Social Media Contests & Giveaways

By Gabriel Ruzin

Legal Considerations for Social Media Contests and Giveaways

The mortgage landscape is rife with federal, state, and local laws that regulate how – and how not – lenders can do business. From fair lending practices to anti-discrimination rules, lending is strictly monitored for malfeasance, improper loan patterning, favoritism, and much more. But what if you have worked hard to do everything by the book, your company has a robust social following because customers love your business and your brand, and you want to reward your followers with social media contests and/or giveaways? You’ll probably be unsurprised to hear that this course of action, while generous, has rules and boundaries as well. Let’s look into a few key regulations that lenders need to know when holding a social media contest or giveaway.

Reined in by RESPA

A major industry regulation that social media contests fall under is the Real Estate Settlement Procedures Act (RESPA). This Act maintains that gifts and promotions linked to the referral of settlement service business are prohibited UNLESS they are part of normal promotional or educational activities. These gifts cannot be related to a referral of business in any way and cannot defray expenses that otherwise would be incurred by the referral source.

In other words, there cannot be any strings attached, or even the implication of strings attached, when it comes to a contest winner doing business with the lender. A lender cannot award a prize or gift in a contest or giveaway and then imply that the winner is now a customer of theirs, must do business with them to receive the prize, or that the winner might receive special treatment if they were to become a customer. These appearances of impropriety could speak to favoritism or ‘buying’ of referrals, both of which are strictly prohibited under RESPA.

Avoid Trigger Warnings

In essence, contests or giveaways should be treated like advertising when shared online. Good loan officers wouldn’t make promises they can’t back up within their ads and these same boundaries should be kept in mind when announcing a contest or giveaway. Anyone creating content for contests should be mindful of including so-called "triggering terms" that require disclosures when used, and mortgage copy must comply with state and federal laws, which include avoiding misleading language.

Broader industry regulations also apply, of course. Contests and giveaways cannot infer a higher probability of mortgage approval if potential customers participate in the contest, a violation of Regulation N. It cannot imply discrimination based on color, race, religion, disability, or any other protected trait. And it cannot include any false or misleading terms within the language of the contest or giveaway. This includes anything from fees, costs, insurance, of ANY potential aspects of an advertised mortgage. The safest course of action is to not include anything at all within the terms of the contest or giveaway that could possibly be construed as mortgage-related specifics.

The Plot Thickens

Mortgage regulations are so numerous and wide-ranging that one might think they would wholly encompass the legal considerations that come with hosting an online contest or giveaway. Unfortunately, the mere action of holding said contest comes with a whole other set of rules, regardless of industry. The complex legal landscape governing digital promotions includes an additional array of state and federal laws. These laws touch upon cybersecurity concerns, the definition of gambling and whether the framework of a contest or giveaway can be considered a true ‘contest’ or a ‘lottery’ (which is illegal for any organization that isn’t a state-run lottery), and the fairness of said contests. To further complicate matters, specific legislation like the Children’s Online Privacy Protection Act (COPPA) and the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM) are very restrictive in how information can be collected and used, even under the purview of contests or giveaways.

And that’s not all. The Telephone Consumer Protection Act (TCPA) requires companies to obtain written consent before they can call or even text a consumer, regardless of intent. And the Federal Trade Commission (FTC) has begun to express concern about how online hashtag contests are managed and industry insiders believe that the Commission may soon create guidelines regarding hashtag contests in the name of transparency and fairness. To say that social media contests within the mortgage industry are closely scrutinized is quite the understatement.

Contests Can Be Fun… If Handled Properly

So with all these rules, regulations, and laws in place, can a mortgage company hold a social media contest or giveaway safely? Of course, provided they are working within the letter of the law. The following key considerations to keep in mind if your marketing department is planning on holding a contest or giveaway:

  • Understand RESPA Regulations: Under RESPA, gifts and promotions tied to the referral of settlement services are prohibited unless they are for genuine promotional or educational purposes. Giveaways cannot be conditional upon the winner doing business with the lender, or anything else related to business referrals. Any language that says – or even implies – illegal incentivization of referrals​​ must be wholly removed.
  • Treat Compliance Like You Would within Advertising: Compliance with state and federal regulations is crucial in mortgage advertising on social media, and holding contests or giveaways is no different. Avoid misleading information and keep in mind key regulations like Regulations B, N, and Z, which address equality and transparency in advertising practices.
  • Non-Industry Legal Considerations Also Apply: Contests on social media must not only navigate state and federal mortgage law, but online and gambling law as well. These may include laws that define gambling, regulate technology use, and laws that ensure contests based on skill do not inadvertently become lotteries. Transparency and fairness must be maintained, especially in contests requiring public voting or involving text and call promotions​​.
  • Utilize Mortgage CRMs for Compliance Concerns: A comprehensive mortgage Customer Relationship Management (CRM) system can support compliance efforts by providing approved messaging and content for social media contests and giveaways. These systems can help loan officers navigate complex compliance guidelines, ensuring that all promotions are within legal boundaries and that they contain fair and transparent language​​.

Mortgage regulations are famously strict and any contests or giveaways handled in the mortgage space are no different. Lenders must be meticulous when designing social media contests and giveaways to ensure legal compliance. By understanding and adhering to RESPA guidelines, federal and state regulations, and platform-specific rules, your company can safely conduct effective and compliant digital promotions that your followers will enjoy.