The CFPB has issued a compliance bulletin that discusses business practices related to customer reviews that could be considered deceptive or unfair for purposes of the CFPA’s UDAAP prohibition.
The bulletin begins with a discussion of the Consumer Review Fairness Act (CRFA) which was enacted in 2016. The CRFA provides that certain provisions in a “form contract” are void from the contract’s inception. A “form contract” is defined as a contract with standardized terms used in the course of selling goods or services and imposed on an individual without a meaningful opportunity to negotiate the standardized terms. The provisions that are void under the CRFA include provisions that would prohibit or restrict a consumer who enters into a form contract from reviewing the seller’s goods, services, or conduct, or would impose a penalty or fee on the consumer for reviewing the seller’s goods, services, or conduct.
The bulletin provides that it would generally be a deceptive act or practice to:
- Include a restriction on consumer reviews in a form contract because the restriction would be void under the CRFA; or
- Attempt to pressure a consumer to remove a posted negative review by invoking a restriction on consumer reviews that is void under the CRFA.
The bulletin also provides that purported contractual restrictions on reviews can be an unfair act or practice. According to the CFPB, by causing consumers to refrain from posting negative reviews and thereby depriving prospective purchasers of negative information, the restrictions can result in consumers buying products they would not have otherwise bought.
The bulletin also contains a discussion of how deceptive acts or practices can occur even in the absence of contractual restrictions on consumer reviews. According to the Bureau, a company can engage in unfair acts or practices by manipulating consumers’ comprehension of available reviews. The Bureau illustrates this possibility by citing two FTC matters in which the FTC found review manipulation to be deceptive. In one matter, a company instructed its employees to leave reviews of its products on third-party websites and to “dislike” negative reviews left by real customers. (The Bureau notes that companies can also deceive consumers by paying non-employees to post misleading reviews.)
In the other FTC matter, a company automatically posted four- or five-star reviews to its website but did not approve or publish hundreds of lower-starred reviews. The Bureau observes that “there are numerous other ways that firms can improperly manipulate consumer reviews” and warns that it “intends to carefully scrutinize whether covered persons or service providers are skewing consumers’ understanding of consumer reviews in a manner that is deceptive (unfair or abusive).”