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Federal Reserve Highlights the Fair Lending Risks Posed by Targeted Internet Marketing


By: Keturah R. James

Internet-MarketingIn January 2020, the Federal Reserve’s Division of Consumer and Community Affairs published an article titled “From Catalogs to Clicks: The Fair Lending Implications of Targeted, Internet Marketing.”[1]  In the article, Federal Reserve staff Carol Evans and Westra Miller discuss how new technologies have made it possible for companies to obtain a “treasure trove of data about consumers”—including their race, gender, internet browsing patterns, where they live, and with whom they do business—and to use that data to target consumer groups.[2]  As the authors put it, this “targeted marketing” cuts both ways: it can facilitate financial inclusion and tailoring for consumers, but it may also be discriminatory under civil rights and consumer protection laws.[3]

In particular, Evans and Miller acknowledge that the use of consumer data to market credit can raise fair lending concerns, but also recognize that little regulatory guidance exists despite the increased use of Internet-based targeted marketing.[4]  Financial institutions are largely left to their own devices in determining how best to comply with laws that prohibit discrimination in lending, like the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA).  Evans and Miller therefore provide specific recommendations to financial institutions who use targeted marketing, such as:

  • Lenders should “ensure that they understand how they are employing targeted, Internet-based marketing and whether any vendors use such marketing on their behalf.”[5]
  • Lenders that use online advertising services or platforms should “monitor the terms used for any filters, as well as any reports they receive documenting the audience(s) that were reached by the advertising.”[6]
  • Lenders should learn “whether a platform employs algorithms . . . that could result in advertisements being targeted based on prohibited characteristics.”[7]

Evans and Miller conclude by emphasizing the importance of carefully designing and monitoring online targeted advertising, especially given the high stakes that fair access to housing and credit have for minority consumers.[8]  Accordingly, as regulation in this area remains to be more thoroughly developed, financial institutions and others may choose to draw on the guidance in this article in their efforts to ensure that their marketing practices comply with applicable law.


[1] Carol A. Evans & Westra Miller, From Catalogs to Clicks: The Fair Lending Implications of Targeted, Internet Marketing, Consumer Compliance Outlook, Third Issue 2019, at 1.

[2] Id. at 2.

[3] Id. 

[4] Id. at 4. 

[5] Id. at 7. 

[6] Id. 

[7] Id.

[8] Id.