Digital marketing firms that provide targeted advertising services to financial services providers are “service providers” subject to enforcement for unfair, deceptive and abusive acts and practices (“UDAAP”) despite the Consumer Financial Protection Act’s (“CFPA”) exception for those providing “time or space” for advertisements, according to a recent Consumer Financial Protection Bureau (“CFPB” or “Bureau”) interpretive rule.

Under the CFPA, companies that provide material services to financial services firms in connection with the offering of consumer financial products qualify as "service providers" subject to UDAAP prohibitions. But Dodd Frank contains an exception from the definition of "service provider" for any person who simply provides "time or space for an advertisement . . . through print, newspaper, or electronic media." The Bureau’s interpretive rule draws a distinction between traditional media, such as print newspapers and broadcasters, that “solely . . . provided airtime or physical space for advertisements,” and “digital marketing providers” that are “materially involved in the development of content strategy in addition to providing airtime or physical space.” The interpretive rule provides examples of such “material involvement:”

  • “When digital marketers target and deliver advertisements to users with certain characteristics, the digital marketer is materially involved in the development of content strategy and is not covered by the 'time or space' exception”;
  • "[D]igital marketing providers do not fall into the 'time or space' exception if a [financial services firm] identifies particular users by name and the digital marketer targets and delivers the advertisements to those users at specific times to increase or maximize engagement"; and
  • "[When a digital marketer determines] which specific users see digital advertisements, such as by determining or suggesting which users are the appropriate audience for advertisements, the digital marketer does not fall within the 'time or space' exception."

Financial Services

According to the rule, firms that engage in these additional activities do not “solely” provide “time or space for an advertisement” and therefore do not qualify for the exception.1

The impetus for the rule appears to be the Bureau’s concerns about discrimination in digital marketing. Indeed, the rule identifies digital marketing providers’ ability to “target and deliver the advertisements to users with certain characteristics (such as demographics, geography, online behavior . . . or offline behavior)” and to use “ad targeting and delivery algorithms [to] identify the audience with the desired characteristics and determine whether and/or when specific consumers see an advertisement” as objects of concern. The rule also expressly provides that “discrimination may constitute an unfair act or practice that violates the CFPB’s UDAAP prohibition” and twice cites to a 2019 Department of Housing and Urban Development complaint alleging discriminatory targeted advertising.

Digital marketing companies that provide targeted marketing and content strategy to their customers should consider the scope of their activities and the possible application of CFPA prohibitions against unfair, deceptive and abusive acts and practices.