QUESTION
We are a mortgage broker in the Midwest. Our loan officers work hard for our borrowers. And we are dependent on our borrowers recommending us to friends and family.
One of the ways we also get attention is on social media, such as Google. People who use us can give their comments about our service. Usually, we get fantastic recommendations from Google reviews. On Google, we usually get 4 or 5 stars!
One of our former customers has given us a 1 star and said some pretty nasty things about us, none of which is true. Now the customer is putting negative reviews on other social media. We’ve tried to talk to her, but she hates our guts.
We want to find a way to ban this person from telling lies about us and make her stop posting. I spoke with our attorney, and she told us to back off and move on. There must be something we can do.
What can we do to stop a disgruntled customer from posting negative reviews about us?
ANSWER
If you typically get 3, 4, or 5 stars, consider yourself fortunate to have such a good reputation. Ratings in that range are viewed as positive and bring several benefits, such as better search visibility and clickthrough rates, stronger brand trust and recognition, and reduced opportunity costs due to higher visibility.
I understand your frustration. However, your attorney gave you good advice.
There is a phrase for what you want to do. It is called suppressing consumer reviews. There are adverse consequences if you get caught. Some companies go so far as to manipulate consumer reviews. That is illegal.
The Consumer Financial Protection Bureau (CFPB) has issued policy guidance on contractual “gag clauses” and fraud associated with fake reviews.[i] The guidance describes certain business practices related to customer reviews that are generally unlawful under the Consumer Financial Protection Act (CFPA).
According to the CFPB, reviews of products and services help to promote fair, transparent, and competitive markets. However, when a company frustrates the ability of consumers to post honest reviews of the products and services used, those firms may be engaged in conduct prohibited by the CFPA.
The CFPB’s guidelines describe certain business practices related to customer reviews that are generally unlawful under the CFPA, including:
· Contractual gag clauses. 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;
· Fake reviews. Laundering fake reviews in ways that appear completely independent from the company to improve the company’s ratings may constitute a deceptive practice; and
· Review suppression or manipulation. Practices limiting the posting of negative reviews or manipulating reviews to trick or confuse customers may be unlawful.
I do not think this is a hill you should die on. It’s not worth it! The CFPB regulates the CFPA’s requirements and will exercise its enforcement and supervisory authorities on this issue.
Let me explain gag clauses and faked, suppressed, or manipulated customer reviews.
Gag Clauses
In 2016, Congress enacted the Consumer Review Fairness Act (CRFA). It became law in response to abuses by companies that restricted consumer reviews. As the statute’s legislative history explains, the wide availability of consumer reviews caused consumers to rely on them more heavily as credible indicators of product or service quality.
But businesses didn’t want to get negative reviews for obvious reasons, so they sought to avoid negative reviews through form contract[ii] provisions with consumers that restrict such reviews. These provisions typically impose monetary or other penalties for publishing negative comments regarding providers’ services or products. The legislative history explains that these “gag clauses or non-disparagement clauses” are harmful to consumers.
The CRFA protects covered communications. A covered communication is defined as
“a written, oral, or pictorial review, performance assessment of, or other similar analysis of, including by electronic means, the goods, services, or conduct of a person by an individual who is party to a form contract with respect to which such person is also a party.”
The CRFA provides, with limited exceptions, that “a provision of a form contract is void from the inception of such contract” if the provision:
· Prohibits or restricts the ability of an individual who is a party to the form contract to engage in a covered communication;
· Imposes a penalty or fee against an individual who is a party to the form contract for engaging in a covered communication; or
· Transfers or requires an individual who is a party to the form contract to transfer to any person any intellectual property rights in review or feedback content, with the exception of a nonexclusive license to use the content, that the individual may have in any otherwise lawful covered communication about such person or the goods or services provided by such person.
Therefore, consistent with these principles, it would generally be deceptive to include a restriction on consumer reviews in a form contract, given that the restriction would be void under the CRFA. In addition, if a financial institution or service provider attempts to pressure a consumer to remove an already posted negative review by invoking a restriction on consumer reviews that is void under the CRFA, that would also generally be a deceptive act or practice. In other words, doing so would place the company in violation of UDAAP.
Therefore, consistent with these principles, it would generally be deceptive to include a restriction on consumer reviews in a form contract, given that the restriction would be void under the CRFA. In addition, if a financial institution or service provider attempts to pressure a consumer to remove an already posted negative review by invoking a restriction on consumer reviews that is void under the CRFA, that would also generally be a deceptive act or practice. In other words, doing so would place the company in violation of UDAAP.An act or practice is deceptive if: (1) there is a representation, omission, or practice that (2) is likely to mislead consumers acting reasonably under the circumstances, and (3) the representation, omission, or practice is material.[iii] The consumer can be misled because the CFPA prohibits a covered person or service provider from engaging in an “unfair, deceptive, or abusive act or practice” that is “in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service.”[iv]
Including an unenforceable material term in a consumer contract is deceptive because it misleads consumers into believing the contract term is enforceable. It would generally be deceptive to include a restriction on consumer reviews in a form contract, given that the restriction would be void under the CRFA.
Thus, covered persons and service providers are liable under the CFPA if they deceive consumers using restrictions on consumer reviews that are unenforceable under the CRFA, if they unfairly deprive consumers of information by using such restrictions, or deceive consumers who read reviews about the nature of those reviews.
Faked, Suppressed, or Manipulated Consumer Reviews
Whether or not there are any contractual restrictions on consumer reviews, financial institutions or service providers can engage in a deceptive act or practice by manipulating consumers’ comprehension of the available set of reviews.
Two recent Federal Trade Commission (FTC) matters illustrate this concern. In the first case, the FTC alleged that a company instructed its employees to leave reviews of its products on a third-party website and also to dislike negative reviews left by real customers. In the second case, a company that sold products through a website allegedly had four- and five-star reviews automatically posted to the website. Still, they did not approve or publish hundreds of thousands of lower-starred, more negative reviews. In both cases, the FTC found the actions to be deceptive.
The FTC recently 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.[v]
Jonathan Foxx, Ph.D., MBAChairman & Managing Director
Lenders Compliance Group
[i] See Unfair
and Deceptive Acts or Practices That Impede Consumer Reviews, Bulletin
2022-05, Consumer Financial Protection Bureau, March 22, 2022
[ii] 15 U.S.C.
45b(a)(3)(A). However, the term “form contract” does not include an
employer-employee or independent contractor contract. 15 U.S.C. 45b(a)(3)(B)
[iii] See 10 CFPB
v. Gordon, 819 F.3d 1179, 1192 (9th Cir. 2016)
[iv] 12 U.S.C.
5531, 5536. For definitions of “covered person,” “service provider,” and
“consumer financial product or service,” see section 1002 of the CFPA, 12
U.S.C. 5481, and the associated regulation, 12 CFR part 1001
[v] FTC Puts
Hundreds of Businesses on Notice about Fake Reviews and Other Misleading
Endorsements, Federal Trade Commission, Press Release, October 13, 2021
