In a recent decision, the Consumer Financial Protection Bureau (CFPB) declared that digital marketing providers must comply with federal consumer financial protection laws when engaged in behavioral targeting for financial products. The logic behind it appears to be centered on protecting consumers from potential harm.
Who’s affected?
First and foremost, the CFPB’s rule appears to cast a wide net over the digital marketing industry, potentially encompassing a multitude of actors and businesses. Digital marketers who engage in the identification or selection of prospective customers — or content placement aimed at influencing consumer behavior — are labeled as service providers subject to this regulation. This broad categorization raises questions about whether all digital marketers involved in financial product advertising should be treated the same way.
The CFPB’s decision to single out digital marketing providers for their involvement in the development of content strategy is also alarming. While digital marketers play a significant role in shaping advertising campaigns, it’s important to consider that their primary objective is to maximize engagement and interaction with ads. This isn’t unique to the financial industry — it’s a fundamental practice in modern day advertising.
CFPB overreach?
The core issue here is the potential overreach of government regulation. By expanding the definition of service providers to include digital marketers, the CFPB risks stifling innovation and imposing unnecessary burdens on a vibrant industry. Digital marketing has evolved and thrived precisely because it can harness the power of data and technology to deliver tailored content to specific audiences, such as making a homeowner who is considering remodeling aware of their HELOC options. This personalized approach has been widely-embraced by businesses and consumers alike.
The CFPB’s assertion that digital marketing providers can be held liable for unfair, deceptive or abusive acts or practices — as well as other consumer financial protection violations — raises concerns about legal ambiguity. What exactly constitutes an “abusive” practice for an agency that has redefined its way into some legal issues?
The CFPB should be careful not to stifle innovation and impose unnecessary regulatory burdens while simultaneously harming the very people they claim to protect. There are already mechanisms in place to hold companies accountable for deceptive advertising practices. Adding an extra layer of unclear regulation may discourage digital marketing providers from engaging with financial firms altogether.
Serious concerns
This rule on digital marketing providers has raised significant concerns within the industry and among advocates of innovation and economic growth. Consumer protection is of paramount concern for all parties; however, it is essential to strike a balance between safeguarding consumers and allowing businesses to thrive in an increasingly digital world.
The broad and vague scope of this rule — along with its potential to hinder digital marketing practices — should be subject to thorough scrutiny and revision before it becomes fully enforceable.