“Fake reviews,” “gag” clauses and other allegedly illicit practices related to consumer online evaluations of financial products are the subject of guidance issued Tuesday by the federal consumer financial protection agency.
The guidance, according to the Consumer Financial Protection Bureau (CFPB), asserts that practices such as posting fake reviews or inserting clauses that forbid a customer from publishing an honest review may violate the Consumer Financial Protection Act (CFPA).
The bureau conceded that online customer reviews are “an important way to promote competitive markets.” But if the reviews are unreliable, the agency said, it might reduce the incentive for companies to provide quality service.
The guidance outlines several areas that the bureau said are generally unlawful under the CFPA, including:
- Contractual ‘gag’ clauses, which attempt to silence consumers from posting an online review, and which the bureau claimed can undermine fair competition. “Banks and financial companies that include clauses in form contracts that forbid a consumer from posting an honest review may be engaged in unfair or deceptive practices,” the bureau said.
- Fake reviews, or those that have been laundered in “ways that appear completely independent from the company to improve their ratings,” which the bureau said could harm markets “if consumers cannot trust that online reviews are legitimate.” The CFPB said that may constitute a deceptive practice.
- Review suppression or manipulation, or the practices of limiting posts of negative reviews or manipulating reviews to “trick or confuse consumers.” The bureau said consumers cannot easily shop and compare products and services when firms engage in the practices; the guidance, it added, explains why these practices may be unlawful.
“Banks and financial companies should ensure that their customer review practices comply with all applicable laws, including the Consumer Financial Protection Act,” the bureau said. “Violations are subject to civil penalties and other legal consequences.”
The agency noted that its guidance is related to the Federal Trade Commission’s (FTC) recent efforts to deter fake reviews and related fraud across the digital economy. That agency, the CFPB noted, recently decided to put hundreds of businesses on notice about fake reviews and misleading endorsements, “which may result in significant penalties against marketers that engage in this misconduct.”