CFPB Explains When Digital Marketers are Service Providers Under the CFPA
The CFPB recently issued an interpretive rule stating that it considers digital marketing providers “service providers” under the Consumer Financial Protection Act (CFPA) when they are “materially involved in the development of content strategy” for a “covered person” and thus are no longer merely offering the covered person “time or space” for digital advertisements. Service providers are subject to the CFPA, including its prohibition on unfair, deceptive, or abusive acts and practices.
Under the CFPA, a person is not considered a service provider solely because they offer “time or space for an advertisement” to a covered person. However, the CFPB explains, a digital marketing provider is considered a service provider when they “commingle the targeting and delivery of advertisements to consumers, such as by using algorithmic models or other analytics, with the provision of advertising time or space” and therefore are “materially involved in the development of content strategy by identifying or selecting prospective customers and/or selecting or placing content to affect consumer engagement.”
The CFPB highlights certain circumstances that would not lead a digital marketing provider to be considered a service provider because the provider is only minimally involved in identifying or selecting prospective customers or selecting or placing content, such as when a digital marketing provider offers a covered person the ability to run an advertisement on a particular web page or application of the covered person’s choosing with advertisements seen by any user of that page or application. However, the CFPB explains, when a digital marketing provider targets and delivers advertisements to users with certain characteristics, even if those characteristics are chosen by the covered person, they are no longer eligible for the “time or space” exception and will be considered a service provider under the CFPA.
Although the CFPB does not explicitly state that this rule is intended to target discrimination, the rule makes a number of references to issues of discrimination in digital marketing, including references to a charge of housing discrimination—which subsequently settled—brought by HUD under the Fair Housing Act against a major social media company whose advertising platform was used for housing-related advertisements and who offered advertisers the ability to define certain groups of consumers to target with housing-related ads.
While the CFPB claims this rule merely interprets existing law as authorized by Congress, it remains to be seen whether the rule actually expands the CFPA’s definition of “service provider” beyond its original meaning.
