CFPB Addresses Application of CFPA to Digital Marketing Providers in New Interpretation Rule | Ballard Spahr LLP
The CFPB published a rule of interpretation which addresses when digital marketing providers are “service providers” subject to the Consumer Financial Protection Act, including the CFPA’s prohibition against unfair, deceptive, or abusive acts or practices.
The CFPB describes digital marketing providers as companies that use data obtained from a range of sources to offer targeted advertising services. For example, they analyze and use data collected from individual consumers to segment consumers by different characteristics such as age, location, or interests. These consumer categories can be used by businesses that use digital marketing vendors to select or exclude certain types of customers. Digital marketing providers can also target advertisements at specific times based on the content a user is currently viewing. The CFPB specifies:
Ultimately, the digital marketer can decide which group(s) the consumer belongs to and which financial services companies wish to advertise to that group, and can select the specific advertisement to display for that group. consumer and/or when to display the ad based on other factors (e.g., how much a business is willing to pay to display the ad). As a result, many digital marketing vendors are materially involved in developing “content strategy” by identifying or screening potential customers and/or selecting or placing content to affect consumer engagement, including purchase or adoption behavior. These activities go well beyond the activities of traditional media sources, such as print newspapers or radio, which only passively provided airtime or physical space for advertisements.
The CFPA defines a “service provider” as “any person who provides a material service to a covered person in connection with the offer or provision by that covered person of a financial product or service to consumers”. A “service provider” includes, but is not limited to, a person who “participates in the design, operation or maintenance of the consumer financial product or service” or “processes transactions relating to the product or service financial to consumers”. A “service provider” does not include a person “solely because such person offers or provides to a covered person [either] a help desk of a type provided to general businesses or a similar ministerial service [or] the time or space for an advertisement for a consumer financial product or service in print, newspaper or electronic media”.
According to the CFPB, digital marketing vendors generally provide a “material service” when they “are materially involved in the development of the content strategy.” Describing a “material service” as a “meaningful or important” service, the CFPB considers digital marketing providers to provide a “meaningful” service to Covered Persons when they “identify or select potential customers and/or select or place content to affect consumer engagement.” In concluding that digital marketing providers provide a “material service”, the CFPB also relies on its characterization of digital marketing providers’ involvement as more similar to the function traditionally performed by a Covered Person’s own customer acquisition or marketing group than a traditional media source (eg, lead generation, marketing analytics or strategy).
The CFPB states that the reference to “solely” providing “time or space for an advertisement” in the “time or space” exception means that digital marketers who do more than provide time airtime or physical space for advertisements do not fall within the exception. It also states that the “time or space” exception should be read together with the exception for “a support service of a type provided to businesses generally or a similar ministerial service”. According to the CFPB, businesses that provide a “corporate service” to a financial institution “are not materially involved in the marketing or distribution of the financial product or service to consumers; they are generally not involved in the identification or selection of potential customers, nor do they select or place content that may affect consumer engagement. The CFPB also interprets the reference to “electronic media” in the “in time or space” exception to refer to the offering of advertising in a manner similar to how advertising was offered by the sources. traditional “print” media, which generally functioned as passive conduits for information provided. by their customers.
The CFPB says there may be circumstances where the conduct of digital marketing providers falls under the “temporal or spatial” exception. One circumstance would be where a digital marketing provider has minimal involvement in identifying or screening potential consumers or selecting or placing content to affect consumer engagement, such as where the agent marketing only offers Covered Persons the ability to choose to serve an advertisement on a particular web page or application chosen by the Covered Person, with advertisements seen by any user of that page or application.
However, the CFPB specifies that a digital marketing provider would not fall under the “time or space” exception if:
- It targets and delivers advertisements to users with certain characteristics, even if those characteristics are specified by the covered person. In these circumstances, it is the digital marketer’s ad serving and targeting algorithms that identify the specific audience viewing the ad. (The CFPB takes note of the decision of the Ministry of Housing and Urbanism action against facebook for alleged violations of the Fair Housing Act in connection with Facebook’s targeted advertising program.)
- A covered person identifies particular users by name and the target digital marketer and serves the ads to those users at specific times to increase or maximize engagement. (The CFPB notes that while a traditional media source may have provided basic information to customers about when to run particular advertisements, the company buying the advertisement generally made the decision as to when and where. place the advertisement).
- It plays an even greater role in determining which consumers see the advertisements, for example by suggesting or determining to the covered person which users are the most appropriate audience for the covered person’s advertisements (rather than receiving such direction of the covered person.)
In his Press releasethe CFPB warns that “[d]Digital marketers acting as service providers may be held liable by the CFPB or other law enforcement agencies for engaging in unfair, deceptive, or abusive acts or practices, as well as other breaches of protection. consumer finance. In the rule of interpretation, the CFPB references the recent amendment to its exam manual to state that discrimination may constitute an unfair act or practice, perhaps sending a message to digital marketing vendors that a violation UDAAP can arise in connection with the marketing of both credit and non-credit transactions.
The interpretative rule is another example of change that the CFPB should be done with input from stakeholders rather than by administrative decree.