What Digital Marketing Firms Face Increased scrutiny After the Consumer Financial Protection Bureau issued an interpretive rule this month that states that companies that use analytics to target consumers can be held liable if they violate consumer protection laws, from the Department of Financial Protection.

This new rule is concerning given financial institutions’ increasing reliance on digital marketing to reach consumers.according to investigation report According to a study released last year by Aligent, 2020 saw significant growth in email marketing, social media, and other forms of digital and online advertising spending. The report found that the bank was twice as likely to spend money on new marketing tools compared to professional services and wealth management marketers. 2021 technology.

Brian Reilly, managing director of Bankbound, a digital marketing agency focused on community banks, has seen a rapid acceleration in marketing investment from traditional to digital channels over the past two years. rice field.

The CFPB ruling, which states that digital marketers can no longer claim immunity from the Consumer Financial Protection Act and are liable for “unfair, deceptive or abusive acts or practices” or UDAAP, is two-fold. raising questions. What can financial institutions, and the digital marketing firms they rely on, expect?

Rafael DeLeon, Senior Vice President of Industry Engagements at Ncontracts, a risk management and compliance software company, and former Director of Banking Relations at the Comptroller of the Currency, said:

“The Biden administration has repeatedly told us that its goal is to promote equitable access to safe and affordable financial services,” Deleon said. “It expanded the definition of what is considered ‘abusive’ practices under the UDAAP and committed to working with states to implement ‘active’ and fair lending. I am looking at the results.

agency in 2021 sued Online lender LendUp for cheating borrowers about the cost of installment loans.lender shut down At the end of the year. and, JulyTrident also paid the CFPB an additional $4 million in civil penalties for violating the Equal Credit Opportunity Act and the Consumer Financial Protection Act.

“Digital Redline is the next logical step in that enforcement effort,” De Leon said. and may lead to discrimination.”

Venable partner and member of the law firm’s advertising and marketing group, Ellen Berge, said of the CFPB announcement: march Discrimination in all consumer finance segments, including non-credit products, violates UDAAP prohibitions.

“Recent regulations regarding digital marketers and their role in executing pricing and advertising initiatives could be part of that theme,” said Berge.

On Aug. 11, the Federal Trade Commission, seeking comment on damages caused by commercial surveillance, said it was investigating whether new rules are needed to protect people’s privacy and information.

“According to the FTC, consumers know only a fraction of what is being collected,” Berge said. “When you combine that with new advanced behavioral targeting for delivering ads, everything seems to work.”

Bradley Arant Boult Cummings partner Jonathan Kolodziej also notes that the CFPB has taken steps under the current administration to regulate the use of algorithms, machine learning and other advanced technologies.

“This seems to be another step on that front,” he said. “This paves the way for the CFPB to enforce the law against digital marketers. Even if we do not take

The potential for CFPB scrutiny means that some of the relationships and services that digital marketing firms offer need to be reconsidered, said Berge.

This can mean ensuring compliance management systems are in place and aligned with fair lending laws. DeLeon also recommends that these companies evaluate whether the audience filters they use may inadvertently exclude protected classes from displaying online advertising.

“Financial institution partners want evidence that their digital marketing partners are proactive in preventing discrimination,” he said.

De Leon said financial institutions need to scrutinize vendor controls and oversight more closely than ever before.

“Does your digital marketing partner understand the Fair Lending Act? Do they have tools to measure the likelihood that selecting certain audience characteristics will lead to inadvertent and discriminatory behavior? How do you manage change?” DeLeon suggests banks should ask. “In the past, a lot of the trust was, ‘Who are you working with?’

He pointed out that digital marketing companies that work with financial institutions have the capabilities to meet these needs.

Fintel Connect in Vancouver, Canada referenced Fintel Check. It’s a compliance management system that uses artificial intelligence to flag banks whose products are advertised and to identify unregulated content.

“As a marketing technology provider in the financial services sector, our approach is to provide our clients with the tools they need to successfully market their products in line with the CFPB’s requirements,” the company said in a statement.

Huntsville, Alabama-based DeepTarget announced in August that it will use intelligent targeting technology from AI engineering firm CognitiveScale. The company said it chose CognitiveScale partly because of its focus on trust and governance, and its efforts to ensure its technology is not used for unfair or deceptive marketing purposes. increase.

“DeepTarget is committed to providing the innovative technology that community financial institutions need, including trustworthy AI-based solutions that ultimately protect consumers from unfair and deceptive practices. You can use them with the confidence that they are in line with the CFPB guidelines and regulations that protect them,” the company said in a statement.