CFPB Releases Guidance on ‘Tricks’ Used by Companies to Keep Consumers Enrolled in Subscription Services

The Consumer Financial Protection Bureau yesterday released guidance advising companies that taking advantage of consumers by making it too hard to cancel subscription services or trial periods where a reduced fee is charged for a period of time could run afoul of federal law. These types of services, called “negative option” services essentially “interpret a person’s silence or failure to cancel an agreement as continued acceptance of the offer,” according to the CFPB.

Companies must disclose — clearly and conspicuously — the material terms of an offer for a product or service with a negative option feature, the CFPB said. Misleading consumers could be construed as a violation of the Consumer Financial Protection Act. The terms that consumers must be made aware of, according to the CFPB, are:

  • That the consumer is enrolling in and will be charged for the product or service.
  • The amount (or range of amounts) that the consumer will be charged.
  • That charges will be on a recurring basis unless the consumer takes affirmative steps to cancel the product or service.
  • That, in a trial marketing plan, charges will begin (or increase) after the trial period unless the consumer takes affirmative action.

Companies must also obtain consent from consumers before enrolling them in negative option services. Consent is not informed, the CFPB noted, if “a seller mischaracterizes or conceals the negative option feature, provides contradictory or misleading information, or otherwise interferes with the consumer’s understanding of the agreement.”

Consumers must also be able to easily cancel negative option services. The CFPB cited an example where a credit card issuer said that an add-on product could be canceled immediately with “no questions asked” but then directed representatives to “repeatedly rebut requests to cancel, with the result that consumers were often unable to cancel unless they demanded cancellation multiple times in succession.”

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