Financial Services/CFPB

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On February 27, 2023, the Supreme Court granted the certiorari petition of the Consumer Financial Protection Bureau (CFPB) to hear a case that could cast doubt on all of the regulations that have been promulgated by the bureau to date, as well as all pending investigations and litigation brought by the agency.

The Court will consider in Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA) whether the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution, which says, “no money shall be drawn from the Treasury, but in consequence of appropriations made by the law.”…

Continue Reading Supreme Court Agrees to Hear Case Involving CFPB Funding

The Consumer Financial Protection Bureau (CFPB) has moved to curb digital mortgage comparison-shopping platforms from receiving referral fees, issuing an advisory opinion that outlines how companies violate the Real Estate Settlement Procedures Act (RESPA) when “they steer shoppers to lenders by using pay-to-play tactics rather than providing shoppers with comprehensive and objective information.” The advisory is a warning to digital marketing platforms of the potential consequences of business relationships with mortgage lenders. The CFPB has a direct sightline into the marketing activities of mortgage lenders though supervision and routine examinations, and has already put a target on digital marketing providers.

The CFPB’s advisory opinion describes how platform operations can violate Section 8 of RESPA by enhancing the placement of lenders or related service providers on the digital platforms, or by otherwise steering consumers to those lenders or service providers. in addition, the opinion provides illustrative examples.…

Continue Reading CFPB Warns Digital Mortgage Comparison-Shopping Platforms About Referral Fees and Pay-to-Play Advertising

When it comes to negative options, the CFPB has strong opinions. As demonstrated in its new circular, these opinions generally align with those of the Federal Trade Commission (FTC), which has repeatedly targeted trial offers, subscription sales, and other programs involving recurring charges for enforcement. The circular reaffirms the CFPB’s focus—shared with the FTC—on combating digital dark patterns used to engage in unfair, deceptive, or abusive acts or practices, especially when those techniques are combined with negative option marketing.

In an upcoming webinar on March 1, 2023 (RSVP here), Venable will be presenting an in-depth analysis of the CFPB’s circular, as well as CFPB and FTC enforcement actions and private litigation based on purportedly unlawful negative option marketing. For those who can’t wait, we’ve summarized the highlights of the circular below.…

Continue Reading The CFPB Joins the FTC on Negative Option Marketing and Dark Patterns in New Circular

The Consumer Financial Protection Bureau (CFPB) has once again been found to be unconstitutionally structured. The ruling is a win for CFPB critics and calls into question most actions taken by the agency.

A unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit held on Wednesday that the CFPB’s funding mechanism, funded by fees generated by Federal Reserve Board not through Congressional appropriations, is unconstitutional. According to the court, the CFPB’s funding is double insulated from Congress and, thus, is unaccountable to both Congress and the public. As such, the CFPB’s funding mechanism violates the Constitution’s separation of powers design and, specifically, the Appropriations Clause.…

Continue Reading Federal Appeals Court Finds CFPB Unconstitutionally Funded, Structured

Last week, the Federal Trade Commission turned its attention to the mortgage relief industry once again. In its most recent enforcement action, the FTC joined forces for the first time with the California Department of Financial Protection and Innovation (DFPI).

On September 12, 2022, the agencies jointly filed a complaint in the U.S. District Court for the Central District of California against several companies alleged to have operated a mortgage relief scam. Two days later, the court issued a temporary restraining order (TRO) appointing a receiver and freezing the defendants’ assets until the parties can be heard on whether to issue a preliminary injunction.

The defendants consist of various corporate entities doing business as Home Matters USA, Academy Home Services, Atlantic Pacific Service Group, and Golden Home Services America, and two individual defendants who own the companies.…

Continue Reading FTC Joins with California DFPI to Obtain Asset Freeze Against Mortgage Relief Business

The Federal Trade Commission’s recent action against Credit Karma serves as a reminder to advertisers that optimizing consumer conversion is not—and cannot be—the be-all and end-all. Regardless of what split or A/B testing results show, claims must be truthful, substantiated, and not misleading.

Per the FTC’s administrative complaint, Credit Karma advertised third-party credit offers to Credit Karma members as “pre-approved,” but, in fact, the creditors had not pre-approved the credit offers and consumers were required to apply and go through the creditors’ underwriting process. The FTC’s investigation showed that about one-third of those customers were denied the advertised credit.…

Continue Reading FTC Action Against Credit Karma Underscores That Conversion Cannot Trump Compliance

Through a new interpretive rule announced this week, the Consumer Financial Protection Bureau (CFPB) has declared that digital marketing providers can be held liable under the Consumer Financial Protection Act (CFPA) if they engage in or substantially assist unfair, deceptive or abusive practices in advertising financial products on behalf of banks and nonbanks covered by the CFPA.

While service providers to “covered persons” under the CFPA are already subject to the Act, Congress carved out an exception for service providers offering or providing to covered persons “time or space for an advertisement for a consumer financial product or service through print, newspaper, or electronic media.” The CFPB’s new rule limits the applicability of that exemption to digital marketing providers such that the “electronic media” prong is very nearly void.…

Continue Reading CFPB Warning to Consumer Financial Services Digital Marketing Providers

A lawsuit filed by the CFPB last week against a national credit reporting agency provides some insight into the types of website features and designs that regulators like the Consumer Financial Protection Bureau and Federal Trade Commission will target. As we covered previously, digital dark patterns—or website design, features, and interfaces used to allegedly deceive, steer, and manipulate users—are a priority for both rulemaking and enforcement actions by the FTC. Although the focus has been on website features that “trick or trap” consumers into subscriptions, the potential for broad and arbitrary application of this concept is worrisome. What is the line between a website that is acceptably optimized for conversion and one that is illegally steering users to make purchases?

In the highly detailed complaint, the CFPB alleged, among other things, that the net impression of various advertising messages, combined with the design of the webpage where users landed when clicking on the ads, obscured the nature of the offer (a month-to-month subscription of a credit-monitoring service and credit score), the status of a user’s enrollment in the service, and the purpose of collecting a user’s payment information.

More specifically, the complaint described how call-to-action buttons, email subject lines, font color and size, text placement, and website flow were employed to confuse consumers who were seeking information about or copies of their annual free credit report and steer them instead into unwittingly purchasing a subscription for credit monitoring.…

Continue Reading Latest CFPB Lawsuit Sheds Light on Digital Dark Patterns

In a bulletin published last week, the Consumer Financial Protection Bureau (CFPB) warned banks and other financial companies against impeding honest reviews of consumer financial products and services. Although it does not cite a specific study for financial products and services, the CFPB’s bulletin describes how online reviews impact other industries across the economy.

We have been covering the Federal Trade Commission’s (FTC) efforts to combat what it sees as rampant customer review fraud, and now the CFPB is preemptively addressing its growing concern with how online reviews will play into customers’ decision-making when they are choosing from among several financial providers.

At first glance, the CFPB’s foray into the deceptive use of online reviews might appear to come out of left field, but it reflects a more general theme of following the FTC’s playbook and scrutinizing financial service providers more holistically, including their marketing practices. The bulletin itself cites to several recent FTC settlements in this area as persuasive precedent for application of the CFPB’s UDAAP authority.…

Continue Reading The CFPB Warns Companies Against Impeding or Manipulating Honest Customer Reviews

In its much-anticipated cryptocurrency executive order issued earlier this month, the Biden administration called for a coordinated interagency approach to the regulation of digital assets and to the study of their potential risks.

A significant part of this effort focuses on the nation’s primary consumer protection agencies, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

Historically, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN) have played the primary roles in regulating digital assets, with the FTC and CFPB largely taking a wait-and-see approach. But this has left open a regulatory gap for crypto activities that do not involve a security or a commodity derivative.…

Continue Reading Biden Tasks Consumer Protection Agencies with Stepping Up Cryptocurrency Oversight