CFPB Warns Against Gag Clauses and Fake Review Fraud

In a recently issued compliance bulletin, the Consumer Financial Protection Bureau (CFPB) warned banks and financial service firms against attempting to gag or manipulate online consumer reviews. The CFPB identified several review-related practices as potentially deceptive, unfair, or abusive, including attempts to silence consumers through gag clauses in contracts, manufacturing fake reviews, selectively posting only positive reviews, or asking non-customers to write favorable review. According to the CFPB, this type of activity skews customers’ understanding of financial products and regulated companies and harms the financial services market.

One law, the Consumer Review Fairness Act, already bans companies from using gag clauses in customer contracts to restrict customers from writing negative reviews. In this warning, the CFPB said it would consider it deceptive (or unfair or abusive) under the Consumer Financial Protection Act for financial services companies to include these types of clauses in their contracts, or to engage in other manipulative conduct like phony reviews or deceptive endorsements. The CFPB warned this conduct could result in civil penalties or other legal consequences.

This warning is related to the Federal Trade Commission’s similar effort to deter fake reviews and related fraud across the digital economy.

For more information and the CFPB’s news release click here

• Carl R. Galant
• Partner
• McGINNIS LOCHRIDGE
• 1111 W. 6th St., Bldg. B, Ste. 400
• Austin, TX 78703
• o 512-495-6083 f 512-505-6383