On February 29, 2024, the Consumer Financial Protection Bureau (CFPB) issued Circular 2024-01warning operators of “digital comparison shopping tools” and “lead generators” that they may be “covered persons” subject to the CFPB’s jurisdiction. and Their activities may put them at risk of engaging in “abusive” acts or practices that violate federal law.
Specifically, the circular describes in detail how certain advertising compensation models that encourage the promotion of products in the financial interest of the operator or lead generator over that of the consumer may constitute an abusive act or practice. In light of this circular – and the CFPB recent push to expand jurisdiction About non-bank financial services providers: Operators, their affiliates and other financial institutions that use online product comparison tools should review their marketing practices and relationships with third parties.
CFPB asserts jurisdiction over price comparison websites
Many consumers visit carriers to compare costs, features or other terms of a set of comparable financial products or services. Similarly, lead generators may advertise financial products to consumers and then sell the information they collect through the consumer's interaction with these advertisements to third-party financial services providers.
The Consumer Financial Protection Act prohibits “covered persons” and “service providers” from engaging in any abusive act or practice. As a foundation for its guidance, the CFPB describes how traders and lead generators may be “covered persons” or “service providers” and therefore subject to CFPB oversight and enforcement, depending in part on its business model. The CFPB takes the position that certain dealers or lead generators may interact sufficiently with consumers to “intermediate” a credit product, an activity that is expressly regulated by the CFPB. However, even if the entity is not actually brokering loans, the CFPB could also claim that the operator or lead generator is providing consumers with "financial advisory services," another defined activity that brings an entity under the scope of jurisdiction of the CFPB as a covered person. Alternatively, the CFPB has previously indicated that it considers some of these companies to be "service providers" of actual financial services providers and therefore subject to the CFPB's jurisdiction (as addressed in more detail in a 2022 interpretive rule).
When is a digital comparison shopping presentation "abusive"?
An act is “abusive” when, among other things, it takes unreasonable advantage of the consumer's “reasonable trust” in the institution to act in the consumer's interest. (For a review, see our April 2023 Customer Alert in the CFPB's abuse policy statement.) As highlighted in the circular, operators of “digital comparison shopping tools” may be at increased risk of being accused of engaging in allegedly abusive acts or practices where their stated goal is to help consumers make informed decisions. about available financial products and services. When an operator presents more expensive or less favorable products to consumers based on its own financial interests, the CFPB suggests that there is a risk of abusive conduct. The CFPB also notes that it considers an operator or lead generator's ability to collect data as a relevant benefit to its abusive analysis. The circular further indicates that the CFPB will carefully consider any affirmative (or implied) representations made by carriers to consumers about the nature of their services when evaluating potential abuse.
To illustrate its concerns, the CFPB details eight hypothetical models of abusive filing. Several of the examples simply highlight the practice of promoting a particular product based on financial gain to the operator rather than the interest of the consumer, particularly when the consumer can identify features of the product that are important to him or her. However, the CFPB suggests that other display features intended to influence consumer choice, such as a dynamic user interface or requiring fewer clicks to access product information, will also be evaluated. The circular also indicates that directing consumers toward certain products to satisfy advertising volume allocations, or using dynamic bidding or a “reward system” to determine the presentation of offers to consumers with certain demographic or other characteristics, could be abusive
Looking to the future
This memo is part of the CFPB's multi-year effort to address dark patterns in the offering of financial products and services, and to make the concepts of unfair, deceptive, or abusive acts and practices (UDAAP) relevant to today's digital marketplace. . Importantly, one of the reasons the CFPB issues circulars is to promote consistency in approach among law enforcement agencies. To that end, the circular provides guidance specifically aimed at other law enforcement agencies, including the Federal Trade Commission (FTC), which has aggressively pursued alleged dark patterns, and state attorneys general, all of which are empowered to do so. meet the CFPB's abusiveness standard (in addition to its independent authority to enforce the unfair and deceptive practices law).
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