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In the year On August 10, 2022, the Consumer Financial Protection Bureau (CFPB) issued a final interpretive rule stating that the Consumer Financial Protection Act (CFPA) applies to companies engaged in targeted advertising of financial products and services. Because the CFPB considers these companies covered by the CFA, they are subject to civil penalties for any “unfair, deceptive, or abusive practices” (UDAAP), even first-time violations. Despite the significance of the interpretation law, the public did not have the opportunity to comment – the interpretation law will be effective from the date of its publication in the Federal Register.
Summary
The CFPA refers to “covered persons” and their “carriers.” A “covered person” is one who offers or offers financial products or services to consumers for use primarily for personal, family or household purposes. 12 USC § 5481(6). A service provider is “any person who provides material services to a covered person in connection with the supply or provision of a consumer financial product or service by a covered person.” 12 USC § 5481(26)(a). Specifically, the term “service provider” does not include entities that provide covered persons with either 1) “support services to businesses generally or similar ministerial services” or 2) “a financial product or service for consumer advertisement at the time or place in print, newspaper, or electronic media.” 12 USC § 5481(26)(b). The CFPB clarifies that digital marketing companies that engage in targeted advertising services are service providers under the CFPA, and that they do not fall short of providing “time or space for advertising.”
The CFPB reasons that parties involved in targeted advertising go beyond merely providing “time or space for advertising … in print, newspaper, or electronic media” because they engage in “identification or selection of potential customers” or “selection or classification.” Content that influences consumer engagement. Although the statute refers to advertising in “electronic media,” the CFPB clarifies that this term includes only advertisements similar to print or newspaper advertisements, such as contextual advertising. (But if Congress had intended the CFPA to cover advertisers targeting financial products and services, it would have said so in 2010, when the CFPA was passed, because regulators were well aware of the practice.)
The CFPB provides some examples of when digital media companies are covered by the CFPA. It states that a provider of covered financial products or services will be subject to the CFPA regardless of whether it chooses the standard for delivering notices or identifies by name to whom notices must be provided. If the digital marketing company chooses when the ad should be served to maximize engagement, the CFPA applies to that company. The CFPB also notes that companies engaged solely in transaction analysis services may be subject to the CFPA.
Notably, although the CFPB explains why the “time or place of advertising” exception does not apply, it does not attempt to explain why targeted advertising is outside the scope of the support service provided. Business in general or similar ministerial service.”
to be taken
Combined with the CFPB’s previous announcement that the UDAAP authority intends to act on algorithmic discrimination, this interpretive rule confirms the CFPB’s desire to become a technology regulator. This is important, as technology companies that work with companies that offer financial products or services can be subject to civil monetary penalties if the CFPB finds them to be engaging in unfair, deceptive or abusive practices in violation of the CFPA. 12 USC § 5565(a)(2). Companies with questions about the CFPB’s mandate, potential priorities, and remedies should contact Manesha Mittal, Libby Weingarten, or a member of the firm’s Privacy and Cybersecurity practice.
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