CFPB puts credit card comparison sites on notice

Dive Brief:

The Consumer Financial Protection Bureau on Thursday warned companies operating credit card comparison websites they may be breaking the law by steering consumers to certain products based on incentives from lenders.
Manipulating comparison results to favor cards that benefit the website over the consumer could violate the Consumer Financial Protection Act, the bureau said in a press release. The CFPB issued guidance to inform law enforcement agencies and regulators of potential violations of federal law.
“Americans turn to online comparison tools to find the credit card with the lowest interest rates or best rewards,” CFPB Director Rohit Chopra said in the release. “The CFPB is working to ensure that digital advertisements for financial products are not disguised as unbiased and objective advice.”

Dive Insight:

The CFPB found that comparison sites often allow card companies to bid for preferential placement in comparison lists, allowing the company to target certain customers or meet certain volume goals. Websites may also receive payments based on the number of clicks, card applications or sales, the bureau said in guidance issued Thursday.

Some comparison sites operate as both a consumer aid and a lead generator for card companies by “presenting themselves as consumer-serving comparison-shopping tools while simultaneously increasing profits by directing leads based on financial benefit,” the guidance said.

“The CFPB expects firms to comply with the law and this guidance is in part intended to assist in that,” a bureau spokesperson said by email. “If we continue to see manipulative advertisements on rigged comparison sites, we may take action.”

The warning comes two weeks after the CFPB issued a report on credit card interest rates and annual fees that revealed large banks offered worse terms and interest rates for their credit cards when compared to small banks and credit unions. The interest rate spread between the 25 largest card issuers and small issuers was 8 to 10 percentage points, the report said.

The CFPB report pointed to anti-competitive behavior from large card issuers as a contributor to the disparity in interest rates. Part of that behavior involves offering incentives to card comparison websites to promote more expensive cards over cheaper alternatives offered by smaller banks, the Feb. 16 report said.

Along with the report, the bureau said it’s developing its own credit card comparison tool for consumers, with the goal of giving them an unbiased comparison between different cards, according to a press release. The tool does not have a release date yet, a CFPB spokesperson said.