On August 10, the Consumer Financial Protection Bureau (CFPB or Bureau) issued an interpretive rule, detailing when digital marketing providers for financial firms must comply with federal consumer financial protection laws. The interpretive rule addresses digital marketing providers that commingle the targeting and delivery of advertisements to consumers with the provision of advertising “time or space.” According to the Bureau, when digital marketers are involved in the identification or selection of prospective customers or the selection or placement of content to affect consumer behavior, they are acting as “service providers” subject to the CFPB’s jurisdiction and can be held liable by the CFPB and other law enforcers for committing unfair, deceptive, or abusive acts or practices.
CFPB Director Rohit Chopra explained the reasoning behind the rule: “When Big Tech firms use sophisticated behavioral targeting techniques to market financial products, they must adhere to federal consumer financial protection laws. Federal and state law enforcers can and should hold these firms accountable if they break the law.”
Digital marketing has become a ubiquitous feature of advertising for consumer financial products and services and allows companies to direct ads to consumers who are more likely to interact with an ad or sign up for a product or service. According to the CFPB, these kinds of digital marketers are typically covered by the Consumer Financial Protection Act (Act) as “service providers.” The Act does provide an exception for companies that solely provide time or space for an advertisement for a consumer financial product or service through print, newspaper, or electronic media. However, in the interpretive rule, the CFPB made clear that the exception does not cover firms that are materially involved in the development of content strategy. The interpretive rule directly “address[es] 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.'”
When it comes to providing digital marketing for financial firms, the CFPB explained that it may ultimately be the digital marketer that decides which groups the consumer belongs in and which financial services companies desire to advertise to that group, and may even select the specific ad to display to that consumer and when to display the ad. Accordingly, many digital marketing providers are materially involved in the development of “content strategy” by identifying or selecting prospective customers and selecting or placing content to affect consumer engagement, including purchasing or adoption behavior. The CFPB asserts that these activities go well beyond the activities of traditional media sources and come under the purview of consumer financial protection laws. In particular, identifying prospective customers and then attempting to acquire those customers is a significant component of the “offering” of a consumer financial product or service, which is part of the legally relevant test for determining that a firm is a “covered person” under the Act.
As CFPB Director Chopra explained during his remarks at the 2022 National Association of Attorneys General Presidential Summit, social media “allow[s] advertisers to show ads to only men or women, to not show ads to people who may be disabled, and to not show ads to people interested in certain countries. Facebook allowed advertisers to not show ads to people within certain geographic regions or zip codes … . To be clear: Non-selected groups, regardless of protected class, were not shown the ads.”
The CFPB’s interpretive rule explains:
- Digital marketers provide material services to financial firms: Digital marketers are typically materially involved in the development of content strategy when they identify or select prospective customers or select or place content in order to encourage consumer engagement with advertising. Digital marketers engaged in this type of ad targeting and delivery are not merely providing ad space and time and, thus, do not qualify under the “time or space” exception.
- The CFPB and other consumer protection enforcers can sue digital marketers to stop violations of consumer financial protection law: When digital marketers act as service providers, they are liable for unfair, deceptive, or abusive acts or practices under the Consumer Financial Protection Act.
We view this interpretive rule as a public signal that the Bureau intends to assert jurisdiction directly over social media and web companies that offer targeted advertising services to financial services companies.