Bureau Rule on Digital Marketing
The CFPB recently released an interpretive rule articulating its view regarding digital marketing and the definition of service provider under Dodd-Frank (or the Consumer Financial Protection Act as codified). Companies that meet the definition of service provider under the law are subject to the CFPB’s authority and are obligated to comply with the federal consumer financial protection laws. And financial institutions obligated to supervise their service providers closely.
In the law, the definition for service provider allows the following exceptions (emphasis added):
(B) EXCEPTIONS.—The term ‘‘service provider’’ does not include a person solely by virtue of such person offering or providing to a covered person—
(i) a support service of a type provided to businesses generally or a similar ministerial service; or
(ii) time or space for an advertisement for a consumer financial product or service through print, newspaper, or electronic media.
This new interpretive rule expresses the CFPB’s opinion that some elements or techniques in connection with digital marketing do much more than simply providing “time or space for an advertisement.” In such circumstances, when a company is targeting and delivering advertisements by using algorithms or other tools, that company has gone beyond merely providing “time and space for an advertisement” and will be treated as a service provider under the law. To quote the rule:
Accordingly, digital marketing providers that are involved in the identification or selection of prospective customers or the selection or placement of content to affect consumer engagement, including purchase or adoption behavior, are typically service providers under the CFPA.
Please review the rule and review your marketing and advertising practices and partners to ensure all stakeholders understand the effects of being deemed service providers under the law.
August 18th, 2022
