CFPB: Financial Marketers Must Adhere to Consumer Law

The Consumer Financial Protection Bureau (CFPB) is warning digital marketing companies working with financial firms that they must comply with federal law.

Marketers engaged in identifying prospective customers or placing content to affect consumer behavior are typically considered service providers under the law, according to a Wednesday (Aug. 10) press release. They can be held liable if they engage in unfair, deceptive or abusive practices.

“When Big Tech firms use sophisticated behavioral targeting techniques to market financial products, they must adhere to federal consumer financial protection laws,” said CFPB Director Rohit Chopra in the release. “Federal and state law enforcers can and should hold these firms accountable if they break the law.”

Digital marketing differs from traditional advertising, in that instead of trying to get a product or service to as wide an audience as possible, the goal is to “maximize individuals’ interactions with ads,” the CFPB said in the release.

“They may harvest personal data to feed their behavioral analytics models that can target individuals or groups that they predict are more likely to interact with an ad or sign up for a product or service,” CFPB said in the release.

Marketers are typically covered by the Consumer Financial Protection Act as service providers, although the act has an exception for companies that solely provide time or space for an ad for a consumer financial product or service in print, newspaper or electronic media, the release stated.

However, the CFPB said in the release the exception doesn’t apply to firms that “are materially involved in the development of content strategy.” In addition, firms could also be subject to legal liability for their use of behavioral analytics to connect with customers.

Also Wednesday, the CFPB ordered FinTech Hello Digit to pay damages to customers as well as a $2.7 million fine for charging people overdraft fees in a savings product that falsely guaranteed no overdrafts. The bureau said a faulty algorithm caused overdraft penalties for automated savings withdrawals for customers of Hello Digit.

Read more: Hello Digit Hit By $2.7M CFPB Fine Over Fees Connected to Automated Savings