As the Director of the FTC's Bureau of Consumer Protection, Andrew Smith's mandate is to protect consumers, and small businesses, against unfair, deceptive or fraudulent practices, including in the financial services space. In a keynote at COMPLY2019, Director Smith shared the bureau's enforcement priorities for FinTech, including internet advertising, lead generation, payments and loan servicing.
Before starting in his role at the Federal Trade Commission, Andrew Smith spent 20 years in law firms working as a Financial Institution lawyer, so his knowledge on the subject runs deep. Smith stated that to him, FinTech means offering a lifecycle of financial products to consumers and small businesses over a mobile device, whether that's marketing, origination, servicing, collections or anything else - that's the way the FTC thinks about their enforcement in this area. Smith believes that FinTech is important when it comes to innovation, so his main goal is to protect that innovation while also protecting the consumer.
Technology pervades everything that the FTC does, so they are especially focused on tech and the internet when it comes to regulation and enforcement. Most recently, Director Smith shared that they are focusing on online marketing, influencers and social media regulations. Ratings and reviews of products and services are becoming increasingly important in the way that consumers shop, which led to the FTC bringing their first case against companies who purchase fake reviews. The bureau's main focus in this area is enforcing the Consumer Review Fairness Act that prohibits companies from including a provision in their contracts which would suppress truthful but unfavorable reviews and ratings.
Another key takeaway from Smith's session is that the FTC is going to start cracking down on companies who purchase consumer data from online scammers. In previous practice, enforcement has been mainly pushed on the lead generation companies who are generating bad traffic. Now, the bureau is going to start coming after companies who are purchasing this data, and we can expect to see cases more frequently against advertisers in particular. Smith says that he often hears the reasoning, "how can it be bad traffic if it converts?" This bad traffic frequently does convert, he says, however it cannot be the right answer that it's okay for a brand to be purchasing and funding this ecosystem of deception on the internet.
Smith stated that a big and ongoing focus on the payments side for the FTC is the Compulsory Use Prohibition in the Electronic Funds Transfer Act (EFTA). Outside of that, Smith says that he sees a troubling process with lenders who won't fund electronically unless the consumer agrees to pay electronically. Although the FTC has yet to bring a case for this issue, Smith says that it is one anecdotally he has seen in the marketplace and feels is problematic.
On his last note, Smith talked about how in the loan servicing space, the FTC has seen a variety of issues in previous cases including payments being debited more than once, bad loan payoff information, and failing to post payments in a timely matter (particularly paper payments). The rules brought up in these cases are rules that he believes FinTech and online lenders should be familiar with as well.
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