Attention Digital Marketers of Financial Products and Services: CFPB wants to be friends | Hudson Cook, LLP

Attention, digital marketers! The Consumer Financial Protection Bureau just sent you a friend request.

Last month, the CFPB issued a press release and an interpretative rule titled “Limited Applicability of the ‘Temporal or Spatial’ Exception of the Consumer Financial Protection Act in Relation to Digital Marketing Providers.” All indications point to the CFPB’s intention to subject digital marketers to its jurisdiction in certain circumstances. According to CFPB Director Rohit Chopra, “[a]Advances in technology should help our economy and society move forward, rather than incentivize a rush to seize our sensitive financial data and allow tech giants to evade existing laws that other companies must follow.”

Under the Consumer Financial Protection Act, both the “covered person[s]” and ” service provider[s]to the persons concerned are subject to the Act. A person is a “covered person” under the CFPA if they offer or provide a “financial product or service” intended for use by consumers primarily for personal, family, or household purposes. The term “Covered Person” also includes any Affiliate of a Person described above if the Affiliate is acting as a service provider for the Person.

“Financial products and services” include the granting of credit and leases, participation in depository activities, provision of financial advisory services, assistance in the management or settlement of debts, collection of debts to consumer financial products or services and the provision of consumer reporting information.

The CFPA defines “service provider” as “any person who provides a service to a covered person in connection with the offer or provision by that covered person of a financial product or service to consumers”. This definition includes participation in the design, operation or maintenance of the consumer financial product or service or the processing of transactions related to the consumer financial product or service (other than the unknowing or accidental transmission or processing of data financial so that these data are not differentiated from other types of data of the same form that the person transmits or processes).

The definition of “service provider” contains two exceptions. First, the term “service provider” does not include a person offering “a support service of a type provided to businesses generally or a similar ministerial service”. Second, the term “service provider” does not include a person offering “time or space for advertising a financial product or service to consumers through print, newspaper or electronic media” .

Because of this second exception, merchants were not historically subject to the CFPA if they simply provided the time or space for an advertisement. For example, a newspaper carrying an advertisement for a bank is not subject to the CFPA because it only gives advertising space to a targeted person. However, the CFPB Interpretative Rule addresses the role that digital marketers play and intends to extend its jurisdiction to digital marketers who take certain actions on behalf of Covered Persons.

Director Chopra noted that “as far as modern digital marketing platforms go, these companies don’t provide space on a static billboard. Instead, they identify and analyze the personal data of potential users, and are often paid to convert user interactions into revenue for the financial business.”

In the interpretative rule, the CFPB explains that digital marketing companies engaged in targeted advertising services are “service providers” within the meaning of the CFPA and do not fall under the exception for providing “time or space for an advertisement”. The CFPB explains that entities that engage in targeted advertising go beyond simply providing “time or space for an advertisement…through print, newspaper or mass media. electronics” because they are involved in “identifying or screening potential customers” or “selection or placement of content to affect consumer engagement.” The interpretative rule notes the following in a footnote: “Of course, nothing in this interpretative rule prevents a digital marketing provider from being considered a covered person based on its acts and practices. Indeed, by engaging in collection, tracking, analysis, and maintenance activities, digital marketing providers may be covered persons.”

After studying the rule of interpretation, it appears that the questions to ask when determining whether a digital marketer is within the scope of the CFPB include:

  • Does the digital marketer aggregate the data?
  • Does the digital marketer analyze the data?
  • If yes to either, does the digital marketer then use this information to:
    • decide when (what day and at what time) to show ads?
    • decide which ads to show?
    • decide who to advertise to?

The Interpretation Rule seems to gloss over some key discussions. First, the CFPB explains in great detail why the “time or space for an advertisement” exception does not apply, but it does not attempt to explain why targeted advertising is outside of the other exception for “a support service of a type provided to businesses generally or a similar departmental service”. The CFPB also does not discuss the idea that if Congress wanted the CFPA to cover advertisers targeting users potential financial products and services, he would have said, given that regulators were well aware of the practice in 2010 when the CFPA was passed.

The interpretive rule appears to be an attempt by the CFPB to assert its intention to be a technology regulator. Director Chopra’s quotes refer to platforms that accumulate personal data, tech giants, and Big Tech. What does this mean for dealers? Well, the CFPB just might send a friend request to your digital marketing business.

About Dora Kohler

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