Compliance Blog

Aug 15, 2022

CFPB Issues Interpretative Rule on Digital Marketing Providers

The Consumer Financial Protection Bureau (CFPB) recently issued an interpretive rule (rule) to address digital marketing providers. Financial institutions such as credit unions may use these providers for advertising, which may also help with other activities such as member acquisition and marketing analysis. These providers “aggregate and analyze immense amounts of granular consumer data, and then use that data to determine what advertisements to provide to specific consumers at what times.” Some types of data points these providers may aggregate are account openings and a member’s search history. These providers may allow credit unions to target certain types of members with specific advertising services.

The rule outlines who is subject to the Consumer Financial Protection Act (CFPA) and its prohibitions, including the prohibition against unfair, deceptive, or abusive acts or practices (UDAAP). The rule applies to “covered persons.” A covered person is a “person [who] offers or provides a financial product or service for use by consumers primarily for personal, family, or household purposes.” In addition, service providers to “covered persons” are also subject to the Act. The Act defines a “service provider as ‘any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service.” The definition may also include “a person that ‘participates in designing, operating, or maintaining the consumer product or service [or] processes transactions relating to the consumer financial product or service.”

However, there are exceptions to who may constitute a service provider. A service provider may not include a person who ‘solely by virtue of such person offering or providing to a covered person…a support service, [or] time or space for an advertisement for a consumer financial product or service through’ traditional media and electronic media. The rule finds digital marketing providers that are deeply involved in the content strategy, which allows a credit union to identify and acquire potential members, provide a “material service” and may be considered service providers.

The definition of a service provider may not always apply to a digital marketing provider. For example, a service provider that solely offers support services or time or space for an advertisement does not meet the definition of a service provider. The CFPB finds a digital marketing provider’s action may sometimes push the provider out of the service provider definition and into the exception, depending on the role of the digital marketing provider. In other words, the provider’s conduct determines whether the digital marketing provider falls into an exception.

On the other hand, the CFPB maintains digital marketing providers that do more than solely support services or offer time or space for advertisements do not qualify for the exception. For example, the CFPB maintains “[d]igital marketing providers do not fall within the ‘time or space’ exception if they target and deliver advertisements to users with certain characteristics…” Here, the CFPB argues the act where specific members are intentionally selected to see specific ads goes beyond “solely selling airtime or physical space.” Generally, the CFPB maintains a digital marketing provider falls under the service provider definition when the provider suggests specific users for specific types of advertisements, finding the generation of these “lead[s]” is content strategy.

A credit union may use a digital marketing provider to identify and acquire potential members and establish marketing strategies for different types of financial products. A credit union may want to ensure that its policies and procedures are correctly designed to implement and manage these relationships.

If there are any questions, please do not hesitate to contact NAFCU’s Regulatory Compliance team at compliance@nafcu.org.

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About the Author

Justin White, Regulatory Compliance Counsel, NAFCU

Justin White, NAFCU-Regulatory-Compliance-Counsel

Justin joined NAFCU as a regulatory compliance counsel in August 2021. As part of the Regulatory Compliance Team, he provides daily compliance assistance to member credit unions on a variety of topics.

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