On January 19, 2023, the CFPB issued a new circular affirming that companies offering “negative option” subscription services must comply with federal consumer financial protection law. Negative option programs include subscription services that automatically renew unless the consumer affirmatively cancels, and trial marketing programs that charge a reduced fee for an initial period and then automatically begin charging a higher fee. The circular highlights examples of unlawful behavior 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.
According to the CFPB, it has received complaints from consumers about being charged for products or services they did not intend to buy or had sought to cancel, and has brought many enforcement actions involving unlawful negative option marketing practices. These enforcement actions included those against Transunion and ACTIVE Network.
The CFPB warned that companies offering negative option programs risk violating the Consumer Financial Protection Act’s (CFPA) prohibition on unfair, deceptive, or abusive acts or practices. These actions and practices include the following:
Fail to disclose, clearly and conspicuously, the material terms of the negative option offer to the consumer;
Fail to obtain the consumer’s informed consent; and
Mislead or impede consumers wishing to cancel.
Read the CFPB’s press release here.
The full circular can be found here.
