The Consumer Financial Protection Bureau (CFPB) released a circular indicating that operators of digital comparison loan shopping tools, or lead generators, can violate the Consumer Financial Protection Act (CFPA) by preferencing services or products “based on financial or other benefits to the operator.” Such an application of the CFPA may have harmful consequences for borrowers by failing to demonstrate that lead generators are taking advantage of customers. So far, the preferencing outlined differs little from pro-consumer policies that control quality.
The circular posits that lead generators act abusively if they promote services and products, based on their financial affiliation. This is because, according to its contents, the consumer reasonably assumes that the lead generator is acting on their behalf, meaning that preferencing certain products cannot be in the consumer’s interest.
There are two major issues with this document. First, the government must be able to demonstrate that preferencing harms consumers. Second, the government must be able to indicate whether the forced disclosure of financial ties would be a sufficient remedy.
In an article discussing the first claim, Venable, LLC explains how the CFPB must be able to demonstrate that lead generators are taking advantage of consumers to their detriment, instead of simply showing how consumers reasonably rely on lead generators to act in their interest. Demonstrating harm would go a long way toward supporting the CFPB’s claims.
The CFPB definitions might not limit “abusive preferencing” to compensating arm’s-length third parties. Instead, it could be interpreted to include steering which benefits operators. The circular targets any form of “steering” based on compensation, falling victim to the “dark pattern” accusations that antitrust agencies employ against Amazon.
A “dark pattern” is a supposedly deceptive marketing practice employed by platforms to get users to buy lower quality, and usually more expensive, brands than they otherwise would. In CFPB Director Rohit Chopra’s press release on the circular, he compares the preferences employed by lead generators to the supposed “dark patterns” observed in the digital retail market. However, the accusations against retailers, particularly Amazon, are not a great metric since they have been patently ridiculous. When Amazon was accused of making their Prime cancelation process deceptively hard, the American Consumer Institute observed that it only took six clicks to cancel one’s Prime subscription. Other types of preferencing by Amazon are forms of quality control no different than what brick-and-mortar retail stores employ when determining where to place items.
The CFPB should not be permitted to engage in the same “dark pattern” name-calling games that antitrust agencies have utilized in recent years. Measures that aim to target consumer platforms like loan lead generators ought to be highly specific and not fall into the trap of double standards with other markets, like in-person retail. Though the circular does not carry the same regulatory weight as a rule, it is still important to expose the agency’s faults before rulemaking is applied under the same pretense.
Isaac Schick is with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.