Social media adoption has grown so quickly that regulators of many industries, especially financial services, have struggled to keep pace. The CARD Act, passed in 2009, sought to protect those under 21 years old from aggressive credit card marketing. Some consumer protection groups are now claiming that card networks and issuing banks are using social media as a way around many of the Act’s requirements, which are mostly concerned with college campus credit card advertising and direct mail. From a Wall Street Journal article:
“The basic issue is that the regulation … is really geared toward marketing on campus or direct mail,” said Eboni Nelson, an associate professor of law at the University of South Carolina, “There leaves a wide gap … for credit-card companies and marketers to solicit new consumers … via email, via social media like Facebook and Twitter.”
But while the opportunity may exist, few networks and issuers are actually using social media to target new customers. In practice, many more companies are using social media as another channel to manage existing customer relationships, and provide customers with a more satisfying experience. Citigroup for example allows current cardholders to pool their reward points via Facebook to make larger purchases.
The evolving relationship between social media and financial services does warrant observation however, and the Consumer Financial Protection Board will have the ultimate say in whether credit card industry regulations require further review with respect to social media.
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