Good Morning!! - Bell Nunnally & Martin LLP · 9/19/2013 13 INTERNET USE… …has expanded dramatically for two reasons: • Smart phones tblt © 2013 Bell Nunnally & Martin LLP

9/19/2013

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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!!


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THE

ELECTRONIC

CREDIT

DEPARTMENT


THE ELECTRONIC CREDIT DEPARTMENT


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What does that mean?


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…


“Electric Personality”

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FATHER OF ELECTRICITY


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FATHER OF ELECTRICITY

Change…

…can be daunting at times…


Taking the paper credit application Taking the paper credit application

and turning it into an electronic credit application

can also be daunting


…can also be daunting…

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Each of you are a modern-dayEach of you are a modern day

Benjamin Franklin!!


We have traveled a long way from Benjamin’s kite

To the Consumer Electronics Convention…


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CUTTING EDGE ELECTRONICS

Includes Includes

• Smart Phones

• Tablets

• HDTVs


HDTVs

And now … we move into the Electronic Future…

What MOVIE best propels us forward into the electronic future…


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TODAY, TODAY,

OUR 2½ HOUR MISSION IS…


…TO BOLDLY GO WHERE… O O GO

NO CREDIT DEPARTMENT

HAS GONE BEFORE!!!


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WE ARE NOW ENTERING THEWE ARE NOW ENTERING THE

ERA OF THE ELECTRONIC

CREDIT DEPARTMENT


CREDIT MANAGER’S

Job Description for 2013:

• effectively implement electronic documents

• learn how to make them legally enforceable


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


y

3. Using the Internet and Social Media

ASK QUESTIONS!!


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POWERPOINT IS AVAILABLE

INSTRUCTION SHEET WITH DIRECTIONS TO ALINK ON LAW FIRM’S WEBSITE

OR


“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


The business world is marching toward the “Paperless Office”

GLOBAL ECONOMY

Indeed, we have an…

E-conomy


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INTERNET USE…

…has expanded dramatically for two reasons:

• Smart phones t bl t


• 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


— 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


of battery power by 3:00 PM

TO SURVIVE

Businesses must connect via the internet with customers and potential customers

• a competitive advantage


• a competitive advantage

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WRITTEN CONTRACTS…

…are the backbone of free …are the backbone of free enterpriseTwo concerns:

• are they enforceable


• are they secure

E-CONTRACTS

We have the same concerns

• are they enforceable

• are they secure


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


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


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


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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


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


is…

the Signature

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SIGNATURES

• Identification of the signerIdentification of the signer

• Conveys the requisite consent to the contract’s specific terms (i.e. acceptance)


( p )

• It’s your…

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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


• 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


― 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


• 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


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


ADOPTED BY A PERSON WITH THEINTENT TO SIGN”

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Electronic Sound?

Ding:

“You’ve got mail!”

“Chi k di !!”


“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


• 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


• 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


• Forgery, and

• Unauthorized alteration of terms

BELLNUNNALLY.COM

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E-CONTRACT PROBLEMS

The Solution:

• Obtain a “credible” e-signature


• 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


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


p ;

— completed securely on-line

Server forBusiness

Website

Internet

Website

E-contractESSP Server

© 2013 Bell Nunnally & Martin LLP. All Rights Reserved.BELLNUNNALLY.COM

TermsE-Signature

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Legally and technologically…

Electronic Signature and

the Digital Signature are

DIFFERENT


DIFFERENT

THE PROBLEM…with the simple Electronic Signature

In other words, the

• single mouse-click;

• push of one button; or

• typing of a name


…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


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


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?


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


secures the content of the document against alterations

P ti ll ki thi k f it


Practically speaking, think of it as …

Tupperware with a pad lock

(i.e. the Digital Seal)


(i.e. the Digital Seal)

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The digital record created inside the electronic d t id


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


And it records the changes to the document and the time such changes were made


Verifies identity / stops forgeryy / p g y

Also, the audit trail includes the Internet Protocol address of the sending computer (i.e. physical address)


YOU KNOW WHO THE DOG IS!!

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How does the IP Address track

to the Applicant’s location?


COMPUTER GEEK ALERT!!


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Domain Name Service

(DNS Server)

Creditor’s Server

(Business Website)

Applicant’s Server

(IP Address)


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


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


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


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


TermsE-Signature

Business Website ESSP Server

E-Contract

H h #

Converted into


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


Copy of signedE-Contract is sent…Credit Manager

Enough Legal/Technical “Mumbo Jumbo”

Now Let’s Discuss Why You “Go Green” and


You Go Green and How To Do So

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ELECTRONIC DOCUMENTS

CREDIT APPLICATION AND GUARANTY


PRIOR TO E-CONTRACTING

In the past…several day processp y p

Salesman meets with Customer

Customer signs


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


Increased speed of processing

ADVANTAGES OF E-CONTRACTING

contracts signed fasterg

reduce paper and postage costs

more legally enforceable than paper


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


#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


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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


#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


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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


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


EnTrust

DocuSign

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Let’s now walk through the

process of signing your new

Electronic Credit Application


Electronic Credit Application

BELLNUNNALLY.COM

THE ELECTRONIC SIGNING PROCESS

DocuSign – an e-signature service provider

Microsoft

Wells Fargo Bank


Wells Fargo Bank

BELLNUNNALLY.COM

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See Handout


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


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


this information will be used to automatically populate fields

BELLNUNNALLY.COM

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EXHIBIT - 2 • Add data and select document type


EXHIBIT - 3 • Review instructions for completing document


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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


— i.e. the IP address, and— time stamp of the click

BELLNUNNALLY.COM

EXHIBIT - 4

Read the


Read the fine print

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EXHIBIT - 5 • Automatic population features


EXHIBIT - 6 • Customer asked via pop-ups and electronic sticky notes to complete fields


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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


EXHIBIT - 8 • Now the debtor can “confirm” the signing


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EXHIBIT - 9


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


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


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


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


illustrates the very essence of a Guaranty

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I guarantee…g

“to pay the indebtedness”…

SHOW ME THE MONEY!!


SHOW ME THE MONEY!!

And now let’s take a

10 minute break!


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PITFALLS OF SOCIAL MEDIA / FDCPA


THE HISTORY OF COMMUNICATION


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3500 BC

Phoenicians develop an alphabet


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


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


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


p


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1904

The First Facebook


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


“Scotty, beam me up!!”

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1979

First cellular phone


1979


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1981

IBM sells first PC


1994

Al Gore creates internet


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2005

ZUCKERBERG LAUNCHES


THE INFORMATION AGE IS UPON US


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Today, the InternetToday, the Internetplays a role in

• Business World


• Personal Life


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The Real World -- Outernet

The Virtual World -- Internet


Let’s convert the InternetLet s convert the Internet

… into the Outernet


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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


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


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


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


― 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


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


• 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


• strengthen the brand (i.e. advertising)

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Starbucks


Coca-Cola


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Oreo


Facebook profile pictures…


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“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


• 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)


#chihuahuas)

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• 225 million users

“The World’s Largest Professional Network”


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


• Free to access

THINGS WE DO:

100%Consume Food92%72%

EmploymentSocial Media


In a Word – WOW!

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SOCIAL NETWORKING

2005 8% of Americans use Social Media

2013 72% of Americans use Social Media


And now…

Social Media Revolution


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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!!


• You can Google the Applicant!!

“GOOGLE” THE APPLICANT

• Allows you to:• Allows you to:

— Learn about existing business

— Learn about prior businesses


• 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


— 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


• 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”


• 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


• 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


• comments

• photos

SECOND DEGREE DIGITAL FOOTPRINTS

Third-parties that refer to the debtor inp

• tagged photos

• comments


• wall posts

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HOW DOES VALUABLE INFORMATION MAKE ITSWAY TO CREDIT MANAGERS?

Customer/ DebtorCustomer/ Debtor

Salesperson


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


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Consumer/Debtor

Credit References

Public RecordsCredit Manager


Credit Reports &

Financial Statements

Salesperson

Consumer/Debtor

Credit References

Public RecordsCredit Manager


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?


SOCIAL MEDIA AS EVIDENCE


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Start with the premise:

What you post or tweet can and will be used against you in a court of law



Cuts both waysCuts both ways…

• Against Debtor – information about assets and/or the location of the debtor


• Against Creditor – deceptive or unlawful conduct

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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


C b th ti t d d


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


• 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


• 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


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


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


g e de a y a ue

THE CREDITOR ANDSOCIAL MEDIA EVIDENCE


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FENCE MANUFACTURER V. SUBCONTRACTOR

• Subcontractor purchases products

• Subcontractor signs guaranty

• Subcontractor fails to pay

• Fence Manufacturer sues and obtains


Fence Manufacturer sues and obtains Judgement — $145K


fi• Subcontractor files Bankruptcy— Lists assets on schedules— Did Not include motorcycle


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• Subcontractor posts pictures on F b k f b d H lFacebook of brand new Harley



• 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


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?


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"


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


accurate representation of the website

SOCIAL MEDIA

THE PITFALL


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THE PITFALL


NOT QUITE AS EXCITING

As Indiana Jones…but, here is a picture of you…


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THE PITFALL


The pitfall to the Credit Manager is…

Wait for it….


Drum roll please…

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…The Law!!


The Pitfall is the LAW…

— FDCPA

— Privacy Laws


y

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OVERVIEW OF FDCPA


FAIR DEBT COLLECTION PRACTICES ACT

• A Federal Law – signed in 1977

• Purpose of Law – to protect consumers from abusive, deceptive, harassing, and unfair conduct


• 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


the state law is inconsistent

PERSONS SUBJECT TO THE FDCPA

– Debt Collectors– Attorneys– Assignees

Creditors using another name


– 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”


COMMUNICATIONS WITH DEBTOR

“Consumer” – includes the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator


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


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


– 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


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


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


• 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


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


OF THE COMMUNICATION

FACEBOOK / FDCPA

• Communications through Facebook may be seen as a communication in an "unusual place" in violation of the FDCPA


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


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


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


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


• 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


gather information on debtors


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”)


(or, communicating without full disclosure of creditor status)

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All C i ti


All Communications…

— be truthful or constitutes a violation of FDCPA

— Disclosure of creditor status might be


violation of FDCPA (e.g. LinkedIn name has Profession listed in title)


IF you use Social Media to collect a debt

THEN beware of the FDCPA


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YES, WE ARE CUTTING EDGE

We beat CNN to the punch


CNN MONEY ARTICLE, AUGUST 27, 2013“FACEBOOK FRIENDS COULD CHANGE YOUR CREDIT SCORE”


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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


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!!


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CNN ARTICLE

Lending companies that use social data in its credit score are:

Lenndo

Kabbage

Information gathered


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”


are – the network is artificial

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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


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ELECTRONIC COMMUNICATIONS PRIVACY ACT

• Federal Law• Only Applies to Governmental Entities



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


• 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


University filed a motion to dismiss suit under


the Electronic Communications Privacy Act

Competing Arguments

• University asserts page was public


• Student asserts page was private

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Court Held:


Court Held:A party may not illegally access private portions of a person’s Facebook page

• i.e. some parts of Facebook maybe private


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


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


individual people to see her comment

Invasion of Privacy Claim (New Jersy)


plaintiff must prove that • her solitude, seclusion, or private affairs were

intentionally infringed upon, and

• this infringement would highly offend a


reasonable person

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Court Held:


Court Held:

Ehling had taken active steps to protect her Facebook page from public viewing, she had a valid


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


• 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


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


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)


Reasons for Credit ManagersNOT to Review Social Media Sites

• FDCPA

• Privacy Laws


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MY SUGGESTION –IN TODAY’S PARLANCE!!

Just Don’t Do IT


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


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


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…


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HIRE A FIRE-BREATHING ATTORNEY


…that covers the entire State of Texas
