CFPB issues guidance to eliminate confusing subscription practices

CFPB issued a new circular affirming that companies offering ‘negative option’ subscription services must comply with federal consumer financial protection law. Negative option programmes include subscription services that automatically renew unless the consumer affirmatively cancels, and trial marketing programmes that charge a reduced fee for an initial period and then automatically begin charging a higher fee.

Companies risk violating the law if they do not clearly and conspicuously disclose the terms of their subscription services and obtain consumers’ informed consent, or if they make it unreasonably difficult for consumers to cancel. Drawing from the Federal Trade Commission’s (FTC) policy statement and the CFPB’s past enforcement cases, the circular highlights examples of unlawful behaviour by companies that have used dark patterns and other manipulative tactics to trick consumers into paying recurring charges for products and services they do not want.

Eliminating misinterpretation of a contract and use cases

Negative option marketing refers to a term or condition under which a seller may interpret a person’s silence or failure to cancel an agreement as continued acceptance of the offer. The CFPB has received complaints from consumers about being charged for products or services they did not intend to purchase or had sought to cancel and has brought many enforcement actions involving unlawful negative option marketing practices.

The CFPB took action against Transunion for repeatedly breaking the law by violating a CFPB consent order and for deceptive marketing when selling credit scores, reports, and credit monitoring products. The CFPB sued ACTIVE Network for tricking consumers into enrolling into a costly membership club through the use of digital dark patterns. The CFPB has also entered into consent orders with numerous credit card issuers for deceptively marketing optional ‘add-on’ products that charged recurring fees until consumers affirmatively cancelled.

This circular continues the CFPB’s focus on raising awareness about the growing scourge of dark pattern practices and other harmful tactics that companies are using to trick consumers into paying for products or services they do not want. The CFPB is partnering with the FTC in its effort to combat the rise of digital dark patterns, and both agencies will continue to monitor these practices and bring agency actions where needed.