The CFPB Takes a Page from the FTC’s Playbook on Consumer Reviews
Importance of Customer Reviews
In today’s digital age, the first thing many consumers do before making a purchase, is to go online and check out the other customer reviews. In fact, some major retailers require a certain number of online reviews of a product on their website before they will stock those products in store! There is no denying that customer reviews are now more important than they’ve ever been to businesses.
Prohibition on Manipulating Consumer Reviews
Given the importance of customer reviews, the Federal Trade Commission (“FTC”) has been busy taking enforcement actions in this area. The Consumer Review Fairness Act (“CRFA”) was enacted in 2016 and as the title suggests, prohibits certain practices that can skew customer reviews. The CRFA makes any provision of a form consumer contract void if it contains certain provisions commonly known as “gag clauses” or “non-disparagement clauses”. You can read the entire law here for the exact restrictions.
Enforcement authority for CRFA compliance was granted to the FTC1 and/or State’s Attorneys General or any other authorized state consumer protection authority. The CFPB, as regulators so often do, is taking a page from the FTC’s playbook and issued a bulletin making it clear that if financial institutions violate the CRFA, they will treat such a violation as a UDAAP violation, specifically as a “deceptive act or practice”, giving them enforcement authority over CRFA violations by financial institutions.
The bulletin provides that it would generally be a deceptive act or practice to:
- Include a restriction on consumer reviews in a form contract because the restriction would be void under the CRFA; or
- Attempt to pressure a consumer to remove a posted negative review by invoking a restriction on consumer reviews that is void under the CRFA.
The bulletin also provides that purported contractual restrictions on reviews can be an unfair act or practice. The CFPB may consider it “unfair” if a financial institution causes consumers to refrain from posting negative reviews and thereby depriving prospective purchasers of negative information, the restrictions can result in consumers buying products they would not have otherwise bought.
Last, the bulletin also clarifies that an act may violate UDAAP even in the absence of contractual restrictions on consumer reviews. The CFPB takes the position that a financial institution can engage in unfair acts or practices by manipulating consumers’ comprehension of available reviews. The CFPB believes there are numerous ways a company may violate UDAAP as it relates to customer Reviews, and points to two recent FTC matters as examples.
In one matter, a company instructed its employees to leave reviews of its products on third-party websites and to “dislike” negative reviews left by real customers. The CFPB also considers it a UDAAP violation if companies deceive consumers by paying non-employees to post misleading reviews. In the other FTC matter, a company automatically posted four- or five-star reviews to its website but did not approve or publish hundreds of lower-starred reviews.
The CFPB made it clear they will scrutinize company policies and procedures on how they treat customer reviews, especially negative ones.
Now is the time to get your
ducks geese in a row! Financial institutions should review not only their form contracts to make sure they do not contain any prohibited practices, but also review its policies and procedures on how they respond to negative reviews to ensure it is above board. The CFPB’s recent bulletin makes it clear that taking these actions is NOT a wild goose chase!