The Consumer Financial Protection Bureau issued a circular Jan. 19 affirming that companies offering “negative option” subscription services must comply with federal consumer financial protection law.
“Negative option” programs could include subscription services that automatically renew unless a consumer affirmatively cancels, and trial marketing programs that charge a reduced fee for an initial period before automatically charging a higher fee.
According to the CFPB, companies offering negative option programs could violate its ban “on unfair, deceptive, or abusive acts” if they don’t properly disclose the material terms of the negative option to the consumer; don’t obtain the consumer’s informed consent; and mislead or impede when consumers try to cancel, which the CFPB said could include requiring consumers to undertake a complicated process to cancel subscription products or services; force them to speak to customer service agents “for unreasonably long times.”
The circular was intended to highlight examples of illegal behavior by companies that have used “dark patterns” and other tactics that the CFPB deems manipulative to mislead consumers into paying recurring charges for products and services that they do no not want.
Last year, the CFPB charged TransUnion and one of its senior executives, John Danaher, with violating a law enforcement order and deceptive marketing when selling credit monitoring products, credit scores and credit reports. The regulatory agency has also entered into consent orders with multiple credit card issuers after finding that they deceptively marketed optional “add-on” products that charged recurring fees until consumers affirmatively canceled.
“Consumers shouldn’t have to jump through hoops to cancel subscriptions they don’t want, and they shouldn’t have to worry about a trial marketing offer turning into an unwanted monthly charge,” said CFPB Director Rohit Chopra. “The CFPB has made it clear that misleading consumers about products or subscription services they don’t want is not only dishonest, but also a violation of law.”