On August 10, 2022, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule to address digital marketing providers that commingle the targeting and delivery of advertisements to consumers, such as by using algorithmic models or other analytics, with the provision of advertising “time or space”. According to the Bureau, digital marketers that are involved in the identification or selection of prospective customers or the selection or placement of content to affect consumer behavior are typically service providers for purposes of the law. Digital marketers acting as service providers can be held liable by the CFPB or other law enforcers for committing unfair, deceptive, or abusive acts or practices (“UDAAP”) as well as other consumer financial protection violations.
In its press release, the CFPB compares digital marketing to traditional advertising. Whereas traditional advertising relied on getting a product or service out to as wide an audience as possible, digital marketers seek to maximize individuals’ interactions with ads. 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. Since the digital marketing providers go beyond traditional advertising, digital marketers are subject to the Consumer Financial Protection Act as “service providers”.
The interpretive rule explains:
Digital marketers provide material services to financial firms.
The CFPB, states, and other consumer protection enforcers can sue digital marketers to stop violations of consumer financial protection law.
This interpretive rule should be taken as another signal to tech companies that the Bureau is keeping a close eye on use of consumer data and algorithms. Increased enforcement by the CFPB and state regulators may be possible. It is suggested that the CFPB is planning on targeting what it sees as potential discrimination resulting from tech companies’ use of consumer data and algorithms to target ads to consumers by using its UDAAP authority.
Where will the CFPB go next? Contact Firstline at (831) 325-3369 or info@firstlinecompliance.com for questions or comments.