WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) just fired a shot across the bow of companies operating comparison-shopping tools. Often accused of manipulating consumer choices, these corporations are now under the eagle-eyed scrutiny of the CFPB. The agency recently issued a detailed circular to law enforcement agencies and regulators, shedding light on how these companies might find themselves on the wrong side of the law when they steer consumers to certain products or lenders due to elusive kickbacks.
Many Americans habitually use these comparison-shopping tools to compare costs, features, and terms of various financial products, including credit cards, loans, and bank accounts. But are consumers always getting the unbiased information they believe they are? CFPB Director, Rohit Chopra, says, “The CFPB is working to ensure that digital advertisements for financial products are not disguised as unbiased and objective advice.”
These digital comparison-shopping tools, ubiquitous in the realm of retail goods to travel and financial products, have revolutionized how consumers make purchasing decisions. They hold the promise of empowering consumers by allowing them to compare a plethora of competing products quickly and efficiently. Thus, they seem tailor-made to foster competition across markets. However, beneath the surface, a murkier picture may be emerging.
Stealthy and shrouded in the language of the industry—’bounties’—some tool operators allegedly accept financial kickbacks to manipulate lists of results displayed to shoppers. This underhanded maneuver can heavily influence a consumer’s selection of a financial product, potentially to their detriment.
The CFPB is taking aim at these deceptive practices. In a warning to the industry, the agency highlights the dark patterns– manipulative tactics applied to trick consumers into making decisions not in their best interest. The CFPB has already taken action against companies for using such dark patterns. It sued ACTIVE Network for illegal practices and TransUnion for deceptive practices, while the FTC sued Credit Karma for tricking consumers with misleading credit offers.
In addition, the CFPB is casting its net wider and looking into anti-competitive behavior in the credit card market. Evidence from a recent CFPB report indicates large banks may be offering less favorable credit card terms and interest rates compared to smaller banks and credit unions, irrespective of credit risk. The difference in interest rates could equate to as much as $500 in additional annual interest for the average cardholder, placing a significant financial strain on consumers.
In an effort to rectify this discrepancy, the CFPB is developing an unbiased consumer tool for comparing credit card terms and interest rates. This move comes as part of a wider initiative to level the playing field, often unfairly tilted against consumers in various financial product and service markets.
The CFPB’s actions reveal a concerted effort to hold these comparison-shopping tools to account, ensuring that they prioritize consumer interests over financial kickbacks. It’s a bold move towards a more transparent, fair, and consumer-friendly market.
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