Consumer Financial Protection Bureau Warns Against Deceptive Comparison-Shopping Tools

The Consumer Financial Protection Bureau (CFPB) has issued a circular highlighting the potential violation of consumer protection laws by comparison-shopping tools that manipulate results and deceive consumers through dark patterns.

Consumer Financial Protection Bureau Warns Against Deceptive Comparison-Shopping Tools

The Consumer Financial Protection Bureau (CFPB) has issued a circular to law enforcement agencies and regulators, outlining how comparison-shopping tools can violate the law by steering consumers towards certain products or lenders due to kickbacks. These tools are commonly used by consumers to evaluate the costs, features, and terms of various financial products such as credit cards, loans, and bank accounts.

( Credit to: Consumerfinance )

The CFPB Director, Rohit Chopra, emphasizes the importance of ensuring that digital advertisements for financial products are not disguised as unbiased and objective advice. Comparison-shopping tools play a crucial role in helping consumers find the best financial products, particularly credit cards and mortgages. Unfortunately, some operators of these tools take advantage of consumer reliance and manipulate the results. They may accept financial kickbacks to manipulate the displayed lists of results, deceiving shoppers.

Guidance on Consumer Financial Protection Laws for Comparison Shopping

To address this issue, the CFPB has provided guidance on how consumer financial protection laws apply to comparison shopping for financial products other than mortgages. The circular explains how regulators and law enforcement agencies can evaluate comparison-shopping tool operators who accept payments from financial firms to manipulate results or suppress better options that align with consumers’ preferences.

One common tactic used to manipulate consumers is the use of dark patterns. Comparison-shopping tool operators may deceive consumers through user experiences and interfaces that create the illusion of competition. However, if consumers end up paying higher prices or selecting inferior products due to these deceptive practices, only the comparison-shopping company and the paying-to-play company benefit from the appearance of competition.

CFPB’s Action Against Deceptive Practices

The CFPB has already taken action against violators of consumer financial protection laws who employ dark patterns. For example, the agency sued ACTIVE Network for cramming consumers with junk membership fees and sued TransUnion for using dark patterns to make it difficult for consumers to cancel certain subscription services. The Federal Trade Commission has also filed a lawsuit against Credit Karma for tricking consumers with deceptive “Pre-Approved” credit offers.

In addition to addressing deceptive practices, the CFPB is working to increase competition in the credit card market. The agency has identified evidence of potential anti-competitive behavior in this industry, with large banks offering worse credit card terms and interest rates compared to smaller banks and credit unions, regardless of credit risk. To foster greater competition, the CFPB is developing a consumer-facing tool that will provide price transparency for credit card comparison-shopping, allowing consumers to compare terms and interest rates in an unbiased manner.

Leveling the Playing Field for Consumers

The circular from the CFPB is part of a broader effort to level the playing field for consumers in various markets for financial products and services. The agency has taken action against hard-to-cancel subscription services, fake review fraud, pay-to-play fees, and hidden junk fees. Consumers can submit complaints about financial products or services through the CFPB’s website or by calling their hotline.

It is important for companies operating comparison-shopping tools to adhere to federal consumer financial protection laws and ensure that their platforms provide unbiased and objective information to consumers. By promoting transparency and fair competition, consumers can make more informed decisions and find the best financial products for their needs.