Why The CFPB's Preferencing And Steering Practices Circular Should Scare Lead Generators And Consumer Financial Services Providers

Published date05 April 2024
Subject MatterFinance and Banking, Consumer Protection, Media, Telecoms, IT, Entertainment, Financial Services, Consumer Law, Advertising, Marketing & Branding, Dodd-Frank, Consumer Protection Act
Law FirmGlobal Advertising Lawyers Alliance (GALA)
AuthorMr Jonathan L. Pompan (Venable LLP), Shahin O. Rothermel (Venable LLP) and David A. McGee (Venable LLP)

If you've been focused on only the high-level statements from the CFPB, you might already expect Rohit Chopra to fashion himself and the agency as "pro-consumer." Consistent with that approach, the agency just signaled its distaste for, and desire to severely restrict, the common and useful advertising practices of comparison-shopping platforms and lead generation.

Using its bully pulpit (and not notice and comment regulation or waiting for explicit legal authority), the CFPB released a Consumer Financial Protection Circular, stating that operators of digital comparison-shopping tools ("Operators") and lead generators can violate the Consumer Financial Protection Act's (CFPA) prohibition on abusive acts or practices if they steer consumers to certain products or services'or certain providers'based on compensation received by the lead generator or Operator. This might feel like standard consumer protection-speak, except that equating compensation models to abusive conduct means that the CFPB has performance advertising in its crosshairs.

In its press release announcing the circular, the CFPB explains, "[T]he guidance discusses how regulators and law enforcement agencies can evaluate operators of comparison-shopping tools that accept payments from financial firms to manipulate results or suppress options that may better fit the consumer's stated preferences." In the same release, the CFPB also announced that it would be "developing a consumer-facing tool that, once finished, will bring more transparency to credit card comparison-shopping."

CFPA's Prohibition on Abusive Acts or Practices

Under the CFPA, an act or practice is considered abusive if the act or practice (i) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or (ii) takes unreasonable advantage of:

  • A lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;
  • The inability of consumers to protect their interests in selecting or using a consumer financial product or service; or
  • The reasonable reliance by the consumer on a covered person to act in the interests of the consumer.

How the CFPB Believes Consumers Reasonably Rely on Lead Generators and Operators

The CFPB claims jurisdiction over lead generators and Operators as "covered persons" or "service providers" under the CFPA, subjecting lead generators and Operators to the CFPA's prohibition on abusive...

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