August 10^th, the Consumer Financial Protection Bureau has issued guidance to extend its jurisdiction to digital marketing firms. has issued rules of interpretation subject to its authority. The CFPB encourages digital marketing companies, such as search engines and social media platforms, to actively participate in developing content strategies and targeting advertising for financial products based on individual characteristics. It said it may take enforcement action against these companies. This rule is one of a larger effort by the CFPB to expand its jurisdiction.

I. Authority of CFPB for “Service Providers”

In general, the CFPB has broad powers over “subjects” as defined in the Dodd-Frank Act.[1] A covered person is any person who offers or provides any of the eleven specified consumer financial products or services. For example, making, brokering, and servicing loans, providing payment instruments or stored value, and providing payment products or services to consumers by any technological means.[2] In addition to its authority over Subjects who actually provide or provide certain products or services, the CFPB also has authority over certain “Service Providers” to Subjects. Service Provider means a person who “provides essential services to Covered Persons in connection with or in connection with the provision or provision of consumer financial products or services by Covered Persons”.[3] Both you and your service provider must comply with the Dodd-Frank Act’s Prohibition of Unfair, Deceptive, or Abusive Acts or Practices (UDAAP).[4]

II.His CFPB interpretation that digital marketers are service providers

The new rule explains the CFPB’s view that modern digital marketing firms play a “dramatically different” role in consumer advertising compared to traditional media sources such as print newspapers and radio stations. increase.[5] The agency claims digital marketers use advanced analytics techniques, such as machine learning and behavioral analytics, to process large amounts of consumer data to target specific consumers with their ads. doing. Digital marketing providers see themselves as combining the services of delivering targeted advertising with the activities traditional media sources typically do: providing airtime or physical space for advertising.

The CFPB concludes that digital marketing firms can become service providers subject to its mandate when identifying or selecting prospective customers or when selecting or placing content to influence consumer engagement. attached. In the CFPB’s view, modern digital marketing companies that display ads to consumers based on their individual behavior offer “material services.” These companies are service providers because they undertake many functions traditionally performed directly by consumer financial service providers, such as lead generation, customer acquisition, marketing analytics and strategy.

The CFPB notes that the Dodd-Frank Act definition of a service provider excludes companies that provide only “time or space for the advertisement of consumer financial products or services through print, newspaper, or electronic media.” I admit it.[6] The CFPB believes this may not be the case for digital marketing firms actively involved in developing their digital content strategy. In such cases, we don’t just provide “time or space” for advertising. Whether or not a digital marketing company is a service provider depends on meeting the “space and time” exception. For example, a company that targets or delivers advertisements to consumers with certain characteristics would be a service provider even if the people to whom it advertises choose the specific characteristics to target. Similarly, the Authority will allow digital marketers who identify specific customers by name or direct advertising to specific individuals at specific times based on their individual behavior to service providers subject to their authority. It is said that

III. POTENTIAL IMPLICATIONS OF INTERPRETATION RULES

The CFPB issued this guidance in an interpretive rule rather than a legislative rule. An interpretive rule is “a statement issued by an agency to inform the public of the construction of the laws and regulations governed by the agency.”[7] They are not intended to create new laws, but to explain what existing laws mean.[8] This rule expresses the Bureau’s belief that the digital marketing firms listed above are now subject to its powers as service providers and already have the authority to take UDAAP enforcement actions.[9] Additionally, digital marketing companies that commit to the UDAAP may be subject to lawsuits by state attorneys general. States also have the authority to enforce bans on the Dodd-Frank UDAAP.[10] Director Rohit Chopra reminded states of this authority in a speech summarizing the rule at the National Association of Attorneys General the day the rule was announced.[11]

The release of the rules could indicate that the CFPB plans to take enforcement action against digital marketing firms. Enforcement is not guaranteed. The rule simply uses his CFPB “bully pulpit” to discourage digital marketing firms from unfair or deceptive practices related to consumer financial products that do not bode well for new complaints. It could be an attempt.

When a UDAAP case is brought against a digital marketing company, the court will determine whether the company is a service provider. Those courts may disagree with the Bureau’s interpretation.And they probably can’t afford the rules chevron Because it is not a legislative rule for an agency to make notices and comments.[12] Ultimately, to avoid potential UDAAP liability, a digital marketing firm must persuade the court that it merely provided time or space to advertise consumer financial products or services.