Fast-food chain Burger King is under fire for deceptively advertising their Whoppers to be 35% larger than they actually are, and is now being sued by a very unhappy customer.
So, what does a burger case have to do with financial institutions and other consumer finance companies?
Whether it be for something as simple as a burger, or something as important as financial services and products, deceiving consumers with inaccurate marketing materials can be damaging.
Consumer Protection is Key
The lawsuit claims that Burger King's advertisements "are unfair and financially damaging consumers as they are receiving food that is much lower in value than what was promised." The lawsuit also cites social media posts from angry customers to make the case the problem is widespread.
So how does this relate back to financial institutions?
Well, when you break it down, the key points made in the Burger King lawsuit are:
- Consumers being promised one thing, but are receiving something different
- Actions being taken by Burger King are causing financial harm to consumers (even if minimally)
- Multiple complaints have been made against the company, especially across social media channels
- The company is being ordered to correct its deceptive behavior
Although Burger King sells burgers and food, the concerns around deceptive advertising and consumer protection are practically identical to UDAAP cases for financial products and services.
The lesson here for financial institutions (or any other organization) is that it's important to keep consumer protection top of mind and to take proactive steps to prevent deceptive advertising…no matter what products or services you're promoting.
While the Burger King lawsuit is ongoing and the case will likely get dismissed (like the $5 million Kellogg's Pop-Tart case did), those who fall under the jurisdiction of the Consumer Financial Protection Bureau (CFPB) may not be so lucky…
Cracking Down on Repeat Offenders
Russo, the lawyer on the Burger King case, says that "little situations-what some would consider to be a little situation like this-could lead to unfettered behavior from big corporations," and that "left unchecked, misleading advertisements could become the rule rather than an exception."
It seems like CFPB Director Chopra has the same idea. In a lecture given to students at the University of Pennsylvania Law School, Chopra shared his plans to reign in repeat offenders who continuously break the law and view monetary penalties as merely a "cost of business" rather than a punishment.
To combat this, Chopra plans to pivot from monetary penalties to remedies that are more "structural" in nature, including:
- Caps on size or growth
- Bans on certain types of business practices
- Divestitures of certain product lines
- Limitations on leverage or requirements to raise equity capital
- Revocation of government-granted privileges
"We must forcefully address repeat lawbreakers to alter company behavior and ensure companies realize it is cheaper, and better for their bottom line, to obey the law than to break it."
- CFPB Director Chopra
Prevent Deceptive Marketing with Proactive Monitoring
Whether you've run into trouble with regulators in the past or not, the best way to avoid potentially deceptive advertisements is with proactive review and monitoring of all internal and external marketing assets. This way, potential compliance violations are flagged and remediated as soon as possible-before they become an issue with the regulators.