The CFPB has published Compliance Bulletin 2022-05

On March 22, the CFPB issued Compliance Bulletin 2022-05 regarding potentially illegal practices related to consumer reviews. The guidelines state that consumer reviews impact company revenue and help consumers choose between financial providers, which in turn can “encourage dishonest market participants to attempt to manipulate the process of review, rather than competing based on the value of their services, which can frustrate a competitor. Marlet “.

The guidelines begin by noting that form contracts used to restrict consumer reviews by imposing pecuniary or other penalties for posting negative reviews about the provider’s services or products are harmful to consumers and “void from the outset of this contract”. Citing the Bureau’s authority to prohibit “unfair, deceptive, or abusive acts or practices” (UDAAP), the guidelines state that invoking void or unenforceable contractual provisions can also be “misleading”: “One may expect what consumers read the language to mean what it says: that they are limited in their ability to provide consumer reviews. But this is not the case, since the provision is void under applicable law.

The CFPB also plans to apply its similar “unfairness” principles to financial hunches and service providers who use contractual restrictions to limit consumer reviews. Such behavior “can unfairly harm the many other consumers who rely on reviews to decide which products and services to buy.”

The guidance also notes that companies can engage in UDAAPs by manipulating consumers’ understanding of consumer reviews, for example: (i) requiring employees to leave reviews of their products on a third-party website, and also to “dislike” negative reviews left by real customers; and (ii) not endorsing or posting hundreds of thousands of less starred and more negative reviews while posting only four and five star reviews on the Company’s website.

Put into practice : This bulletin is the latest of many guidance documents recently released by the CFPB that generally indicate areas in which the Bureau is prepared to engage (we have recently discussed former CFPB guidance in previous blog posts Consumer Finance and FinTech here, here, here and here). The Bureau has made clear that it intends to use its powers to hold offenders accountable if it identifies UDAAPs in consumer reviews of consumer financial products and services.

When reviewing and developing best practices based on these guidelines, companies should keep the following points in mind:

  • Along with the CFPB, businesses will likely have to grapple with the FTC’s efforts to mitigate fake reviews and related fraud in the digital economy.

  • Businesses should review their current contractual terms to ensure that any void or unenforceable terms comply with all applicable consumer protection laws. Note that CFPB reviewers found unenforceable contractual provisions to be misleading, whether or not the provision is ultimately enforced.

  • Similarly, companies may wish to review all consumer-directed materials and practices – in particular, note that attempting to pressure a consumer to remove a negative review posted by invoking a zero restriction on consumer reviews could be misleading.

  • Although not covered in this bulletin, companies may wish to review and augment their legitimate and legal response protocols for handling negative reviews as part of their complaint tracking policies and procedures.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 83