CFPB's New Digital Marketing Rule

Francis X. Riley III, John L. Ropiequet


The CFPB is now ready to directly regulate the purveyors of digital consumer marketing. The CFPB new rule clarifies when digital marketers and financial products sellers are subject to consumer protection regulations. Digital marketers that are "materially involved" in the development of content strategy — including facilitation of targeted marketing based on customer's behavior so as to affect their purchase behavior — are "service providers" and subject to the bureau's oversight. And, not surprising, FinTech companies that employ these strategies to market financial products are not only subject to oversight, but are required to materially vet and understand the aforementioned marketing service providers. Chopra yesterday stated that "[w]hen Big Tech firms use sophisticated behavioral targeting techniques to market financial products, they must adhere to federal consumer financial protection laws." The "time or space" exemption will "typically not apply to the digital marketing services offered by major platforms," making them liable for violations of the Consumer Financial Protection Act that can be pursued by state attorneys general, he added in the prepared remarks. According to Chopra, digital marketers' actions and involvement in consumer finance strategies go well beyond the "time or space" exemption because their activities seek to maximize individuals' interactions with ads and harvest personal data to feed behavioral models that target individuals or groups. "Digital marketing providers have transformed advertising," the CFPB said in the announcement. "Traditional advertising relies on getting a product or service out to as wide an audience as possible ... Digital marketers, on the other hand, seek to maximize individuals' interactions with ads. "Specifically, the rule makes clear that both digital marketers and the CFPB-regulated entities and individuals to whom they provide services are subject to the Consumer Financial Protection Act of 2010 and its prohibition on unfair, deceptive or abusive acts or practices, the rule explains. The rule's citations defining the relationship between marketer and FinTech company identify the 2019 discrimination complaint brought against Facebook by the U.S. Department of Housing and Urban Development, which later referred the case to the U.S. Department of Justice, which was settled after Meta agreed to stop using a tool that allowed its advertisers to exclude certain Facebook users from seeing housing ads based on factors including their race, religion, gender or disability status. The company agreed to create a new tool, dubbed a "variance reduction system," that aims to remove biases from ads related to housing, employment and credit.

Francis X. Riley III
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