OBSERVATIONS FROM THE FINTECH SNARK TANK

Americans’ consumer finance fairy godmother, the Consumer Financial Protection Bureau (CFPB), issued a circular to law enforcement agencies and regulators explaining “how companies operating comparison-shopping tools can break the law when they steer consumers to certain products or lenders because of kickbacks.”

The CFPB isn’t talking about comparison tools in general—it’s talking about credit cards.

Comparison Sites Aren’t Neutral. Duh.

The CFPB is spot on when it says “consumers often encounter manipulated results or digital dark patterns, fueled by behind-the-scenes incentive payments from lenders.”

By focusing on comparison sites that “manipulate” results, however, the CFPB demonstrates its bias. Plenty of marketers and advertisers “manipulate” data. Why pick on credit card comparison sites? What about insurance comparison sites?

Furthermore, do comparison sites even claim to be neutral and unbiased? Are credit card comparison sites really the cause of a lot of the credit-related issues that consumers have? No to both questions.

And who said these sites were even under the CFPB’s jurisdiction?

Importantly, the CFPB offers no evidence that: 1) consumers don’t know that comparison sites aren’t unbiased, and 2) consumers make poor credit card choices because of comparison sites.

Do Credit Card Shoppers Need A Comparison Site From The CFPB?

To address the (alleged) problems of manipulated results and dark patterns, the CFPB plans to offer its own consumer-facing comparison tool that it says will “bring more price transparency to credit card comparison-shopping” and give credit card shoppers “an unbiased way to compare credit card terms and interest rates.”

Unbiased? The agency that only accepts complaints against large banks is going to be “unbiased”?

One challenge with claiming to offer a superior comparison tool is that what makes one card better than another for any given credit card shopper requires more than just looking at interest rates and fees—it’s also includes the quality of customer service, the quality of digital access to one’s account, and the quality of rewards.

The latter factor may be moot if the Credit Card Competition Act passes, which threatens the existence of rewards altogether.

How will the CFPB capture descriptions and ratings of service quality? By creating its own rating/reviews site?

The bureau has previously commented on the prevalence of fake and fraudulent review sites. In a March 2022 notice, CFPB Director Rohit Chopra commented, “corporate disinformation campaigns that manufacture fake reviews are not only a threat to free speech and fair competition, they are also illegal.”

But not all fake reviews come from “corporate disinformation campaigns.” Plenty of people leave fake reviews on websites for a multitude of reasons.

So how will the CFPB prevent that from happening on its own review site?

It might do so by requiring cardholders to authenticate themselves and prove they actually hold the card they’re reviewing. It’s doubtful, however, that anybody within their right mind would do that.

Why The CFPB Is Creating A Credit Card Comparison Site

Ignoring the challenges associated with creating a useful comparison site, the idea for the tool is a stroke of genius on the CFPB’s part.

How will it collect info for its comparison tool? It could force card issuers to submit information (rates, fees, terms) on their card offerings, which will give the agency a better ability to review and validate consumer complaints.

And if it gains traction among consumers, the tool will give the CFPB insights into consumer interest in credit cards. I can imagine a future CFPB notice telling us that consumers are looking for the “wrong” cards.

What Will Become Of Existing Comparison Sites?

If a CFPB comparison site gains traction with consumers is a big if. Sites like Bankrate, Credit Karma, and Lending Tree have been around for years and attract millions of (satisfied) consumers looking to find and compare financial products.

They’re also very successful lead generators for the financial services firms that advertise on the sites.

It’s naive to think—in the short term, at least—that consumers will ignore those sites and flock to a CFPB comparison site. It does beg the question: How will consumers even know that a CFPB comparison site even exists?

The CFPB could: 1) advertise the site; 2) require card issuers to publicize the site; and/or 3) try to fine and/or regulate existing comparison sites out of existence.

A Comparison Tool From The CFPB Is Not A Solution To Anything

With no evidence that consumers make poor credit card choices because of comparison sites, there’s no basis for the CFPB to waste taxpayer dollars to create its own comparison website.

If it’s true consumers don’t know that comparison sites are (potentially) biased, then the solution is simply more consumer education and/or a requirement that comparison sites indicate that it accepts advertising revenue from providers included on their sites and to be more transparent about how providers are ranked (if there is a ranking).

Creating and offering a comparison tool is a step too far.

As an independent agency of the US government, its jurisdiction encompasses banks, credit unions, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors, and other financial companies operating within the United States.

The CFPB’s primary role is to supervise and enforce compliance with federal consumer financial laws, ensuring that consumers are treated fairly by their financial service providers and have access to transparent, fair, and competitive markets for financial products and services.

Nowhere in that description of the CFPB’s jurisdiction and duties does policing of comparison sites come in. Comparison sites might rate and provide information about financial services providers—but they don’t provide those services themselve.

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