Continuing a recent trend, the CFPB claimed its Unfair, Deceptive and Abusive Practices (UDAAP) oversight authority to claim that some digital marketers, including what it calls “Big Tech,” are facing a potential liability of the UDAAP and the oversight of the CFPB.
Digital marketers, including “big techs,” who are “materially involved” in creating content for consumer financial products, are subject to oversight and enforcement by the CFPB and other regulators, and can face the responsibility of the UDAAP
In a recent rule of interpretation, the CFPB clarified when digital marketers and digital providers of financial products would be subject to consumer financial services regulation. The CFPB pointed out specifically that this would apply to Big Tech companies that engage in such practices.
The rule applies to a digital marketer who “offers or supplies a financial product or service intended for use by consumers primarily for personal, family or household purposes” and who provides services such that he has a “material involvement” with the party for which he is marketing. The marketer’s “material involvement” includes helping identify or screen potential customers and placing content that affects consumer engagement or buying behavior, the rule says. In its announcement of the rule, the CFPB said:
Digital marketers who are involved in the identification or selection of potential customers or the selection or placement of content to affect consumer behavior are generally service providers for the purposes of the law. 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.
The rule of interpretation said this applies to digital marketers when their advertisements, algorithms and programs enable company marketing to identify marketing targets “with desired characteristics and determine if and/or when specific consumers see an advertisement”.
The CFPB clarified that this interpretive rule applies to Big Tech. CFPB Director Chopra said, “When Big Tech companies use sophisticated behavioral targeting techniques to market financial products, they must comply with federal financial consumer protection laws. Federal and state law enforcement can and should hold these companies accountable if they break the law.
There is an exception for entities that traditionally provide or arrange “time and space” for advertising through traditional media. Noting the limitations of the exception, the CFPB stated:
Digital marketing providers have transformed advertising. Traditional advertising relies on delivering a product or service to as wide an audience as possible… Digital marketers, on the other hand, seek to maximize individuals’ interactions with advertisements. Thus, digital marketers are moving beyond the traditional roles of traditional “media source” marketing companies.
The CFPB’s recent use of UDAAP’s authority to expand its reach without resorting to the formal rule-making process
By asserting that the UDAAP gives it the power to regulate entities, the CFPB has set out broad views of its oversight and enforcement authority without the need to craft a proposed rule that would require public comment. and compliance with the Administrative Procedures Act. Buchalter recently issued Client Alerts regarding this use of UDAAP authority to claim supervisory or enforcement authority without issuing a proposed rule regarding:
As the CFPB continues to be increasingly active and assertive, its use of the UDAAP as a tool for extending authority may become more frequent.