In this episode of his “Clearly Conspicuous” podcast
series, “CFPB Warns of Manipulation in Digital Comparison
Shopping Tools,” consumer protection attorney Anthony
DiResta discusses the Consumer Financial Protection
Bureau’s (CFPB) circular warning about comparison shopping
operators potentially violating federal law. The CFPB’s
guidance explains how certain practices can deceive consumers who
rely on these tools for unbiased information about financial
products, particularly in the credit card and mortgage markets. He
also notes that the CFPB’s circular is part of broader efforts
to level the playing field for consumers across various financial
product and service industries.

Listen to more episodes of Clearly Conspicuous
here.

Podcast Transcript

Welcome to another podcast of Clearly Conspicuous. As we’ve
noted in previous sessions our goal in these podcasts is to make
you succeed in this current environment that’s very aggressive
and progressive, make you aware of what’s going on with the
federal and state agencies and give you practical tips for success.
It’s a privilege to be with you today.

CFPB Issues Circular Warning Federal Enforcement Agencies and
Regulators About Comparison Shopping Operators

Today we discuss the Consumer Financial Protection Bureau
issuance of a circular to law enforcement agencies and regulators
explaining how companies operating comparison shopping can break
the law when they steer consumers to certain products or lenders
because of kickbacks. Consumers use comparison shopping tools to
evaluate the cost, the features and the terms of many financial
products, including credit cards, loans and bank accounts. However,
consumers often encounter manipulated results or digital dark
patterns fueled by behind-the-scenes incentive payments from
lenders. The circular explains how these practices may violate
federal law and highlights examples of illegal arrangements.
According to CFPB Director Chopra, “Americans turn to online
comparison tools to find the credit cards with the lowest interest
rates or the best rewards. The CFPB is working to ensure that
digital advertisements for financial products are not disguised as
unbiased and objective advice.”

How Digital Comparison Shopping Tools Work and What Risks They
Pose for Consumers

Digital comparison shopping tools are widely used in many
product categories, from retail goods to travel and financial
products. By allowing consumers to compare a variety of competing
products quickly and efficiently, these tools have the potential to
benefit individual consumers and drive competition across the
larger market. Comparison shopping tools can help consumers
evaluate and find financial products, especially credit cards and
mortgages. Consumers often rely on these tools to navigate
difficult financial decisions. However, some tools operators take
advantage of that reliance and manipulate results. For example,
some operators might accept financial kickbacks, sometimes referred
to as bounties, within the industry, to manipulate lists of results
displayed to shoppers. The CFPB previously issued guidance on how
real estate and mortgage laws apply to mortgage comparison
shopping. In today’s circular, the CFPB provides guidance on
how consumer financial protection laws apply to comparison shopping
for other financial products. Comparison shopping tools can heavily
influence a consumer selection of a financial product. Many digital
comparison shopping tools hold themselves out as providing unbiased
and objective advice. The guidance discusses how regulators and law
enforcement agencies can evaluate operators of comparison shopping
tools that accept payments from financial firms to manipulate
results or suppress options that may better fit the consumer’s
stated preferences.

Dark Patterns in Comparison Shopping

Looking at dark patterns in comparison shopping now. Dark
patterns are a common tool used to manipulate consumers. Operators
of comparison shopping tools may deceive consumers with user
experiences and user interfaces that lead people to believe they
are the beneficiaries of competition. However, if consumers are
being tricked into paying higher prices or selecting inferior
products, the comparison shopping company and the company paying to
play may be the only ones benefiting from the facade of
competition. The CFPB has warned that dark patterns can violate
consumer financial protection laws, and the agency has taken
enforcement actions against violators.

Competition in the Credit Card Market

Next issue to think about here is increasing competition in
credit cards and other markets. The CFPB has found evidence of
practices that may imply anti-competitive behavior in the consumer
credit card market, as well as high levels of concentration in the
industry. A recent CFPB report showed that large banks are offering
worse credit card terms and interest rates than small banks and
credit unions, regardless of credit risk. The difference in
interest rates can translate to $400 to 500 in additional annual
interest for the average cardholder. The CFPB has also published
research showing how the larger issuers have increased their
interest rate margin over the past decade, resulting in about $25
billion in additional interest charges in 2023 alone.

Key Takeaways

So here’s the key takeaway. The CFPB circular is part of a
broader effort to level the playing field by the bureau that they
believe is too often tilted against consumers across many different
markets for consumer financial products and services. The guidance
follows an advisory opinion to protect mortgage borrowers from
pay-to-play digital comparison shopping platforms. It also follows
efforts to level marketplaces throughout actions on hard-to-cancel
subscription services, fake review fraud, pay-to-play feel and
hidden junk fees. So please stay tuned to further programs as we
identify and address the key issues and developments, and provide
strategies for success. I wish you continued success and meaningful
day. Thank you.

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