Reputation Risk: Misinformation Challenges

QUESTION
We have had a major problem caused by a group that is spreading misinformation about our company. They have made all kinds of claims about us, all lies, saying that we discriminate in lending, do not hire minorities, charge higher loan rates to minorities, and even have a health insurance plan that reduces women’s health care. They are lying about much more. It hurts because these are all lies. 

The result of this barrage is that the news media got involved. After that, local officials got involved. They are demanding that the CFPB get involved, even though we have never had a fair lending issue and passed all our fair lending examinations with no adverse findings. 

Now, our company has seen a drastic drop in loan originations. Our marketing department is small, and they have done what they can by issuing press releases and setting up community meetings. We even outsourced our response to an outside law firm to fight back. None of these options have worked. The barrage keeps coming, and our loan officers are finding it impossible to originate loans. 

I realize that you may not have the magic recipe to stop this onslaught. But maybe you could give us some suggestions that are outside regulatory compliance. We know that you can help with insight and ideas that might stem the tide. 

So, our question is, how can we contain the spread of misinformation about our company?

ANSWER
Thank you for your question. I appreciate the confidence you have in me. Given the urgency of your question, I will provide some feedback, ideas, and suggestions. 

The fact is, dealing with the challenge of misinformation is really not outside the purview of regulatory compliance. Of the many risks that a financial institution faces, one of the most difficult to manage is reputation risk. Indeed, the OCC lists reputation risk as among the top four risks associated with corporate and risk governance. The other three are strategic risk, compliance risk, and operational risk. 

By “misinformation,” I mean the spreading by witting and unwitting agents of false, inaccurate, or misleading information that is communicated regardless of an intention to deceive. Typically, misinformation consists of falsehoods, false rumors, insults, and even pranks. 

Your question demonstrates how quickly and pervasively misinformation can destroy the reputation of a company. Years of building up a company’s reputation can be decimated in a matter of minutes due to social media and other lightning-fast purveyors of information. A feeding frenzy targets the institution, and although you may slow it down or sometimes stop it, the damage is done and can last for many years. 

Instead of getting into all the regulatory details, as it seems you have that somewhat covered, I will provide the feedback that I believe will help you in ‘real time.’ If you want guidance in evaluating your reputation risk procedures, you can contact me to arrange a review. 

I think you would be best helped by asking your crisis management team a set of several important questions. Meet regularly to determine updates and resolutions. Reduce to writing the actions taken and the results. You will likely need them if a regulatory agency gets involved. 

One of the difficulties in containing misinformation is the lack of critical thinking skills of those exposed to or perpetuating the falsehoods. So, I will mention the areas where the absence of such skills causes a “blind spot” in their thinking. There are tons of books and manuals involving critical thinking skills. Consult them. Courses and training are available, too. I will highlight a policy and procedure model for you to consider. However, be sure you educate yourself, your personnel, and your consumers on critical thinking skills. 

Procedural Model for Evaluating Misinformation

 In my model, I set forth the challenges as being threefold: 

(1) the question: how to identify the problem; 

(2) the critical thinking dynamic: what kind of thinking causes the entrenchment of the misinformation; and, 

(3) the responsive action: determining the actions required to respond to the misinformation. 

You cannot stop misinformation from being disseminated if you cannot develop an understanding of at least these three challenges. Therefore, I suggest that you immediately provide critical thinking skills training to your affected personnel, especially those who have contact with the public. They are your primary ambassadors to the community. 

What follows are some suggestions using the question, critical thinking dynamic, and responsive action model. Of course, you can design your own model. I am only grazing the surface of the procedural methods needed to organize a response to the damaging misinformation affecting your company’s reputation. 

Reputation Risk 

Challenges to Controlling Misinformation 

Three Primary Questions 

1. Question: What is the misinformation problem, and where does it originate?

 

Critical Thinking Dynamic:

The exposure to misinformation tends to increase people’s belief in its truth. The dynamic causes a condition known as the illusory truth effect. This often occurs because people generally forget the source but remember the information.

 

In fact, misinformation often continues to influence people’s thinking even after correction, a condition called the continued influence effect.

 

Responsive Action:

Identify the source(s) of the misinformation. Determine the extent of repeated exposure to information, which includes false declarative statements and assertions. 

2. Question: What can be done culturally and preemptively?

 

Critical Thinking Dynamic:

Unfortunately, people do not routinely track and evaluate the credibility of sources. However, when they do, the impact of misinformation from less credible sources can be reduced (but usually not eliminated). Unfortunately, many people lack “news literacy,” that is, the ability to identify misinformation.

 

Online source evaluations are challenging but can be taught. News literacy interventions can help people to identify misinformation. This condition can be controlled by prebunking, which is the alternative to debunking and should be the first strategic maneuver.

 

Responsive Action:

Encourage your personnel and community to evaluate information as they encounter it, thereby reducing the likelihood of mentally encoding inaccurate information.

 

Provide accurate corrections on all media, especially social media, as soon as possible, because doing so increases the quality of people's sharing decisions on the media platform.

 

Corrections should only come from an authorized spokesperson. Warn people that they might be misinformed, thereby reducing their reliance on misinformation. 

3. Question: What can be done to deal with specific pieces of misinformation?

 

Critical Thinking Dynamic:

In responding to misinformation, beware of the overkill backfire effect. This occurs where there are too many counterarguments, which, ironically, tend to strengthen misconceptions.

 

Then again, the familiarity backfire effect can also create havoc because corrections that repeat misinformation can ironically strengthen misconceptions. Keep in mind that the efficacy of corrections depends in part on the recipient’s motivation to believe the statement.

 

If the correction challenges a person’s worldview, it is usually less effective than one consistent with a person’s worldview. Thus, there is another backfire effect, the worldview backfire effect, where corrections to misinformation can ironically strengthen misconceptions.

 

And, emotional language influences the spread of misinformation and carries the corrective information in the form of further misinformation. Thus, even if successful, updates to factual beliefs may not translate into an actual attitude change.

 

Responsive Action:

Fact-checking and corrections may work, at least in part, but this does not mean fact-checking can eliminate all inaccurate beliefs.

 

Corrections are more effective if:

- In addition to providing a simple retraction (viz., “not true”), a company proposes a causal alternative, and generally if it provides substantive, relevant information; 

- They are periodically repeated; 

- They involve multiple relevant counterarguments and explanations; 

- People are made to be suspicious of the source or intent of the misinformation; and, 

- They come from trusted sources or highlight expert consensus.

Now, let’s turn our attention to a brief outline of how to handle corrections and responses to the instances where misinformation adversely affects your institution’s reputation. 

Ten Ways to Promote Corrections to Misinformation

1. The first response is going to be the most important response. So, be very sure of the entirety of the correction. Misreporting a correction has significant cascading effects that often are abused by bad actors.

 

2. Encourage your personnel to detect discrepancies in the correction to avoid inaccurate presentations and understandings. For example, to encourage your personnel to determine the accuracy of the correction, you should:

a.   Promote critical thinking and project confidence to the public;

b.   Encourage people to shift to analytical thinking; and,

c.   Advise consumers to follow sourcing Best Practices by showing them how to be their own fact checkers.

 

3. Assemble an internal group to ensure that there is a process to review and publish a correction to misinformation when it occurs. Follow the Best Practices approach to issuing corrections (viz., accurate headlines, and avoiding defensive statements).

 

4. Do not refrain from attempting to debunk or correct misinformation out of fear that doing so will backfire or increase beliefs in false information. And, don’t worry too much about a worldview backfire, despite issues around motivated reasoning and ideology-based selective sharing of fact checks, and so forth.

 

5. Do not get into defensively publishing simple negations. They are not effective. The public must receive a clear explanation of (1) why the mistaken information was thought to be correct in the first place, (2) why it is now clear it is wrong, and (3) why your correction is accurate.

 

6. Make sure your corrective claim is plausible. Do not confuse the issue with unlikely scenarios. When using factual (i.e., causal) alternatives, the alternative should not be complex, and it must have the same explanatory relevance as the original misinformation.

 

7. Ensure the misinformation is clearly and saliently paired with the correction. It should be virtually impossible for the individual to ignore, overlook, or not notice the correction. I know this seems counterintuitive, but juxtaposing the correction with the mistaken information leads to people seeing the inconsistency, which leads to them accepting the resolution. Repeat the misinformation only once and directly prior to the correction. While multiple repetitions of the misinformation prior to the correction should be avoided, one repetition is beneficial to updating the mistaken belief.

 

8. Do not polarize or stigmatize unnecessarily and be sure to use inclusive language.

 

9. Make a concerted effort to translate complicated ideas into cogent, simple, and easily understood concepts readily accessible to the target audience. This will facilitate the acceptance of the correction as well as encode the memory of it.

 

10. Finally, and importantly, use your critical thinking skills to develop a strong rebuttal technique that will debunk attempts at misinformation. But also, think ahead! Be sure to encourage prebunking to detect and, if needed, correct potential challenges to your institution’s reputation.

Jonathan Foxx, Ph.D., MBA

Chairman & Managing Director

Lenders Compliance Group