements— Balance Sheets and Cash Flow Statements— Debt Structure
Public Records
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Public Records• Recent Development: Social Media
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GATHERING INFORMATION FROMSOCIAL MEDIA
• Research of publicly posted information • Research of publicly posted information
• You can view "public communications” from the applicant/debtor
• Gaining access to “semi private”
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Gaining access to semi-private communications
RESEARCH OF PUBLICLY POSTED INFORMATION
• Debtor has put that information on a billb d l id th i f ti billboard alongside the information superhighway
• Includes information posted publicly and without privacy settings
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Does not require you to engage the debtor to obtain access
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FIRST DEGREE DIGITAL FOOTPRINTS
Debtor actions / communications
• wall posts
• tweets
• blogs
• comments
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• comments
• photos
SECOND DEGREE DIGITAL FOOTPRINTS
Third-parties that refer to the debtor inp
• tagged photos
• comments
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• wall posts
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HOW DOES VALUABLE INFORMATION MAKE ITSWAY TO CREDIT MANAGERS?
Customer/ DebtorCustomer/ Debtor
Salesperson
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Credit Manager
HOW DOES VALUABLE INFORMATION MAKE ITSWAY TO CREDIT MANAGERS?
F th C dit M ’ C t From the Credit Manager’s Computer— i. e. Online Research
From the Sales Team
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
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Consumer/Debtor
Credit References
Public RecordsCredit Manager
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Credit Reports &
Financial Statements
Salesperson
Consumer/Debtor
Credit References
Public RecordsCredit Manager
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Credit Reports &
Financial Statements
Salesperson
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Today We Face the Question:Today, We Face the Question:
Is Social Media a Tool or a Trap?
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
SOCIAL MEDIA AS EVIDENCE
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SOCIAL MEDIA AS EVIDENCE
Start with the premise:
What you post or tweet can and will be used against you in a court of law
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
SOCIAL MEDIA AS EVIDENCE
Cuts both waysCuts both ways…
• Against Debtor – information about assets and/or the location of the debtor
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Against Creditor – deceptive or unlawful conduct
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SOCIAL MEDIA AS EVIDENCE
Information that is publically posted for the world to see or privately posted for the user's closest 130 "friends” canbecome “Evidence” in a Court of law
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
C b th ti t d d
SOCIAL MEDIA AS EVIDENCE
Can be authenticated and admitted into evidence under the Rules of Evidence
• Let's now look at several cases
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• Defendant sought evidence to undermine a
ROMANO V. STEELCASE(N.Y.S. – 2010)
mental anguish claim
• Defendant wanted to introduce social media evidence to show the defendant was not in anguish
Plaintiff claimed this information as pri ate
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Plaintiff claimed this information was private
• Court rejected plaintiff's privacy argument
ROMANO V. STEELCASE(N.Y.S. – 2010)
The Court reasoned that:
• according to Facebook Policy – "it helps you share information with your friends around you"
• since Facebook is about sharing
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• since Facebook is about sharing information with others, the plaintiff had no expectation of privacy
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TWO CASES DISCUSSING THE “VALUE” OFSOCIAL MEDIA EVIDENCE
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
BAROCIO V. BANK OF AMERICA(N.D. CAL. – 2012)
Court determined evidence gleaned from a social networking site regarding the debtor's whereabouts was rank speculation
• low evidentiary value
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
low evidentiary value
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PARTEE V. UNITED RECOVERY GROUP(C.D. CAL. – 2010)
Court recognized that the evidence gathered from MySpace supported the creditor’s contention concerning the debtor's whereabouts
• high evidentiary value
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
g e de a y a ue
THE CREDITOR ANDSOCIAL MEDIA EVIDENCE
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
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FENCE MANUFACTURER V. SUBCONTRACTOR
• Subcontractor purchases products
• Subcontractor signs guaranty
• Subcontractor fails to pay
• Fence Manufacturer sues and obtains
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Fence Manufacturer sues and obtains Judgement — $145K
FENCE MANUFACTURER V. SUBCONTRACTOR
fi• Subcontractor files Bankruptcy— Lists assets on schedules— Did Not include motorcycle
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
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FENCE MANUFACTURER V. SUBCONTRACTOR
• Subcontractor posts pictures on F b k f b d H lFacebook of brand new Harley
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
FENCE MANUFACTURER V. SUBCONTRACTOR
• Fence Manufacturer files an Objection to the jDebtor’s Bankruptcy Discharge
— based in part on Facebook pictures of the debtor on new motorcycle
• Harley not listed on his bankruptcy schedules
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
y p y
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AUTHENTICATING PRINTOUTS OF ASOCIAL MEDIA WEBSITE
Three issues:Three issues:
1. What was actually on the website?
2. Does the exhibit or testimony accurately reflect it?
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
3. If so, is it attributable to the debtor's site?
AUTHENTICATING PRINTOUTS OF ASOCIAL MEDIA WEBSITE
To prove up the website, requires testimony from
"a witness with personal knowledge of the website at issue stating that the printout accurately reflects the content of the website and the image of the page on the computer at which the printout was made"
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Toytrackerz LLC v. Koehler (D.Kan. – 2009)
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KSOLO, INC. V. CATONAL (2008)
Court Admitted screenshots from a website
• proven up by a declaration of the person who created the screenshots
• attesting that the "screenshots are an accurate representation” of the website
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
accurate representation of the website
SOCIAL MEDIA
THE PITFALL
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THE PITFALL
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
NOT QUITE AS EXCITING
As Indiana Jones…but, here is a picture of you…
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THE PITFALL
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
The pitfall to the Credit Manager is…
Wait for it….
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Drum roll please…
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…The Law!!
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
The Pitfall is the LAW…
— FDCPA
— Privacy Laws
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
y
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OVERVIEW OF FDCPA
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
FAIR DEBT COLLECTION PRACTICES ACT
• A Federal Law – signed in 1977
• Purpose of Law – to protect consumers from abusive, deceptive, harassing, and unfair conduct
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• FDCPA
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STATE DEBT COLLECTION LAWS
• 42 States have laws regulating unfair debt collection practices
• FDCPA will preempt state law if th t t l i i i t t
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
the state law is inconsistent
PERSONS SUBJECT TO THE FDCPA
– Debt Collectors– Attorneys– Assignees
Creditors using another name
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
– Creditors using another name
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COMPLIANCE WITH FDCPA
FDCPA strictly regulates communicationsbetween debt collectors and consumers
“made in connection with the collection of a debt”
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
COMMUNICATIONS WITH DEBTOR
“Consumer” – includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Debtor = Consumer
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COMMUNICATIONS WITH DEBTOR
Collector may not contact the Debtor:
• At any unusual time or place known to be inconvenient to the
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
consumer;
FTC POLICY STATEMENTLOCATION INFORMATION
The FDCPA restricts communication with third partiespas follows:
• Collector shall:
– Identify himself, state that he is confirming or correcting location information
– Not state that such debtor owes any debt
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
– Not communicate with any such person more than once, unless requested to do so by such person or their earlier response was erroneous
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FDCPA CASES DISCUSSINGSOCIAL MEDIA INFORMATION
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
BEACHAM V. MARKONE FINANCIAL(FLA. CIR. CT. – 2010)
A d bt ll t tili d F b k t A debt collector utilized Facebook to locate and communicate with the debtor
The debtor sought injunctive relief to stop this activity
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
this activity
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BEACHAM V. MARKONE FINANCIAL(FLA. CIR. CT. – 2010)
Trial Court temporarily enjoined the collector from the following:
• Writing messages on debtor's wall regarding debt
• Messaging debtor
• Messaging debtor's family and Facebook friends
U i f l h "J ff H t " d
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Using false names such as "Jeff Happenstance" and "Loxley A. Duffus" to message the debtor on Facebook
By the way, here is Loxley A. Duffus…
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SOCIAL MEDIA PARAMETERS(RESEARCH AND COMMUNICATIONS)
COMMON SENSE:
IF it would be prohibited in other contexts
THEN it will be prohibited in social media
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
THEN it will be prohibited in social media
COMMUNICATION WITH DEBTORS ANDCOMMUNICATION WITH DEBTORS ANDTHIRD PARTIES THROUGH FACEBOOK
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FACEBOOK / FDCPA
• All communications are public, even if p ,marked private, others have access (like a post card)
• THUS, THIRD PARTIES SEE THE CONTENT OF THE COMMUNICATION
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
OF THE COMMUNICATION
FACEBOOK / FDCPA
• Communications through Facebook may be seen as a communication in an "unusual place" in violation of the FDCPA
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
place in violation of the FDCPA
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FACEBOOK / FDCPA
• "Friend" requests from a creditor to a debtormay be seen as deceptive
• The purpose of the request is not to "friend" the debtor, but rather to obtain information f b i
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
for a business purpose
FACEBOOK / FDCPA
"Friend" requests made after hours and received by the debtor on a mobile device that sounds an alarm could be considered harassing
“Friend” requests do not include the required
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Friend requests do not include the required disclosure of a debt collector’s identity
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FACEBOOK / FDCPA
“Friend” requests from a fake account may be Friend requests from a fake account may be misrepresentation under the FDCPA“Friend” requests from a real account may provide third parties with improper notice of a debt under the FDCPA
BOTTOM LINE
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
BOTTOM LINE:DO NOT ASK A DEBTOR TO BE YOUR FRIEND ON FACEBOOK
FACEBOOK / FDCPA
"Friend" requests from the debtor to the creditor
• Should be ignored (not declined)
• The debtor may be trying to setup the
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• The debtor may be trying to setup the creditor for an FDCPA claim
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FROM A CREDIT MANAGER’S POINT OF VIEW
Social Media has a business purpose Social Media has a business purpose
used to promote a business’ brand
gather information on credit application
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
gather information on debtors
FROM A CREDIT MANAGER’S POINT OF VIEW
IF you use Social Media to gather information
THEN be careful not to participate in any deceptive conduct to obtain it
(like asking to be a “Friend”)
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
(or, communicating without full disclosure of creditor status)
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All C i ti
FROM A CREDIT MANAGER’S POINT OF VIEW
All Communications…
— be truthful or constitutes a violation of FDCPA
— Disclosure of creditor status might be
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
violation of FDCPA (e.g. LinkedIn name has Profession listed in title)
FROM A CREDIT MANAGER’S POINT OF VIEW
IF you use Social Media to collect a debt
THEN beware of the FDCPA
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
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YES, WE ARE CUTTING EDGE
We beat CNN to the punch
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
CNN MONEY ARTICLE, AUGUST 27, 2013“FACEBOOK FRIENDS COULD CHANGE YOUR CREDIT SCORE”
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
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CNN MONEY ARTICLE, AUGUST 27, 2013“FACEBOOK FRIENDS COULD CHANGE YOUR CREDIT SCORE”
CNN reports Social Media is a creditworthiness tool:
Lenders are reviewing social data to determine lending risk
Lenders review loan applicant’s Facebookpage
— the applicant’s friends are debtors; and
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
the applicant s friends are debtors; and — the frequency the applicant interacts with
that person
CNN ARTICLECNN ARTICLE
“BIRDS OF A FEATHER FLOCK TOGETHER”THE “DEADBEAT” FLOCK!!
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
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CNN ARTICLE
Lending companies that use social data in its credit score are:
Lenndo
Kabbage
Information gathered
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Are you friends with debtors? Frequency of interaction with
debtors
CNN MONEY ARTICLE
Competing arguments on whether social media data is helpful: data is helpful:
• People who pay attention to social media are more likely to stay on top of their business
• Since consumers control who their “Friends”
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
are – the network is artificial
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CNN MONEY ARTICLE, AUGUST 27, 2013“FACEBOOK FRIENDS COULD CHANGE YOUR CREDIT SCORE”
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
PRIVACY LAW CONSIDERATIONS
Two main concerns:
1. Whether or not to access a debtor’s information contained on social media sites
2. Whether or not to use such information
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
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PRIVACY LAW CONSIDERATIONS
ELECTRONIC COMMUNICATIONS PRIVACY ACT
• Federal Law• Only Applies to Governmental Entities
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
PRIVACY LAW CONSIDERATIONS
State Law – (Statutory and Common Law)
• Invasion of Privacy – must be highly offensive to reasonable person
• Defamation – publication of false information
Lib l itt d f ti
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Libel – written defamation
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RODRIGUEZ V. WIEDNER UNIV.,E.D.P.A.,June 2013
University accessed student’s Facebook account and suspended him for displaying images of weapons on his page
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
University filed a motion to dismiss suit under
RODRIGUEZ V. WIEDNER UNIV.,E.D.P.A.,June 2013
the Electronic Communications Privacy Act
Competing Arguments
• University asserts page was public
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• Student asserts page was private
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Court Held:
RODRIGUEZ V. WIEDNER UNIV.,E.D.P.A.,June 2013
Court Held:A party may not illegally access private portions of a person’s Facebook page
• i.e. some parts of Facebook maybe private
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
be private
EHLING V. MONMOUTH-OCEAN HOSP.
Facts
N.J., 2012
• Ehling was a Facebook friend of another hospital employee
• Hospital coerced that employee to grant the Hospital access to his Facebook account
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
account
• Hospital reviewed private information from the account
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Ehling’s Claim
EHLING V. MONMOUTH-OCEAN HOSP.N.J., 2012
g“Invasion of privacy”– she had a reasonable expectation of privacy in the information she posted on Facebook because she only allowed
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
individual people to see her comment
Invasion of Privacy Claim (New Jersy)
EHLING V. MONMOUTH-OCEAN HOSP.N.J., 2012
plaintiff must prove that • her solitude, seclusion, or private affairs were
intentionally infringed upon, and
• this infringement would highly offend a
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
reasonable person
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Court Held:
EHLING V. MONMOUTH-OCEAN HOSP.N.J., 2012
Court Held:
Ehling had taken active steps to protect her Facebook page from public viewing, she had a valid
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
claim for invasion of privacy
YATH V. FAIRVIEW CLINICS,
• Clinic employee posted Yath’s
Minnesota, 2012
• Clinic employee posted Yath smedical information on MySpace
• That was in complete breach of the doctor/patient privilege
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
• The medical information was removed after less than ten days
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YATH V. FAIRVIEW CLINICS,Minnesota, 2012
Appellate Court held: • Even temporary posting of
patient’s medical file on a public website like MySpace satisfied the “publicity” element of invasion of
i
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
privacy
CHANEY V. FAYETTE COUNTY PUBLIC SCHOOL DIST.,
A picture of a high school student wearing a
U. S. DISTRICT COURT, 2013
p g gbikini was posted on Facebook site
The picture and the student’s full name were used in a PowerPoint presentation by the school district to demonstrate the dangers of using social media
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
using social media
The student claimed she was branded as “promiscuous”
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In ConclusionReasons for Credit Managersto Review Social Media Sites
• To Assess Creditworthiness
• To Collect Debts (locate debtor, locate assets)
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
Reasons for Credit ManagersNOT to Review Social Media Sites
• FDCPA
• Privacy Laws
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
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MY SUGGESTION –IN TODAY’S PARLANCE!!
Just Don’t Do IT
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
RULES TO LIVE BY:
Regardless of my recommendation – In your capacity as a credit manager,
at some point you probably will be asked to review a social media site
If so, here are:
4 Rules to Live by
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
4 Rules to Live by
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1) Use social media like a phone book: to locate someone or gather information that someone
RULES TO LIVE BY:
someone or gather information that someone has made public
2) Never “friend” a debtor or his friends on Facebook
3) Question the reliability of the information4) Understand the limits imposed by the FDCPA
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
4) Understand the limits imposed by the FDCPAand know your state’s privacy laws
If you need assistance … Enforcing your Contracts,
electronic or otherwiseelectronic or otherwise…
I leave you with one FINAL POINT…
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.
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HIRE A FIRE-BREATHING ATTORNEY
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
…that covers the entire State of Texas
© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM
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