CFPB Takes Aim at Comparison-Shopping Sites for Financial Products
On February 29, 2024, the Consumer Financial Protection Bureau (CFPB) issued Circular 2024-01, Preferencing and steering practices by digital intermediaries for consumer financial products or services. Continuing to expand their definition of “covered persons” who are subject to their jurisdiction, the CFPB’s new circular warns operators of “digital comparison-shopping tools” and “lead generators” that they may be engaging in “abusive” acts or practices in violation of federal law.
CFPB Sees a Thin Line Between Assistance and Manipulation
Digital comparison-shopping tools and lead generators, designed ostensibly to aid consumers in navigating the complex marketplace of financial products and services, hold significant influence over consumer decision-making. However, in their circular and press release the CFPB identified several practices within these platforms that raise critical concerns for the Bureau about the integrity of their recommendations, which in turn might lead the Bureau to take enforcement actions.
1. Preferential Treatment for Profit
A primary concern highlighted by the CFPB involves the placement and recommendation of products or services based on financial remuneration received by the platform, rather than the consumer's best interests. For instance, a product paying higher fees to the platform might receive a more prominent position or be labeled as "featured." According to the CFPB, this is potentially misleading to consumers if they believe that these recommendations are unbiased.
2. Steering Consumers Based on Compensation
Another point of special concern for the Bureau in their circular was the practice of steering consumers towards products or services that offer the platform higher compensation. Steering includes tactics where comparison tools match consumers with financial products (e.g., loans or credit cards) that pay the highest referral fees, regardless of whether these are the most suitable options for the consumer's needs.
3. Manipulative Presentation and Dynamic Bidding
The CFPB also points out the use of dynamic bidding systems and volume allocation practices that can lead to manipulative presentation of options. For example, a platform might steer consumers towards certain providers to meet a quota of leads generated, influenced by the potential financial rewards for the platform rather than the value to the consumer.
4. Misrepresentation of Comprehensive Choices
Finally, some platforms may present a set of options as comprehensive and based on objective criteria such as price, terms, and service quality. However, the Bureau points out that these representations could be skewed by financial benefits to the operator. Platforms may choose to exclude options from companies with whom they do not have a financial relationship, ultimately misleading consumers into not exploring other options and making less informed choices.
The Path Forward
This circular is part of the Bureau’s years long effort to target dark patterns and make unfair, deceptive, or abusive acts and practices (UDAAP) concepts relevant for the digital economy. However, it is important to remember that these circulars are policy statements do not have the full force and effect of laws or regulations. They are issued to advise enforcement authorities such as the Federal Trade Commission (FTC) and state attorney generals, who can enforce the CFPB’s abusiveness standard in addition to their independent enforcement authority over unfair and deceptive practices.
The Circular does not address whether a platform can avoid a negative finding by disclosing its interest or compensation. As a result, whether the Bureau would find that these disclosure eliminate the consumer’s reliance that the generator is acting in the consumer’s best interest has yet to be seen. But no matter the potential finding, it is clear that these platforms must start operating with heightened sense of responsibility and transparency to ensure that consumer interests remain at the forefront of their operations.
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