Watching a Watchdog

Melody L

Several months ago, I published an article describing the newly formed federal agency Consumer Financial Protection Bureau, or CFPB. This group has been active now for more than a year and their sole focus is on protecting consumers. They have a website that provides some useful information and guidance. The website is also a venue where consumers can easily file complaints against merchants and financial institutions.

The CFPB has been actively examining very large institutions and there have been three recent examples of the actions that they have initiated based on their findings, specifically against American Express, Discover and Capital One. American Express received a fine of $27.5 million, along with an estimated restitution to consumers of $85 million. Capital One received fines of $25 million, plus an additional $35 million to the OCC, and an estimated restitution to consumers of $140 million. Discover received fines of $14 million and an estimated restitution to consumers of $200 million.

It is no longer sufficient just to make the disclosure to the consumer but rather, you must make it in such a way that it is understandable to the consumer.

The above activity provides us with some valuable insight into the activities of the CFPB and how business and Financial Institutions should behave toward their consumers. I recently participated in a webinar, sponsored by They had five experts who spoke on the recent activities of the CFPB.

The key message that was delivered during the webinar was this: When offering your products to your consumers, ensure that they understand the cost and the elements of what is being offered. Ensure that your disclosures are clear and in plain language so that the consumer can understand it. It is no longer sufficient just to make the disclosure to the consumer but rather, you must make it in such a way that it is understandable to the consumer.

When promoting your product and getting the consumer to buy it, there are some guiding principles for you to consider.

These guiding principles are: transparency, simplicity, honesty, proportionality, neutrality and helpfulness.

Transparency is the principle of ensuring that the information is presented to the consumer in a clear fashion. An example of this would be ensuring that the color of the font is not such that the consumer does not readily see it.

Simplicity is all about plain language that the consumer can understand.

Honesty is simply providing consumers with the products they purchased and providing in good faith the customer service your products will require.

Proportionality covers the act of pricing your products consistently. The pricing practices will be under the microscope from a consumer protection perspective.

Neutrality is the principle of not tilting the playing field toward eliciting or encouraging an impulsive decision that would result in the consumer spending more now versus making a purchasing decision later.

Helpfulness is having products and site features that are oriented to helping the consumer make better decisions.

Although the actions to date have been against large financial entities, the CFPB are continuously monitoring and searching for consumer complaints online. If your product or service is one that gets noticed, then you can be certain that they will evaluate your business practices from a consumer protection perspective. If those practices are found in violation of being fair or are perceived as deceptive then it is likely you will be facing fines and making restitution to your consumers. Take a look at your business and evaluate it from the CFPB perspective and start taking corrective action now.

Melody L is chief operating officer for L3 Payments.