The Roundup: Deception in Contract Fine Print, the FTC’s “Dark Patterns” Suit Proceeds, and 5 Common UDAAP Violations
Welcome to the PerformLine Regulatory Compliance Roundup, home of the latest news, articles, and reports from our industry, curated for you. Let’s get into it.
In this edition: The CFPB warns against deception in contract fine print, a registry is created to detect corporate repeat offenders, a federal judge allows the FTC’s “dark patterns” suit to proceed, a Fifth Circuit temporarily halts the transfer of CFPB late fee litigation, digital channels create consumer compliance struggles for banks, the FTC’s annual report to the CFPB on 2023 activities regarding financial acts, 5 common UDAAP compliance violations + how to stop them, and the Semi-Annual Report of the Consumer Financial Protection Bureau.
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CFPB Warns Against Deception in Contract Fine Print
The CFPB issued a warning against the use of deceptive and unenforceable fine print in contracts for consumer financial products, which can mislead consumers into believing they have waived certain legal rights. The CFPB highlighted that federal and state laws prohibit coercive contract clauses and will take action against companies using these tactics. This move is part of the CFPB’s broader efforts to ensure fairness in financial interactions and emphasizes its ongoing initiatives to protect consumer rights and combat deceptive practices.
Registry Created to Detect Corporate Repeat Offenders
A registry has been established by the CFPB to detect and deter corporate repeat offenders in the financial sector. This registry will track companies that violate consumer laws and are subject to enforcement actions, aiding in identifying recidivist behaviors. The initiative aims to hold companies accountable and prevent repeated illegal activities and supports broader enforcement and oversight to protect consumers from deceptive practices.
Significant Stat: $8 Million: The total fine against a telecom company and political consultant for using deepfake generative AI in robocalls. Read more
Federal Judge Allows FTC “Dark Patterns” Suit to Proceed
A major retailer allegedly used deceptive “dark patterns” in its subscription enrollment and cancellation processes. The FTC argues that these practices misled consumers by making it easier to enroll in a subscription service than to cancel it. The judge’s ruling highlights the need for clear disclosures and obtaining express informed consent from consumers, reflecting the FTC’s focus on combatting manipulative online marketing tactics.
Fifth Circuit Temporarily Halts Transfer of CFPB Late Fee Litigation
The Fifth Circuit Court of Appeals has temporarily stopped the transfer of a CFPB lawsuit from Texas to the District of Columbia, challenging the CFPB’s $8 credit card late fee rule. The plaintiffs argue that the transfer would delay the resolution of their challenge and is inappropriate. The court’s stay is in place until June 18, 2024, pending further responses and decisions.
Digital Channels Create Consumer Compliance Struggles for Banks
Banks face increased compliance challenges due to the rise of digital channels and fintech partnerships, which blur oversight lines and complicate regulatory adherence. Regulatory agencies, such as the FDIC, highlight deficiencies in third-party oversight, especially in banking-as-a-service. Compliance teams must adapt to new marketing methods, including social media, to meet regulatory expectations. Effective vendor management and thorough due diligence are essential for navigating these complexities successfully.
FTC’s Annual Report to CFPB On 2023 Activities Regarding Financial Acts
The FTC provided its annual report to the CFPB detailing its 2023 enforcement activities related to the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA). The report covers the FTC’s actions in areas such as auto financing, payday lending, and electronic fund transfers, highlighting new rules and ongoing litigation. It also emphasizes the FTC’s efforts to protect military consumers and its educational initiatives for both consumers and businesses.
5 Common UDAAP Compliance Violations + How to Stop Them
A recent report highlights five of the most common Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) in marketing materials for consumer finance companies. Understanding these key compliance issues can help organizations ensure transparent and compliant communications with consumers. Check out the top 5 UDAAP compliance issues with examples here.
Semi-Annual Report of the Consumer Financial Protection Bureau
The CFPB has released its Semi-Annual Report to Congress for the period beginning April 1, 2023, and ending September 30, 2023. The report covers rules and orders, complaints, supervisory and enforcement actions, state consumer financial law, fair lending, workforce and contracting diversity, and budget.
