WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has 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 CFPB explained.
According to the Bureau, 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) recent policy statement and the CFPB’s past enforcement cases, 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,” the CFPB said.
Silence as Form of Acceptance
The CFPB additionally explained that 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 said it 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 noted it 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.
‘Particularly Harmful’
“Today’s circular highlights that negative option programs can be particularly harmful when paired with dark patterns because consumers may be misled into purchasing subscriptions and other services with recurring charges and be unable to cancel the unwanted products and services or avoid their charges,” the CFPB said. “Digital dark patterns are design features used to deceive, steer, or manipulate users into behavior that is profitable for a company, but often harmful to users or contrary to their intent.”
For additional info: Consumer Financial Protection Circular, Unlawful negative option marketing practices.