Law360 (August 24, 2022 at 2:38 PM EDT) —

Ellen Berg
Ellen Berg
Leonard Gordon
Leonard Gordon
Jonathan Pompan
Jonathan Pompan

Through new interpretive rules, the Consumer Financial Protection Bureau recently Declared Digital marketers engage in or materially facilitate unfair, deceptive, or abusive practices when promoting financial products on behalf of a CFPA-covered bank or non-bank; You may be held liable under the Consumer Financial Protection Act.

Together with the Federal Trade Commission’s recently announced privacy rulemaking, the latest set of interpretive rules issued by the agency underscores the two agencies’ concerted efforts to curb behavioral advertising.

Neither agency will determine whether tracking information, algorithms, digital technologies, and other tools used to determine which advertisements are shown to consumers may be used in unfair and deceptive ways. I am concerned about

This new rule brings digital marketing providers to help with ad targeting within the CFPB’s enforcement jurisdiction.

Although service providers to covered persons under the CFPA are already subject to the Act, Congress does not permit covered persons to “advertise for consumer financial products or services in print, newspaper, or electronic media.”

The CFPB’s new rule limits the applicability of that exemption to digital marketing providers, so electronic media prongs are largely null and void.

According to CFPB director Rohit Chopra, digital marketing providers may offer space for advertising, but these companies also offer many other features that go well beyond the exemption. Because of this mixed functionality, Digital Marketing Providers may not disclose to UDAAP any unfair, deceptive, or abusive conduct or practices or to any Subject who directly or knowingly engages in such conduct. If you provide material assistance, you may be held liable for violations of the CFPA.

And importantly, the CFPB recently stated that discrimination can constitute unjust conduct or practices that violate the CFPA’s UDAAP prohibitions.

The new rules have far-reaching implications by design and indicate the types of advertising activity under scrutiny by the agency. Chopra clarified that under the new rule, “the ‘time or space’ service provider exemption generally does not apply to digital marketing services offered by major platforms.”

But it’s not just the major platforms that are at stake. That’s because the new rules don’t distinguish between digital marketing providers based on size or market influence. Chopra is also encouraging state enforcers to follow his precedent and take enforcement action against digital marketing providers that no longer meet the criteria for exemption under the new rules.

What activities are not exempt for digital marketing providers?

The rule contains lengthy clarifications on digital marketing activities beyond the exemption, in the CFPB’s opinion. In general, advertisers that formulate content strategies by identifying or selecting prospective customers or by selecting or placing content that influences consumer engagement are unlikely to fall within the time or space exceptions .

According to the CFPB, it’s clearer when digital marketing providers decide whether they should show digital ads to a particular consumer. covered person.

The CFPB compares this function to the role of a lead generator, which is considered a service provider under the CFPA and believes it does more than provide airtime or physical space to place ads. .

Even if a digital marketing provider receives instructions from a subject about the types of audiences the subject wishes to reach, the CFPB has determined that the digital marketing provider loses time or space exceptions when applying ad targeting and delivery algorithms. Did. Identify audiences with desirable characteristics and determine if or when a particular consumer sees an ad.

As the CFPB explains, “Using algorithms and business-specific data to determine when certain businesses’ ads are shown to certain consumers, and to influence consumer engagement, It goes far beyond the activities performed by traditional media sources.”

Do references to electronic media still have meaning?

The CFPB noted that the use of the phrase “print, newspaper, or electronic media” alongside other exemptions from support or ministerial services does not indicate that time or space exceptions “would generally have been practiced.” I reasoned that it meant “to serve ads in a similar manner.” from traditional media sources such as ‘print’ and ‘newspaper’. ”

The exception doesn’t actually mention the media source, but the CFPB further explains:[a] Traditional media sources typically provided a “time or space” (i.e. airtime or physical space for advertising) that was relatively mostly (i.e. mainly “ministry”) involved in developing content strategies. ”

The CFPB debate begs us the following questions. Does the term “electronic media” as Congress uses still make sense? In theory, it does.

In the 1990s, before law school, one of the authors of this article worked for what was then known as an interactive advertising agency. Back then, online advertising was all about impressions. It meant how many people would see a banner ad placed on a website, and whether visitors to that page would see the ad. If you’re a digital marketing provider stuck in his 1990s, you might fall under today’s time or space exception.

The CFPB provided the following example.

For example, a digital marketer may provide you with the ability to choose to have your advertisements appear on a particular web page or application of your choosing so that all users of that page or application will see your advertisements. You can Digital marketers typically fall under the “time or space” exception in these situations.

Note, however, that the concept of using behavioral analytics in advertising was already well developed when Congress enacted the CFPA in 2010, including a definition and exception for “service providers.”

By that time, the FTC had held a workshop on behavioral advertising in 2007 and in 2009 released a staff report on the industry’s self-regulatory principles for online behavioral advertising. Other industry groups met with Congress and regulators to explain the benefits of innovation and advertising technology services to both businesses and consumers. And since 2010, the FTC and CFPB have been actively scrutinizing digital marketers, including lead generators.

For example, in 2016, staff of the FTC Consumer Protection Agency published a paper on lead generation, and both agencies took enforcement action against lead generation services. More recently, the CFPB launched a market study of technology companies that offer online advertising-powered payment services, offering buy-now-pay-later credit.

In promoting the new rule, including a statement made prior to the National Bar Association’s presidential summit, Chopra said the rule stopped digital marketing providers from performing in a manner similar to traditional print media. He explained that he was motivated by the CFPB’s decision.

Rather, he said[s]Social media platforms and other ad networks are not simply in the business of displaying ads, they are part of persuasion, often a role that corporate marketing and product development departments have played for many years. ”

The CFPB’s Temporal or Spatial Exception Limitation is the latest in a series of rules of interpretation issued by the CFPB without notice or comment. For digital marketing companies that haven’t given much thought to CFPB regulation, it’s time to address a variety of pitfalls that the CFPB may catch on to.

Coupled with the privacy rulemaking announced by the FTC, it’s clear that the administrations of Chopra and FTC Chairman Lina Khan intend to focus heavily on digital marketing providers.


Ellen T. Berge is Partner and Co-Chair of the Payment Processing and Merchant Services team at Venable LLP.

Leonard L. Gordon is Partner and Chair of the company’s Advertising and Marketing Group. Previously, he was Director of the FTC Northeast Region.

Jonathan L. Pompin is Partner and Chair of Venable’s Consumer Financial Services Practice Group and CFPB Task Force.

Longtime Associate Liz Clark Rinehart contributed to this article.

The opinions expressed are those of the authors and do not necessarily reflect the views of the company, its clients, Portfolio Media Inc. or its affiliates. This article is for general information purposes and is not intended to be construed as legal advice.

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