CFPB warns of kickbacks and abuse by comparison-shopping websites

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The Consumer Financial Protection Bureau issued guidance about comparison-shopping websites and lead generators, warning that companies may be deceiving consumers and manipulating results by taking kickbacks from banks and lenders to steer borrowers to specific financial products.

The CFPB said Thursday that it was providing guidance to law enforcement agencies and regulators on ways in which digital intermediaries "can break the law when they steer consumers to certain products or lenders because of kickbacks." 

The CFPB did not identify any companies by name. But the field of comparison websites is crowded and most have financial relationships with banks, credit card issuers and mortgage lenders. Many community banks and credit unions have trouble competing because they often get buried at the bottom of search pages even though their products may offer higher yields or be better suited to the consumer. 

The top comparison-shopping websites include NerdWallet, Credit Karma, Bankrate.com, WalletHub and LendingTree, among others. A few sites have launched their own credit cards, raising concerns about whether they are pushing their own products to consumers. 

Some companies have found themselves in regulators' crosshairs. Last year, Credit Karma paid $3 million to reimburse consumers after the Federal Trade Commission alleged the company gave consumers false credit card preapproval offers — largely because the offers got better click rates. 

"The CFPB is working to ensure that digital advertisements for financial products are not disguised as unbiased and objective advice," CFPB Director Rohit Chopra said in a press release.

Last year, the CFPB issued a policy statement redefining what constitutes an "abusive" act or practice as behavior that generally obscures important features of a product or service, or takes unreasonable advantage of a consumer. The "abusive" standard has vexed banks and financial firms since it was introduced in the Dodd-Frank Act in 2010.

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Companies that operate digital comparison-shopping tools can violate the federal prohibition on abusive acts or practices if they distort the shopping experience by steering consumers to certain products or services based on remuneration to the operator, the CFPB said. Some digital intermediaries manipulate results on their sites by accepting kickbacks, referred to in the industry as "bounties," giving preference to financial firms that pay them to top the lists of results.

Lead generators also are included in the CFPB's guidance if they "steer consumers to one participating financial services provider instead of another based on compensation received," the bureau said.

"Consumer interests are not served when they are steered toward more expensive or less favorable products because those products are offered by the tool operator or its affiliates or because those products generate more revenue for the tool operator," the bureau said.

The Consumer Financial Protection Act prohibits service providers from engaging in any unfair, deceptive or abusive act or practice, known as UDAAP. The bureau said it is concerned that the companies are taking "unreasonable advantage" of a consumer if they give preferential treatment to their own products or to other products and services "through steering or enhanced product placement, for financial or other benefits." 

A key problem is that consumers may rely on a comparison-shopping website or lead generator to act in their best interests without knowing of the payment arrangements behind the scenes. 

Digital intermediaries often are paid on a fee-per-action basis by receiving fees "per click, per application, per conversion, per offer, or per sale," the CFPB said. Often the comparison websites allow financial institutions to bid against each other for the best placement by paying bounties that target consumers that fit certain characteristics or that are aimed at meeting specific goals.

"The degree to which these bounties affect product placement depends on the operator's business model and the weight given to provider compensation over other factors," the CFPB said in its guidance. 

The bureau made a clear distinction between banner advertisements and pop-up ads and the compensation arrangements that give preferential treatment to certain products.

It is unclear how the comparison-shopping websites will respond to the CFPB's guidance. In 2022, the bureau said that digital marketing firms that use algorithms or other analytics to target specific customers with ads or content can be held liable for abuses under federal law.