Subscription fees charged for services people don’t want are the target of new guidance issued Thursday by the federal consumer financial protection agency with an aim of “rooting out” the tactics by some companies, the agency said.
The Consumer Financial Protection Bureau (CFPB) said it issued a circular affirming that companies offering “negative option” subscription services must comply with federal consumer financial protection law.
The CFPB said companies offering negative option programs risk violating the Consumer Financial Protection Act’s (CFPA) prohibition on unfair, deceptive, or abusive acts or practices in instances where the companies:
- 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.
- Mislead or impede consumers wishing to cancel.
The bureau said 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. More specifically, the agency cited programs which 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.
“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,” the CFPB said in a release.
The circular, the agency said, 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 agency said consumers have complained to it about being charged for products or services they did not intend to purchase or had sought to cancel.