Litigation Risks of Failure to Archive Social Media Communications

By now, most members of the financial and mortgage banking industries know they must retain and archive electronic communications. But some companies don’t yet realize that social media communications are included in this mix. And among those that do realize the requirements, archiving efforts are far from complete.

Why don’t more companies archive social media communications? There are several reasons. Some think archiving will add too much content to their document review processes. Others fear it will increase the cost of data storage. And some firms prefer a wait-and-see approach, doing nothing until rules for archiving social media are clarified and finalized.

The risk of a hands-off approach to social media archiving is that financial regulators are keenly aware of social media use, and they expect to be able to review social messages upon request, in response to customer complaints or during examinations. When they can’t, they impose fines and sanctions associated with noncompliant recordkeeping.

Regardless of the rationale for not preserving social communications, failure to do so is risky business. Deloitte has highlighted the risk of an enterprise’s inability to produce social media records in litigation. Deloitte reports that social media information is frequently used by regulated companies in investigations that support litigation, with more than 50 percent of law firms working on cases that involve social media communications.

Missing or incomplete records of social communications can lead to trial losses and adverse judicial decisions if a defendant can neither prove nor disprove a claim. E-discovery is a major cost factor in the escalating costs of litigation. E-discovery sanctions are increasing, primarily for these three reasons: failure to preserve communications, failure to produce communications, and delaying the production of requested communications. Simply put, inconsistent or nonexistent recordkeeping is a litigation risk that can also lead to higher legal costs and sanctions against a firm.

If you aren’t yet archiving social media content and communications, a few best-practice tips can make the process less daunting:

  1. All social content and communications are not created equal. In the mortgage industry, messages involving customer-facing employees are more likely to be subject to retention rules and discovery requests than administrative messages. Tip: Recordkeeping and archiving programs and policies can—and should—prioritize different record types and sources within an organization.
  1. Not every message needs be kept forever. Some messages are redundant, obsolete, and trivial (ROT). Keeping too much information—or keeping it too long—consumes corporate resources. Retrieval costs can spiral while staff sorts through mountains of information to find requested content. Tip: Recordkeeping policies should differentiate between what must be retained and what can be destroyed. Destruction schedules and policies are an essential component of effective recordkeeping policies.
  1. Content is king. It’s not the social media platform (or the communication device used) that determines whether communications should be archived. An instant message conversation about loan rates can be as relevant a business record as a phone call or paper documentation. Likewise, an app-based appointment-setting button facilitating borrower meetings with loan officers could be considered a solicitation record. Tip: When creating guidelines for communication records archiving, the focus should be on the content of the communication, rather than how it was generated.

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