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CFPB Statement on Contract Terms and Fake Review Fraud

On March 22, 2022, the CFPB issued a policy statement on “gag” contract clauses and fake review fraud. Although the chip indicates that financial companies will face consequences for illegally manipulating or deleting consumer reviews, the message has wider implications for all digital marketers.

The guidelines regarding potentially illegal practices related to consumer reviews aim to ensure that customers can write reviews, especially those posted online, about financial products and services that accurately reflect their opinions and experiences. The guidelines also point out that practices such as posting false reviews or inserting clauses prohibiting a customer from posting an honest review can violate the Consumer Financial Protection Act.

“No company in America should be able to stop a customer from posting an honest review online,” CFPB Director Rohit Chopra said. “Disinformation campaigns by companies that suppress legitimate reviews or fabricate fake reviews are not only a threat to free speech and fair competition, they are also illegal.”

The CFPB guidelines outline certain business practices related to customer reviews that are generally illegal under consumer financial protection law, including: (i) Contractual “gag” clauses: attempting to prevent consumers from posting a online reviews can harm fair competition. Banks and finance companies that include clauses in standard form contracts prohibiting a consumer from posting an honest review may engage in unfair or deceptive practices; (ii) False reviews: Marketplaces can be harmed if consumers cannot believe that online reviews are legitimate. Laundering fake reviews in a way that appears completely independent of the company to improve their ratings may be a deceptive practice; and (iii) removal or manipulation of reviews: consumers cannot easily purchase and compare products and services when companies engage in practices to limit the posting of negative reviews or manipulate reviews to mislead or confuse consumers.

It is important to note that companies may engage in unfair, deceptive and abusive acts and practices by manipulating consumers’ understanding of consumer reviews, for example: (i) asking employees to leave reviews of their products on a third party website, and also to “dislike” negative reviews left by real customers; and not to endorse or post hundreds of thousands of less starred and more negative reviews.

The CFPB policy statement relates to efforts by the Federal Trade Commission to deter fake reviews and related fraud in the digital economy. In fact, the FTC recently voted to warn hundreds of companies about false reviews and misleading recommendations, which can result in significant penalties against marketers who engage in this misconduct.

Banks and finance companies must also ensure that their customer assessment practices comply with all applicable laws, including the Consumer Financial Protection Act. Violations are subject to civil penalties and other legal consequences.

Regardless of the specific vertical, digital marketers should consider consulting with an experienced FTC attorney to design and implement best practices, including but not limited to responsible contracting and ensure first and third party compliance with FTC Approval Tips.


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